INCOME TAXES

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

The income tax expense (benefit) consists of the following for the years ended December 31, 2025, 2024, and 2023 (in thousands):

	Year Ended December 31,
	2025		2024		2023
U.S. federal income tax expense (benefit):
Current	$	51,994	$	47,239	$	56,474
Deferred	9,291		16,396		18,739
	61,285		63,635		75,213
State income tax expense (benefit):
Current	12,606		10,597		20,253
Deferred	1,424		(2,456)		(3,814)
	14,030		8,141		16,439
Total income tax expense	$	75,315	$	71,776	$	91,652

Beginning with the year ended December 31, 2025, the Company has prospectively adopted the guidance in ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes Disclosures (“ASU 2023-09”). The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09 (in thousands, except for percentages):

	Year Ended December 31, 2025
	Amount		Percent
U.S. federal statutory income tax rate	$	59,409	21.0	%
State and local income taxes, net of federal income tax effect (1)	11,382		4.0	%
Tax credits:
Research and development tax credits	(555)		(0.2)	%
Nontaxable or nondeductible items:
Share-based compensation impacts	4,779		1.7	%
Other	300		0.1	%
Effective income tax rate	$	75,315	26.6	%

(1) State tax in California, Florida, New York and Pennsylvania made up more than 50% of the tax effect in this category.

Also in accordance with ASU 2023-09, the following table reflects income taxes paid disaggregated by Federal and State for the year ended December 31, 2025 (in thousands):

	Amount
Federal	$	57,500
State	9,787
Total income taxes paid	$	67,287

The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:

	Year Ended December 31,
	2024		2023
U.S. federal statutory tax rate	21.0	%	21.0	%
State and local income taxes, net of federal income tax effect	3.5	%	4.8	%
Valuation allowance	(0.8)	%	(1.5)	%
Share-based compensation impacts	1.2	%	0.7	%
Other, net	0.4	%	0.5	%
Effective income tax rate	25.3	%	25.5	%

The Company recorded income tax expense of $75.3 million, $71.8 million, and $91.7 million, which represents an effective tax rate of 26.6%, 25.3%, and 25.5% for the years ended December 31, 2025, 2024, and 2023, respectively. The Company released $0.4 million, $2.2 million, and $5.8 million of state valuation allowances for the years ended December 31, 2025, 2024, and 2023, respectively. The income tax expense for the year ended December 31, 2023 includes $21.8 million of tax expense related to the Termination Fee payment received on behalf of Amedisys, under the terms of the Mutual Termination Agreement, net of merger-related expenses.

The variance in the Company’s effective tax rate of 26.6%, 25.3%, and 25.5% for the years ended December 31, 2025, 2024, and 2023, respectively, compared to the federal statutory rate of 21%, as well as year-over-year changes, was primarily attributable to the inclusion of state taxes in multiple jurisdictions, various non-deductible expenses, and changes in state valuation allowance.

The components of deferred income tax assets and liabilities were as follows as of December 31, 2025 and 2024 (in thousands):

	December 31, 2025		December 31, 2024
Deferred tax assets:
Price concessions	$	5,697	$	8,053
Compensation and benefits	7,364		6,166
Interest limitation carryforward	3,533		5,768
Operating lease liability	25,323		23,880
Net operating losses	46,459		50,860
Other	13,012		12,676
Deferred tax assets before valuation allowance	101,388		107,403
Valuation allowance	(2,839)		(3,337)
Deferred tax assets, net of valuation allowance	98,549		104,066
Deferred tax liabilities:
Accelerated depreciation	(16,914)		(12,630)
Operating lease right-of-use asset	(20,078)		(18,883)
Intangible assets	(43,445)		(48,412)
Goodwill	(67,766)		(59,303)
Other	(6,365)		(12,414)
Deferred tax liabilities	(154,568)		(151,642)
Net deferred tax liabilities	$	(56,019)	$	(47,576)

Deferred tax assets are generally required to be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. For the year ended December 31, 2025, the Company maintains a valuation allowance of $2.8 million against certain state net operating losses (“NOL”). In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which those temporary differences are deductible. The Company considers the scheduled reversal of deferred tax liabilities, including the effect in available carryback and carryforward periods, projected taxable income and tax-planning strategies, in making this assessment. On a quarterly basis, the Company evaluates all positive and negative evidence in determining if the valuation allowance is fairly stated.

At December 31, 2025, the Company had $33.7 million of tax-effected federal NOL carryforwards all of which are currently available to offset future taxable income in the United States and reflected as a deferred tax asset of the company. Tax-effected federal NOL carryforwards of $22.7 million expire beginning in 2028 through 2036, and $11.0 million of tax-effected federal NOLs have an indefinite carryforward period. At December 31, 2025, the Company had $3.5 million tax-effected amounts of interest limitation carryforwards which have an indefinite carryforward period. At December 31, 2025, the Company also had $12.8 million tax-effected amounts of cumulative state NOL carryforwards available to offset future taxable income in various states. These state NOL carryforwards will expire beginning in 2026 through 2044, with some having an indefinite carryforward period.

At December 31, 2025, 2024, and 2023, there were no unrecognized tax benefits for uncertain tax positions. Tax related interest and penalties are classified as a component of income tax expense.

The following table presents the valuation allowance for deferred tax assets for the years ended December 31, 2025, 2024 and 2023 (in thousands):

			Additions
Description	Balance at Beginning of Period		Charged (Benefit) to Costs and Expenses		Charged (Benefit) to Other Accounts		Balance at End of Period
2023: Valuation allowance for deferred tax assets	$	13,056	$	(6,685)	$	—	$	6,371
2024: Valuation allowance for deferred tax assets	$	6,371	$	(3,034)	$	—	$	3,337
2025: Valuation allowance for deferred tax assets	$	3,337	$	(498)	$	—	$	2,839

The company files income tax returns in the U.S. and various state and local jurisdictions. There are no ongoing Federal or state income tax audits as of December 31, 2025. The statute remains open for examination by the Internal Revenue Service beginning with year 2022 and in state jurisdictions for periods beginning in 2021.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. 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. The Company has reflected the applicable provisions of the OBBBA into its consolidated financial statements for the year ended December 31, 2025, and there is no material impact on the Company’s effective tax rate.