Townsquare Media, Inc.TSQ
Townsquare Media, Inc. Income Taxes Disclosure
Income Taxes
Income tax expense from operations for the years ended December 31, 2025 and 2024 consisted of the following (in thousands):
| 2025 | 2024 | |||||||||||||
| Current income tax expense | ||||||||||||||
| State | $ | 465 | $ | 663 | ||||||||||
| Total current income tax expense | $ | 465 | $ | 663 | ||||||||||
| Deferred tax expense | ||||||||||||||
| Federal | $ | 3,291 | $ | 135 | ||||||||||
| State | 972 | 509 | ||||||||||||
| Total deferred income tax expense | 4,263 | 644 | ||||||||||||
| Total income tax provision | $ | 4,728 | $ | 1,307 | ||||||||||
Total income tax expense from operations differed from the amount computed by applying the federal statutory tax rate of 21% for the years ended December 31, 2025 and 2024, due to the following (in thousands):
| 2025 | 2024 | |||||||||||||||||||||||||
| Pretax income at federal statutory rate | $ | (1,055) | 21.0 | % | $ | (2,020) | 21.0 | % | ||||||||||||||||||
State income tax expense, net federal expense (1) | 313 | (6.2) | % | 277 | (2.9) | % | ||||||||||||||||||||
| Section 162(m) non-deductible compensation | 2,100 | (41.8) | % | 2,600 | (27.0) | % | ||||||||||||||||||||
| Non-controlling interest | (371) | 7.4 | % | (373) | 3.9 | % | ||||||||||||||||||||
| Meals and entertainment | 86 | (1.7) | % | 97 | (1.0) | % | ||||||||||||||||||||
| Excess stock compensation | (7) | 0.1 | % | (185) | 1.9 | % | ||||||||||||||||||||
| Other non-deductible items | 53 | (1.1) | % | 52 | (0.5) | % | ||||||||||||||||||||
| Total Non-deductible items | 1,861 | (37.1) | % | 2,191 | (22.8) | % | ||||||||||||||||||||
| Tax attribute expiration | 212 | (4.2) | % | 164 | (1.7) | % | ||||||||||||||||||||
| Prior year NOL adjustment | (37) | 0.7 | % | 2,826 | (29.4) | % | ||||||||||||||||||||
| Tax rate changes | (8) | 0.2 | % | 34 | (0.4) | % | ||||||||||||||||||||
| Stock-based compensation | 176 | (3.5) | % | 589 | (6.1) | % | ||||||||||||||||||||
| Property and equipment | — | — | % | (92) | 1.0 | % | ||||||||||||||||||||
| Total Adjustment of prior year deferred taxes | 343 | (6.8) | % | 3,521 | (36.6) | % | ||||||||||||||||||||
| Change in valuation allowance | 3,261 | (64.9) | % | (2,698) | 28.0 | % | ||||||||||||||||||||
| Other items | 5 | (0.1) | % | 36 | (0.4) | % | ||||||||||||||||||||
| Total expense for income taxes | $ | 4,728 | (94.1) | % | $ | 1,307 | (13.6) | % | ||||||||||||||||||
(1) For the years ended December 31, 2025 and 2024 the jurisdictions making up the majority of state and local income taxes were:
2025: Texas, Iowa, New Jersey, Louisiana, and New York.
2024: Louisiana, Texas, Iowa and Kentucky.
Income taxes paid (net of refunds received) for the years ended December 31, 2025 and 2024 were as follows (in thousands):
| 2025 | 2024 | |||||||||||||
| Federal | $ | — | $ | — | ||||||||||
| State: | ||||||||||||||
| Texas | 219 | 152 | ||||||||||||
| Illinois | — | 43 | ||||||||||||
| Michigan | 50 | — | ||||||||||||
| Minnesota | — | 39 | ||||||||||||
| Kentucky | 110 | 117 | ||||||||||||
| Louisiana | 145 | 250 | ||||||||||||
| Other | 37 | 80 | ||||||||||||
| Total State | $ | 561 | $ | 681 | ||||||||||
| Total Income Taxes Paid, net of refunds | $ | 561 | $ | 681 | ||||||||||
On July 4, 2025, the U.S. government enacted The One Big Beautiful Bill Act of 2025 (“OBBBA”). The OBBBA includes a broad range of tax reform provisions, including extending and modifying various provisions of the Tax Cuts and Jobs Act and expanding certain incentives in the Inflation Reduction Act while accelerating the phase-out of other incentives. The legislation has multiple effective dates, with certain provisions effective in 2025 and other provisions effective in 2026 and subsequent years.
The Company has reflected the tax impact of the OBBBA relating to the interest expense limitation under Section 163(j), which resulted in an increase to the current year interest expense deduction. The impact of the increased current year business interest deduction resulted in a lower utilization of definite lived net operating loss carryforwards as well as a corresponding reduction of the current year amount of interest expense carryforward and related valuation allowances.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities at December 31, 2025 and 2024 are presented below (in thousands):
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Allowance for credit losses | $ | 1,265 | $ | 1,000 | |||||||
| Accrued expenses and other current liabilities | 99 | 283 | |||||||||
| Stock-based compensation | 2,909 | 2,557 | |||||||||
| Investments | 1,653 | 1,657 | |||||||||
| Property and equipment | 1,098 | 1,312 | |||||||||
| Interest expense | 34,685 | 29,029 | |||||||||
| Operating lease obligations | 12,636 | 13,541 | |||||||||
| Non-current liabilities | 2,959 | 2,490 | |||||||||
| Net operating loss and credit carryforwards | 24,650 | 25,001 | |||||||||
| Foreign tax credits | 385 | 385 | |||||||||
| 82,339 | 77,255 | ||||||||||
| Less: valuation allowance | (39,083) | (35,822) | |||||||||
| Deferred tax assets | 43,256 | 41,433 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets | 48,549 | 41,402 | |||||||||
| Operating lease right of use assets | 11,466 | 12,321 | |||||||||
| Software development costs | 4 | 210 | |||||||||
| Deferred tax liabilities | 60,019 | 53,933 | |||||||||
| Net deferred tax liabilities | $ | (16,763) | $ | (12,500) | |||||||
As of December 31, 2025, the Company has federal net operating loss carryforwards of approximately $93.6 million available to offset future income which will expire in the years 2026 through 2037, of which $45.7 million has an indefinite life. Approximately $14.8 million is applicable to Townsquare Radio, Inc. and can only be utilized against its future earnings (subject to further limitations under Section 382 of the Internal Revenue Code), and $33.1 million applicable to post IPO operations of the Company and can be utilized against future earnings without limitation through 2037. Additionally, the Company has various amounts of state net operating loss carry forwards expiring through 2045.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities and projected future taxable income in making this assessment. At December 31, 2025 and 2024, management believes it is not more likely than not that the Company will realize the benefits of these deductible differences.
The table below presents the changes in the Company’s valuation allowance:
| 2025 | 2024 | |||||||||||||
| Balance at beginning of the year | $ | (35,822) | $ | (38,520) | ||||||||||
| Additions charged to income tax benefit | (4,133) | (6,226) | ||||||||||||
| Allowances taken or written off | 876 | 8,970 | ||||||||||||
| Other adjustments | (4) | (46) | ||||||||||||
| Balance at the end of the year | $ | (39,083) | $ | (35,822) | ||||||||||
The increase in the valuation allowance of $3.3 million during the year ended December 31, 2025 is primarily due to an increase in the valuation allowance for interest expense carryforwards of $3.7 million and a $0.4 million increase in state valuation allowances, partially offset by the utilization of net operating loss carryforwards of $0.8 million. The decrease in the valuation allowance of $2.7 million during the December 31, 2024 period, is primarily due to the utilization of net operating loss carryforwards in excess of interest expense carryforwards.
A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits for the years ended December 31, 2025 and 2024 is as follows (in thousands):
| 2025 | 2024 | |||||||||||||
| Balance at beginning of the year | $ | 13,040 | $ | 12,986 | ||||||||||
| (Decrease) increase due to change in tax rate | (37) | 54 | ||||||||||||
| Balance at the end of the year | $ | 13,003 | $ | 13,040 | ||||||||||
As of December 31, 2025, the Company had unrecognized tax benefits of $13.0 million, all of which if recognized, would result in additional federal and state net operating loss carryforwards, with $5.5 million impacting the effective tax rate, and $7.5 million fully offset by a valuation allowance. It is not expected that unrecognized tax benefits will materially change in the next 12 months.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.