Exzeo Group, Inc. Income Taxes Disclosure
Note 9. Income Taxes
The components of income tax expense (benefit) attributable to continuing operations were as follows:
|
|
December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
25,990 |
|
|
$ |
5,976 |
|
|
$ |
(5,079 |
) |
State |
|
|
6,440 |
|
|
|
1,583 |
|
|
|
(1,274 |
) |
Foreign |
|
|
209 |
|
|
|
84 |
|
|
|
67 |
|
Total current income tax expense (benefit) |
|
|
32,639 |
|
|
|
7,643 |
|
|
|
(6,286 |
) |
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
(4,946 |
) |
|
|
1,216 |
|
|
|
(4,691 |
) |
State |
|
|
(160 |
) |
|
|
312 |
|
|
|
(1,042 |
) |
Foreign |
|
|
10 |
|
|
|
(3 |
) |
|
|
1 |
|
Total deferred income taxes |
|
|
(5,096 |
) |
|
|
1,525 |
|
|
|
(5,732 |
) |
Income tax expense (benefit) from continuing operations |
|
$ |
27,543 |
|
|
$ |
9,168 |
|
|
$ |
(12,018 |
) |
Total taxes paid, net of refunds, for the years presented are as follows:
|
|
December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 (1) |
|
|||
Federal |
|
$ |
26,176 |
|
|
$ |
2,574 |
|
|
$ |
(3,152 |
) |
State |
|
|
5,931 |
|
|
|
715 |
|
|
|
(786 |
) |
Foreign |
|
|
198 |
|
|
|
129 |
|
|
|
145 |
|
Discontinued operations |
|
|
— |
|
|
|
10,530 |
|
|
|
(6,739 |
) |
Cash paid for income taxes, net of refunds (2) |
|
|
32,305 |
|
|
|
13,948 |
|
|
|
(10,532 |
) |
Income taxes paid, net of refunds received, are disaggregated by jurisdiction for those jurisdictions where such amounts exceeded 5% of total income taxes paid, net of refunds, for the periods presented. For all periods shown, income taxes paid in India fell below this threshold and are therefore excluded. Accordingly, income taxes paid (refunds) by jurisdiction for the periods presented are as follows:
|
|
December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
State: |
|
|
|
|
|
|
|
|
|
|||
Florida |
|
$ |
5,931 |
|
|
$ |
715 |
|
|
$ |
(786 |
) |
The Company's income tax expense (benefit) differs from the amount that would result from applying the statutory U.S. federal income rate to income from continuing operations before taxes as follows:
|
|
December 31, |
|
|||||||||||||||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||||||||||||||
(in thousands, except percentages) |
|
($) |
|
|
(%) |
|
|
($) |
|
|
(%) |
|
|
($) |
|
|
(%) |
|
||||||
U.S. federal statutory tax rate |
|
$ |
23,161 |
|
|
|
21.0 |
% |
|
$ |
7,400 |
|
|
|
21.0 |
% |
|
$ |
185 |
|
|
|
21.0 |
% |
State income taxes, net of federal tax benefit (1) |
|
|
4,411 |
|
|
|
4.0 |
% |
|
|
1,436 |
|
|
|
4.1 |
% |
|
|
82 |
|
|
|
9.3 |
% |
Foreign tax effect |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
India - statutory tax rate |
|
|
5 |
|
|
|
0.0 |
% |
|
|
35 |
|
|
|
0.1 |
% |
|
|
62 |
|
|
|
7.0 |
% |
Return to provision adjustment |
|
|
190 |
|
|
|
0.2 |
% |
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
Change in valuation allowances |
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
|
|
(12,806 |
) |
|
|
(1450.3 |
)% |
Nontaxable or nondeductible items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Stock-based compensation |
|
|
248 |
|
|
|
0.2 |
% |
|
|
49 |
|
|
|
0.1 |
% |
|
|
77 |
|
|
|
8.8 |
% |
Executive compensation under 162(m) |
|
|
698 |
|
|
|
0.7 |
% |
|
|
321 |
|
|
|
0.9 |
% |
|
|
292 |
|
|
|
33.0 |
% |
Restricted stock windfall tax benefit |
|
|
(1,192 |
) |
|
|
(1.1 |
)% |
|
|
(51 |
) |
|
|
(0.1 |
)% |
|
|
(24 |
) |
|
|
(2.7 |
)% |
Other |
|
|
22 |
|
|
|
0.0 |
% |
|
|
(22 |
) |
|
|
(0.1 |
)% |
|
|
19 |
|
|
|
2.1 |
% |
Other adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Return to provision adjustment |
|
|
— |
|
|
|
0.0 |
% |
|
|
— |
|
|
|
0.0 |
% |
|
|
95 |
|
|
|
10.8 |
% |
Income tax expense (benefit) |
|
$ |
27,543 |
|
|
|
25.0 |
% |
|
$ |
9,168 |
|
|
|
26.0 |
% |
|
$ |
(12,018 |
) |
|
|
(1361.0 |
)% |
Tax Allocation Agreement and Filing Status
The Company is included in the consolidated federal and state income tax returns of its parent company, HCI. A written tax allocation agreement governs the manner in which consolidated income taxes are allocated among HCI’s subsidiaries. Under this agreement, each subsidiary records income tax expense or benefit as if it filed a separate income tax return. The agreement provides the Company with an enforceable right to receive tax benefits for losses or credits generated.
The consolidated income tax returns of HCI and its subsidiaries for the years ended December 31, 2024, 2023 and 2022 remain subject to examination by U.S. federal and state taxing authorities.
The Company has no uncertain tax positions that, if recognized, would have a material impact on the effective tax rate. The Company classifies interest and penalties related to uncertain tax positions, if any, as income tax expense. No such amounts were recognized during the years ended December 31, 2025, 2024, or 2023.
Significant components of the Company’s deferred income tax assets and liabilities were as follows:
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Stock-based compensation |
|
$ |
227 |
|
|
$ |
115 |
|
Unearned revenue |
|
|
4,329 |
|
|
|
— |
|
Accrued expenses |
|
|
84 |
|
|
|
81 |
|
Intercompany deferred loss |
|
|
1,208 |
|
|
|
544 |
|
Total deferred tax assets |
|
|
5,848 |
|
|
|
740 |
|
Valuation allowance |
|
|
(1,208 |
) |
|
|
(544 |
) |
Total deferred tax assets, net of valuation allowance |
|
|
4,640 |
|
|
|
196 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Property and equipment - capitalized software |
|
|
(1,296 |
) |
|
|
(878 |
) |
Prepaid expenses |
|
|
(369 |
) |
|
|
(149 |
) |
Unearned revenue |
|
|
— |
|
|
|
(1,290 |
) |
Total deferred tax liabilities |
|
|
(1,665 |
) |
|
|
(2,317 |
) |
Net deferred income tax asset (liability) |
|
|
2,975 |
|
|
|
(2,121 |
) |
The Company had no federal or state net operating loss carryforwards as of December 31, 2025.
A valuation allowance must be established for deferred tax assets when it is more likely than not that such assets will not be realized based on available evidence both positive and negative, including recent results, available tax planning strategies, and projected future taxable income. As a result of the sale of TTIC, the Company incurred a tax loss and recognized a deferred tax asset of $544 as of December 31, 2024. Subsequently the Company increased the deferred tax asset to $1,208 as of December 31, 2025 as a result of return-to-tax provision adjustments finalized during the current period. The valuation allowance reflects management's conclusion that it is more likely than not that the deferred tax asset related to the sale of TTIC would not be realized.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. The OBBBA includes various 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 OBBBA has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA has an immaterial impact on the Consolidated Financial Statements.
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.