Victory Capital Holdings, Inc. Income Taxes Disclosure
NOTE 10. Income Taxes
The following table presents the provision for income taxes for the years ended December 31, 2025, 2024, and 2023:
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
||||||
Current tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
|
60,835 |
|
|
$ |
|
41,502 |
|
|
$ |
|
32,457 |
|
State |
|
|
|
13,149 |
|
|
|
|
10,840 |
|
|
|
|
8,554 |
|
Foreign |
|
|
|
21 |
|
|
|
|
34 |
|
|
|
|
201 |
|
Total current tax expense |
|
|
|
74,005 |
|
|
|
|
52,376 |
|
|
|
|
41,212 |
|
Deferred tax expense (benefit): |
|
|
|
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
|
36,320 |
|
|
|
|
26,680 |
|
|
|
|
17,951 |
|
State |
|
|
|
(2,078 |
) |
|
|
|
5,658 |
|
|
|
|
3,618 |
|
Foreign |
|
|
|
11 |
|
|
|
|
178 |
|
|
|
|
(30 |
) |
Total deferred tax expense |
|
|
|
34,253 |
|
|
|
|
32,516 |
|
|
|
|
21,539 |
|
Income tax expense |
|
$ |
|
108,258 |
|
|
$ |
|
84,892 |
|
|
$ |
|
62,751 |
|
The Company adopted ASU 2023-09 on a prospective basis. As a result, the December 31, 2025 disclosure differs from December 31, 2024, and 2023.
The following table presents a reconciliation between the reported income tax expense and the amount computed by applying the U.S. federal statutory income tax rate of 21.0% to income before income taxes for the year ended December 31, 2025:
|
|
|
2025 |
|
|
|||||
|
|
|
Amount |
|
|
Percent |
|
|
||
Federal income tax at U.S. statutory rate |
|
|
|
92,047 |
|
|
|
21.0 |
|
% |
State income tax rate, net of federal tax benefit(1) |
|
|
|
8,742 |
|
|
|
2.0 |
|
% |
Foreign Tax Effects |
|
|
|
30 |
|
|
|
— |
|
% |
Tax Credits |
|
|
|
|
|
|
|
|
||
Research and development tax credits |
|
|
|
(239 |
) |
|
|
(0.1 |
) |
% |
Nontaxable or Nondeductible Items |
|
|
|
|
|
|
|
|
||
Excess tax benefits on share-based compensation |
|
|
|
(2,930 |
) |
|
|
(0.7 |
) |
% |
Nondeductible transaction costs |
|
|
|
5,798 |
|
|
|
1.3 |
|
% |
Other |
|
|
|
4,472 |
|
|
|
1.1 |
|
% |
Changes in Unrecognized Tax Benefits |
|
|
|
(8 |
) |
|
|
— |
|
% |
Other Adjustments |
|
|
|
346 |
|
|
|
0.1 |
|
% |
Income tax expense |
|
|
|
108,258 |
|
|
|
24.7 |
|
% |
The following table presents the tax rates for the years ended December 31, 2024, and 2023.
|
|
2024 |
|
|
|
2023 |
|
|
||
Federal income tax at U.S. statutory rate |
|
|
21.0 |
|
% |
|
|
21.0 |
|
% |
State income tax rate, net of federal tax benefit |
|
|
3.3 |
|
% |
|
|
3.3 |
|
% |
Excess tax benefits on share-based compensation |
|
|
(2.4 |
) |
% |
|
|
(2.3 |
) |
% |
Foreign taxes and other |
|
|
0.8 |
|
% |
|
|
0.7 |
|
% |
Income tax expense |
|
|
22.7 |
|
% |
|
|
22.7 |
|
% |
The effective tax rate for the years ended December 31, 2025, 2024 and 2023 differs from the United States federal statutory rate primarily because of state and local income taxes and excess tax benefits on share-based compensation.
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amount used for income tax reporting purposes.
In assessing the realization of deferred tax assets, management considers the reversal of deferred tax liabilities as well as projections of future taxable income during the periods in which temporary differences are expected to reverse. Based on the consideration of these facts, the Company believes it is more likely than not that all of its gross deferred tax assets will be realized in the future, and as a result, has not recorded a valuation allowance on these amounts as of December 31, 2025 and 2024.
(in thousands) |
|
2025 |
|
|
2024 |
|
||||
Deferred tax assets: |
|
|
|
|
|
|
|
|
||
Definite-lived intangibles |
|
$ |
|
— |
|
|
$ |
|
22,437 |
|
Share-based compensation expense |
|
|
|
2,567 |
|
|
|
|
2,573 |
|
Acquisition-related costs |
|
|
|
3,919 |
|
|
|
|
6,142 |
|
Deferred compensation |
|
|
|
16,805 |
|
|
|
|
6,330 |
|
Restructuring expenses |
|
|
|
963 |
|
|
|
|
1,042 |
|
Contingent consideration arrangements |
|
|
|
189 |
|
|
|
|
239 |
|
R&E expenditures |
|
|
|
— |
|
|
|
|
3,331 |
|
Other |
|
|
|
843 |
|
|
|
|
89 |
|
Total deferred tax assets |
|
|
|
25,286 |
|
|
|
|
42,183 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
|
|
||
Definite-lived intangibles |
|
|
|
44,063 |
|
|
|
|
— |
|
Indefinite-lived intangibles |
|
|
|
424,960 |
|
|
|
|
171,905 |
|
Goodwill |
|
|
|
26,598 |
|
|
|
|
18,413 |
|
Debt issuance costs |
|
|
|
840 |
|
|
|
|
1,226 |
|
Depreciation |
|
|
|
2,986 |
|
|
|
|
890 |
|
OCI - Swap gain and cumulative translation adjustment |
|
|
|
3,641 |
|
|
|
|
6,221 |
|
Prepaid expenses |
|
|
|
561 |
|
|
|
|
308 |
|
Unrealized gain on deferred compensation investments |
|
|
|
664 |
|
|
|
|
340 |
|
Other |
|
|
|
765 |
|
|
|
|
— |
|
Total deferred tax liabilities |
|
|
|
505,078 |
|
|
|
|
199,303 |
|
Deferred tax liability, net |
|
$ |
|
(479,792 |
) |
|
$ |
|
(157,120 |
) |
As of December 31, 2025 and 2024, the Company had no material net operating loss carryforwards.
As of December 31, 2025, the amount of gross unrecognized tax benefits and interest and penalties totaled $0.8 million which was included in other liabilities in the Consolidated Balance Sheet. If these balances were recognized in a future period, it would result in a tax benefit and a decrease in effective tax rate. The aggregate changes in the Company’s total gross amount of unrecognized tax benefits are summarized as follows:
(in thousands) |
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Balance at the beginning of the year |
|
$ |
- |
|
|
$ |
- |
|
|
$ |
- |
|
Increases related to tax positions in prior years from acquisition |
|
|
729 |
|
|
|
- |
|
|
|
- |
|
Increases related to tax positions in prior years |
|
|
44 |
|
|
|
- |
|
|
|
- |
|
Decreases related to expiration of statute of limitations |
|
|
(10 |
) |
|
|
- |
|
|
|
- |
|
Balance at the end of the year |
|
$ |
763 |
|
|
$ |
- |
|
|
$ |
- |
|
As of December 31, 2025, 2024, and 2023, the Company had no material interest and penalties related to the liability for unrecognized tax benefits in its income tax provision.
For the year ended December 31, 2025, income taxes paid (net of refunds received) were as follows:
(in thousands) |
|
2025 |
|
||
Federal |
|
$ |
|
57,200 |
|
State |
|
|
|
15,631 |
|
Foreign |
|
|
|
54 |
|
Total income taxes paid (net of refunds received) |
|
$ |
|
72,885 |
|
In the normal course of business, the Company is subject to examination by federal and certain state and local tax regulators. As of December 31, 2025, U.S. federal income tax returns for 2022, 2023 and 2024 are open and therefore subject to examination. The Company's 2023 U.S. federal income tax return is currently under audit. State and local income tax returns filed are generally open for examination from 2021 to 2024.
We have analyzed the Company’s tax positions for all open years and have concluded that no additional provision for income tax is required in the consolidated financial statements. The Company does not expect the total amount of unrecognized tax benefits to significantly increase in the next twelve months.
The Organization for Economic Co-operation and Development released a framework (“Pillar 2”) in 2021 to introduce a global minimum tax of 15% for companies with global revenues and profits above certain thresholds. Certain aspects of Pillar 2 were effective January 1, 2024 and other aspects are effective January 1, 2025. Each country is required to implement Pillar 2 through its own local tax legislation. Although the U.S. has not yet enacted legislation to adopt Pillar 2, many other countries have adopted, or are in the process of adopting, legislation to implement Pillar 2. Pillar 2 did not materially impact the Company’s effective tax rate or its Consolidated Balance Sheets, Consolidated Statement of Operations or Consolidated Statement of Cash Flows in 2025. The Company does not currently expect Pillar 2 to have a material impact on its future effective tax rates or consolidated financial statements and continues to monitor Pillar 2 developments.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into U.S law. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework 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. As of December 31, 2025, we have determined that OBBBA does not have a material impact on our consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 6, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 15, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 29, 2018 | |
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.