UNITED FIRE GROUP INCUFCS
UNITED FIRE GROUP INC Income Taxes Disclosure
INCOME TAX
Income tax expense (benefit) is composed of the following:
| Years Ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| Current | $ | 35,398 | $ | 23,469 | $ | (2,217) | |||||||||||
| Deferred | (5,653) | (8,392) | (7,803) | ||||||||||||||
| Income tax expense (benefit) | $ | 29,745 | $ | 15,077 | $ | (10,021) | |||||||||||
A reconciliation of tax calculated at the U.S. federal statutory tax rate to that calculated at the effective tax rate for the year ended December 31, 2025 is as follows:
| 2025 | ||||||||
| Amount | % | |||||||
| U.S. federal statutory tax rate | $ | 31,067 | 21.00 | % | ||||
State and local income taxes, net of federal income tax effect(1) | 1,438 | 0.97 | ||||||
| Foreign tax effects | ||||||||
| United Kingdom | ||||||||
| Foreign tax withheld | 2,881 | 1.95 | ||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | ||||||
| Effect of cross-border tax laws | 1,028 | 0.69 | ||||||
| Tax credits | ||||||||
| Foreign tax credit | (4,448) | (3.01) | ||||||
| Other tax credits | (40) | (0.03) | ||||||
| Changes in valuation allowances | — | — | ||||||
| Nontaxable or nondeductible items | (141) | (0.10) | ||||||
| Changes in unrecognized tax benefits | — | — | ||||||
| Other adjustments | ||||||||
| Interest income on refunds | (2,581) | (1.74) | ||||||
| Other adjustments | 541 | 0.37 | ||||||
| Effective tax rate | $ | 29,745 | 20.10 | % | ||||
(1) State taxes in Illinois made up the majority (greater than 50 percent) of the tax effect in this category.
A reconciliation of income tax expense (benefit) computed at the applicable federal tax rate of 21.0 percent for the years ended December 31, 2024 and 2023 to the amount recorded in the accompanying Consolidated Statements of Income is as follows:
| Years Ended December 31, | 2024 | 2023 | ||||||
| Income (loss) before taxes | $ | 77,034 | $ | (39,721) | ||||
| Federal statutory rate | 21 | % | 21 | % | ||||
| Expected income tax expense (benefit) | $ | 16,177 | $ | (8,339) | ||||
| Tax-exempt municipal bond interest income | (1,881) | (2,763) | ||||||
| Nontaxable dividend income | (27) | (269) | ||||||
| Compensation | 1,228 | 596 | ||||||
| Research & development credit | (16) | 540 | ||||||
| Other, net | (404) | 215 | ||||||
| Income tax expense (benefit) | $ | 15,077 | $ | (10,021) | ||||
We measure certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is 21.0 percent. The significant components of deferred tax assets and liabilities consist of the following at December 31, 2025 and 2024:
| December 31, | 2025 | 2024 | ||||||
| Deferred tax assets | ||||||||
| Financial statement reserves in excess of income tax reserves | $ | 26,388 | $ | 23,203 | ||||
| Unearned premium adjustment | 24,888 | 22,700 | ||||||
| Employee profit sharing | 5,008 | 3,112 | ||||||
| Other-than-temporary impairment of investments | 597 | 14 | ||||||
| Compensation expense related to stock options | 2,138 | 1,410 | ||||||
| Nonqualified deferred compensation | 2,564 | 2,400 | ||||||
| Net unrealized gain (loss) - all other securities | 7,103 | 19,572 | ||||||
| Other | 4,758 | 3,639 | ||||||
| Gross deferred tax asset | 73,444 | 76,050 | ||||||
| Valuation allowance | — | — | ||||||
| Deferred tax asset | 73,444 | 76,050 | ||||||
| Deferred tax liabilities | ||||||||
| Deferred policy acquisition costs | 32,293 | 30,459 | ||||||
| Investments in partnerships | 2,270 | 1,938 | ||||||
| Over funded pension benefit | 4,933 | 4,694 | ||||||
| Prepaid pension cost | 8,832 | 8,086 | ||||||
| Net bond discount accretion | 1,213 | 705 | ||||||
| Depreciation | 2,614 | 3,085 | ||||||
| Identifiable intangible assets (1) | 945 | 945 | ||||||
| Capitalized Software | 2,614 | 534 | ||||||
| Other | 2,282 | 2,586 | ||||||
| Gross deferred tax liability | 57,996 | 53,032 | ||||||
| Net deferred tax asset (liability) | $ | 15,448 | $ | 23,018 | ||||
(1) Related to our acquisition of Mercer Insurance Group, Inc.
As of December 31, 2025 and 2024, the Company has recorded no valuation allowance as we believe it is more likely than not that all deferred tax assets will be realized. Our determination was based on evidence of taxable income in the carryback and carryforward periods and our tax planning strategy of holding debt securities with unrealized losses to recovery.
Income taxes paid (net of refunds received) disaggregated by domestic and foreign jurisdiction in 2025 were as follows:
| 2025 | |||||
| U.S. federal income taxes paid (refunded) | $ | 19,490 | |||
U.S. state income taxes paid (refunded)(1) | 1,180 | ||||
| Foreign income taxes paid (refunded) | |||||
| United Kingdom | 2,881 | ||||
| Income taxes paid (refunded) | $ | 23,551 | |||
(1) No individual jurisdiction met the 5% threshold for individual disclosure.
In 2024 and 2023 we made cash payments for income taxes of $16,112 and $1,348, respectively. We made no interest payments in 2025, 2024 and 2023.
In 2024 and 2023 we received federal tax refunds of $0 and $14,017, respectively, which resulted from the utilization of our net operating losses and net capital loss carryforwards and carrybacks. We have no loss carryforwards and no tax credit carryforwards as of December 31, 2025.
Domestic and foreign income (loss) before income tax expense (benefit) for the year ended December 31, 2025 is as follows:
| 2025 | |||||
| U.S. income (loss) | $ | 137,596 | |||
| Foreign income (loss) | 10,340 | ||||
| Income (loss) before income taxes | $ | 147,936 | |||
Total income tax expense (benefit) disaggregated by domestic and foreign jurisdiction for the year ended December 31, 2025 is as follows:
| 2025 | |||||
| U.S. federal income tax expense (benefit) | $ | 25,043 | |||
U.S. state income tax expense (benefit)(1) | 1,821 | ||||
| Foreign income tax expense (benefit) | |||||
| United Kingdom | 2,881 | ||||
| Income tax expense (benefit) | $ | 29,745 | |||
(1) No individual jurisdiction met the 5% threshold for individual disclosure.
As of December 31, 2025, we had no alternative minimum tax credit carryforwards.
We file a consolidated federal income tax return and file income tax returns in various state jurisdictions. The U.S. Federal income tax returns of the Company for years prior to 2022 are no longer subject to examination by the taxing authorities. The Company does not have any unrecognized tax benefits ("UTBs") at December 31, 2025 or December 31, 2024. In the event the Company has UTBs, interest and penalties related to uncertain tax positions would be recorded as part of income tax expense in the financial statements. The Company regularly assesses the likelihood of additional tax assessments by jurisdiction and, if necessary, adjusts its tax reserves based on new information or developments.
Enactment of the One Big Beautiful Bill Act of 2025
On July 4, 2025, the One Big Beautiful Bill Act of 2025 (the "Tax Act") was signed into law, which includes both tax and non-tax provisions. Changes in tax law are recorded in the period of enactment. The changes resulting from the tax provisions in the Tax Act did not have a material impact on the Company's financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 26, 2016 | |
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.