UPBOUND GROUP, INC.UPBD

UPBOUND GROUP, INC. Income Taxes Disclosure

10-KFiled Feb 23, 20265 min read
Income Taxes
For financial statement purposes, earnings before income taxes by source was comprised of the following:
 Year Ended December 31,
(in thousands)202520242023
Domestic$93,639 $165,020 $38,375 
Foreign14,452 12,521 14,492 
Earnings before income taxes$108,091 $177,541 $52,867 
Cash paid for income taxes, net of refunds received, by source was comprised of the following:
 Year Ended December 31,
(in thousands)2025
Federal$57,986 
State and Local9,229 
Foreign2,562 
Cash paid for income taxes, net of refunds received$69,777 
Reconciliations of the federal statutory rate of 21% to the effective rate follows:
Year Ended December 31, 2025
(dollar amounts in thousands)AmountPercent
Federal statutory tax rate$22,699 21.0 %
State and local income taxes, net of federal income tax effect(1)
4,237 3.9 %
Foreign tax effects
Puerto Rico
Statutory tax rate difference between Puerto Rico and United States1,568 1.5 %
Other353 0.3 %
Other130 0.1 %
Effect of cross-border tax laws, net(464)(0.4)%
Tax credits
Research and development tax credits(3,477)(3.2)%
Other(1,019)(0.9)%
Changes in valuation allowances1,382 1.3 %
Nontaxable or nondeductible items
Non-deductible compensation7,194 6.7 %
Other1,927 1.8 %
Changes in unrecognized tax benefits483 0.4 %
Other adjustments(164)(0.3)%
Effective income tax rate$34,849 32.2 %
(1) State taxes in California, Illinois, Indiana, New York, Texas and Wisconsin made up the majority (greater than 50 percent) of the tax effect in this category.
Year Ended December 31,
20242023
U.S. federal statutory tax rate21.0 %21.0 %
Non-deductible compensation3.2 %57.1 %
State income taxes5.7 %16.5 %
Effect of foreign operations1.6 %19.5 %
Effect of current year credits(2.5)%(9.9)%
Change in unrecognized tax benefits(0.1)%(6.9)%
Other permanent differences0.9 %1.7 %
Prior year return to provision adjustments0.2 %0.3 %
Changes in valuation allowances(0.3)%11.4 %
Other adjustments0.8 %(0.9)%
Effective income tax rate30.5 %109.8 %
The components of income tax expense (benefit) are as follows:
 Year Ended December 31,
(in thousands)202520242023
Current expense (benefit)
Federal$(24,583)$79,751 $58,480 
State7,358 2,451 9,644 
Foreign3,841 1,537 4,385 
Total current(13,384)83,739 72,509 
Deferred (benefit) expense
Federal48,143 (39,712)(28,084)
State(1,154)11,462 1,316 
Foreign1,244 (1,426)12,305 
Total deferred48,233 (29,676)(14,463)
Total income tax expense$34,849 $54,063 $58,046 
Deferred tax assets (liabilities) consist of the following:
 December 31,
(in thousands)20252024
Deferred tax assets
Net operating loss carryforwards$74,402 $12,814 
Accrued liabilities76,264 63,258 
Intangible assets73,083 133,235 
Property assets— 9,641 
Lease obligations77,243 72,790 
Other assets7,744 3,892 
Foreign tax credit carryforwards6,181 2,348 
Total deferred tax assets314,917 297,978 
Valuation allowance(6,148)(8,599)
Deferred tax assets, net308,769 289,379 
Deferred tax liabilities
Rental merchandise(273,457)(176,375)
Property assets(9,706)— 
Lease assets(73,550)(70,786)
Other liabilities(3,880)(1,874)
Total deferred tax liabilities(360,593)(249,035)
Net deferred taxes$(51,824)$40,344 
On July 4, 2025, the One Big Beautiful Bill Act ("OBBB") was signed into law. The OBBB contains a broad range of tax reform provisions, including the reinstatement of 100% bonus depreciation and the immediate expensing of domestic R&D under the new § 174A of the Internal Revenue Code. As a result of the enactment of OBBB, the acceleration of certain expenses for tax purposes resulted in an increase to the deferred tax liability with a corresponding increase to income tax receivable as of December 31, 2025. The provisions of OBBB did not have a material impact on our tax expenses for the year ended December 31, 2025, but are expected to have a favorable impact on our cash taxes in 2026.
As of each reporting date, our management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. At December 31, 2025, we had net operating loss carryforwards of approximately $276 million for state, $293 million for federal and $8 million for foreign jurisdictions.
After review of all available evidence, we have determined that a valuation allowance is required against certain state net operating loss carryforwards due to inability to project sufficient taxable income to utilize these losses prior to expiration. We also had federal, state and foreign tax credit carryforwards of approximately $9.9 million of which a portion has been offset by a valuation allowance. The net operating losses and credits will expire in various years between 2026 and 2044.
We file income tax returns in the U.S. and multiple foreign jurisdictions with varying statutes of limitations. In the normal course of business, we are subject to examination by various taxing authorities. We are currently under examination by certain state revenue authorities for the fiscal years 2013 through 2022. The following is a summary of all tax years that are open to examination.
•U.S. Federal - 2022 and forward
•U.S. States - 2013 and forward
•Foreign - 2021 and forward
We do not anticipate that adjustments as a result of these audits, if any, will have a material impact on our Consolidated Statements of Operations, Consolidated Balance Sheets, and statement of cash flows or earnings per share.
A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:
Year Ended December 31,
(in thousands)202520242023
Beginning unrecognized tax benefit balance$368 $1,221 $5,100 
Additions based on tax positions related to current year— — 97 
Additions for tax positions of prior years922 — 759 
Reductions for tax positions of prior years(262)(653)(4,735)
Settlements— (200)— 
Ending unrecognized tax benefit balance$1,028 $368 $1,221 
Included in the balance of unrecognized tax benefits at December 31, 2025, is $0.8 million, net of federal benefit, which, if ultimately recognized, will affect our annual effective tax rate.
During the year ended December 31, 2025, we recorded $3.5 million of interest income primarily related to the reversal of the accrual of interest for matters settled during the year in our favor, partially offset by interest expense of $0.1 million for remaining uncertain tax positions both of which are excluded from the reconciliation of unrecognized tax benefits presented above.

Historical Timeline

Fiscal YearFiled
2025Feb 23, 2026Showing above
2024Feb 25, 2025
2023Feb 27, 2024
2022Feb 24, 2023
2021Feb 28, 2022
2020Mar 1, 2021
2019Mar 2, 2020
2018Mar 1, 2019
2017Mar 1, 2018
2016Mar 1, 2017
2015Feb 29, 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.

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