UNIVERSAL TECHNICAL INSTITUTE INCUTI
UNIVERSAL TECHNICAL INSTITUTE INC Income Taxes Disclosure
Note 16 - Income Taxes
The components of income tax (expense) benefit for the years ended September 30, 2025, 2024 and 2023 are as follows:
| Year Ended September 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current (expense) benefit: | |||||||||||||||||
| United States federal | $ | (17,141) | $ | (6,256) | $ | (97) | |||||||||||
| State | (5,323) | (2,629) | (1,032) | ||||||||||||||
| Total current (expense) benefit | (22,464) | (8,885) | (1,129) | ||||||||||||||
| Deferred (expense) benefit: | |||||||||||||||||
| United States federal | 498 | (4,682) | (4,190) | ||||||||||||||
| State | 710 | (662) | (446) | ||||||||||||||
| Total deferred (expense) benefit | 1,208 | (5,344) | (4,636) | ||||||||||||||
| Total income tax (expense) benefit | $ | (21,256) | $ | (14,229) | $ | (5,765) | |||||||||||
The income tax provision differs from the tax that would result from application of the statutory federal tax rate of 21% to pre-tax income for the years ended September 30, 2025, 2024 and 2023. The reasons for the differences are as follows:
| Year Ended September 30, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Income tax expense at statutory rate | $ | (17,697) | $ | (11,808) | $ | (3,798) | ||||||||||||||
| State income taxes, net of federal tax benefit | (3,258) | (2,611) | (1,188) | |||||||||||||||||
| Excess officers compensation | (1,951) | (659) | (387) | |||||||||||||||||
Stock-based compensation(1) | 2,851 | — | — | |||||||||||||||||
| Transaction costs | — | — | (479) | |||||||||||||||||
| Adjustment to deferred taxes | (1,215) | (801) | (322) | |||||||||||||||||
| R&D credits generated | — | 500 | 546 | |||||||||||||||||
| Decrease in valuation allowance | (221) | 808 | 236 | |||||||||||||||||
Other, net(1) | 235 | 342 | (373) | |||||||||||||||||
| Total income tax (expense) benefit | $ | (21,256) | $ | (14,229) | $ | (5,765) | ||||||||||||||
(1) In prior periods, stock-based compensation of $588 thousand and $15 thousand for the years ended September 30, 2024 and 2023, respectively, were included in “Other, net.”
The components of the deferred tax assets (liabilities) recorded in the accompanying consolidated balance sheets were as follows:
| September 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Gross deferred tax assets: | ||||||||||||||
| Operating lease liability | $ | 48,359 | $ | 42,749 | ||||||||||
| Deferred compensation | 548 | 596 | ||||||||||||
| Accrued compensation | 2,374 | 2,497 | ||||||||||||
| Accrued tool sets | 1,193 | 1,255 | ||||||||||||
| Other reserves and accruals | 2,733 | 5,750 | ||||||||||||
Allowance for Credit Losses(1) | 6,504 | — | ||||||||||||
| September 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred revenue | 4,485 | 3,501 | ||||||||||||
| Net operating losses | 4,500 | 5,044 | ||||||||||||
| Tax credit carryforwards | 461 | 632 | ||||||||||||
| Capitalized R&D costs | 2,068 | 3,085 | ||||||||||||
| Charitable contribution carryovers | 252 | 628 | ||||||||||||
| Other | 13 | 86 | ||||||||||||
| Valuation allowance | (1,903) | (2,012) | ||||||||||||
| Total gross deferred tax assets | 71,587 | 63,811 | ||||||||||||
| Gross deferred tax liabilities: | ||||||||||||||
| Right of use assets for operating leases | (45,129) | (40,189) | ||||||||||||
| Amortization of goodwill and intangibles | (5,452) | (5,513) | ||||||||||||
| Depreciation and amortization of property and equipment | (18,820) | (17,401) | ||||||||||||
| Prepaid and other expenses deductible for tax | (1,805) | (1,535) | ||||||||||||
| Other comprehensive income | (241) | (306) | ||||||||||||
| Total gross deferred tax liabilities | (71,447) | (64,944) | ||||||||||||
| Net deferred tax assets (liabilities) | $ | 140 | $ | (1,133) | ||||||||||
(1) In the prior period, allowance for credit losses of $3.1 million for the year ended September 30, 2024, was included in “Other reserves and accruals.”
We had a valuation allowance of $1.9 million and $2.0 million against the deferred tax assets as of September 30, 2025 and 2024, respectively, based on our assessment of the ability to utilize the deferred tax assets. We continue to maintain a valuation allowance on certain federal and state attributes for which we determined that it was more likely than not that a benefit will not be realized prior to expiration. In assessing whether a valuation allowance was required, we considered the weight of all available positive and negative evidence.
As of September 30, 2025, we had approximately $9.9 million and $70.4 million in net operating losses for federal and state tax purposes, respectively. The federal net operating losses can be carried forward indefinitely, while the state net operating losses will expire at various dates through 2044 if not utilized or carried forward indefinitely.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. The determination is based on the technical merits of the position and presumes that each uncertain tax position will be examined by the relevant taxing authority that has full knowledge of all relevant information. Although we believe the estimates are reasonable, no assurance can be given that the final outcome of these matters will not be different than what is reflected in the historical income tax provisions and accruals.
The following table summarizes the activity related to the gross unrecognized tax benefits for the fiscal years ended September 30, 2025 and 2024:
| Year Ended September 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Balance at beginning of period | $ | 596 | $ | 496 | ||||||||||
| Increases (Decreases) related to current year tax positions | — | 100 | ||||||||||||
| Increases (Decreases) related to prior year tax positions | (149) | — | ||||||||||||
| Balance at end of period | $ | 447 | $ | 596 | ||||||||||
The total amount of gross unrecognized tax benefits was $0.4 million as of September 30, 2025, of which $0.4 million, if fully recognized, would decrease our effective tax rate. The decrease in prior year tax positions primarily relates to refinements to prior period research and development tax credits.
We recognize interest and penalties related to unrecognized tax benefits through income tax expense. No interest or penalties were accrued as of September 30, 2025. We do not expect a significant decrease in our liability for unrecognized tax benefits in the next 12 months.
We file income tax returns for federal purposes and in many states. Our tax filings remain subject to examination by applicable tax authorities for certain length of time, generally three to four years, following the tax year to which these filings relate.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We have assessed the effects of the new tax legislation, including 100% bonus depreciation on qualified property acquired for the fiscal year, and the results have been reflected in our Form 10-K for the year ended September 30, 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.