Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes

Income Taxes

11. Income Taxes

“Income (loss) before provision for income taxes” as shown in the accompanying Consolidated Statements of Income (Loss) is comprised of the following (in thousands):

	Year Ended December 31,
	2024		2023		2022
Domestic	$	(37,232)	$	(82,690)	$	(25,443)
Foreign		43,432		41,151		43,571
Total	$	6,200	$	(41,539)	$	18,128

Components of the “Provision for income taxes” in the accompanying Consolidated Statements of Income (Loss) consist of the following (in thousands):

	Year Ended December 31,
	2024		2023		2022
Current
Federal	$	(6,807)	$	1,748	$	696
Foreign		6,529		5,248		6,856
State and local		503		564		2
Total current expense		225		7,560		7,554
Deferred expense
Federal		(649)		39,634		1,039
Foreign		(1,453)		573		(1,522)
State and local		—		9,180		300
Total deferred expense (benefit)		(2,102)		49,387		(183)
Provision for income taxes	$	(1,877)	$	56,947	$	7,371

A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:

	Year Ended December 31,
	2024			2023			2022
U.S. statutory tax rate		21.0	%		21.0	%		21.0	%
State and local taxes, net of federal benefit		5.7			3.7			2.7
Income attributable to non-controlling interests (a)		(12.7)			(16.3)			(9.3)
Subtotal		14.0	%		8.4	%		14.4	%
Non-creditable foreign and domestic taxes - non-controlling interest (b)(c)		30.7			(4.6)			14.0
Non-creditable foreign taxes - RE/MAX Holdings (c)(d)		8.7			(0.5)			8.1
Foreign derived intangible income deduction		(8.6)			—			—
Other permanent differences		23.3			(3.4)			4.3
Uncertain tax positions		—			2.4			—
Foreign Tax Rate Differential		(2.5)			—			—
162(m) compensation limitation		1.6			—			1.1
Valuation Allowance		(108.0)			(153.1)			—
Effect of permanent difference - adjustment TRA liability		4.8			15.0			—
Other		5.7			(1.3)			(1.2)
		(30.3)	%		(137.1)	%		40.7	%

(a) Given the majority of the Company’s income is generated via a pass-through entity of which the non-controlling interest owns approximately 40%, that proportion of the Company’s income is not subject to U.S. or state income tax rates.

(b) Approximately 40% of foreign taxes paid at the RMCO level and corporate subsidiary taxes are attributable to the non-controlling interest. As a result, these taxes are not creditable against the U.S. taxes of Holdings.

(c) The percentage impact of these items in 2023 switched directionally because the Company’s pre-tax net income changed from positive to negative.

(d) While a portion of foreign taxes are creditable within the U.S. since Canada’s tax rate is higher than the U.S. statutory rate a portion of the tax paid will not be creditable.

The components of the Company’s deferred tax assets and liabilities are summarized as follows (in thousands):

	As of December 31,
	2024		2023
Deferred tax assets
Goodwill, other intangibles and other assets	$	28,322	$	33,897
Settlement charge		1,180		4,011
Imputed interest deduction pursuant to tax receivable agreements		1,987		2,175
Operating lease liabilities		4,398		5,554
Compensation and benefits		5,238		4,414
Allowance for doubtful accounts		1,043		1,401
Contingent consideration liability		315		396
Deferred revenue		3,624		3,952
Foreign tax credit carryforward		14,919		11,358
Net operating loss carryforward		1		2,980
163j business interest limitation carryforward		9,987		5,536
Other		3,497		2,161
Total deferred tax assets		74,511		77,835
Valuation allowance (a)		(69,211)		(72,849)
Total deferred tax assets, net of valuation allowance		5,300		4,986
Deferred tax liabilities
Property and equipment		442		(27)
Goodwill, other intangibles and other assets		(10,888)		(12,543)
Operating lease assets		(2,408)		(3,109)
Other		(894)		(104)
Total deferred tax liabilities		(13,748)		(15,783)
Net deferred tax assets and liabilities	$	(8,448)	$	(10,797)

(a) In 2024 and 2023, a full valuation allowance was recorded against the Company’s deferred tax assets as a result of a combined three-year cumulative loss primarily due to the settlement of the 2023 industry class-action lawsuits.

As of December 31, 2024, the Company had $14.9 million in unutilized foreign tax credit carryforwards. If unused, the carryforwards will begin to expire during the years 2027-2034. This amount has a full valuation allowance recorded against it as of December 31, 2024.

As of December 31, 2024, the Company had $9.9 million of disallowed interest expense carryforwards under Section 162(j) of the Internal Revenue Code. These carryforwards do not expire and can be used to offset future taxable income, subject to annual limitations. This amount has a full valuation allowance booked against it as of December 31, 2024.

Net deferred tax assets are recorded for differences between the financial reporting basis and the tax basis of Holdings’ proportionate share of the net assets of RMCO. The Company recognizes deferred tax assets to the extent, based on available evidence, that it is more likely than not that they will be realized. In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and recent results of operations If not expected to be realized, a valuation allowance is recorded to offset the deferred tax asset.

As of December 31, 2024, the Company did not provide for deferred taxes on unremitted earnings of foreign subsidiaries that are permanently reinvested, for which withholding taxes would be due upon repatriation. The estimated amount of additional tax that would be payable on this income if distributed would be immaterial.

The Company is subject to taxation in the U.S., various states, and in non-U.S. jurisdictions. The Company’s U.S. income tax returns are primarily subject to examination from 2021 forward; however, U.S. tax authorities also have the ability to review prior tax years to the extent loss carry-forwards and tax credit carryforwards are utilized. The open years for non-U.S. tax returns range from 2015 through 2023 based on local statutes.

Uncertain Tax Positions

During 2021 and in connection with the INTEGRA acquisition, the Company assumed an uncertain tax position related to certain U.S. tax matters and also recorded a largely offsetting related indemnification asset.

In both 2023 and 2024, a portion of the uncertain tax position and related indemnification asset assumed in connection with the INTEGRA acquisition were reversed as a result of lapse of applicable statute of limitations.

Uncertain tax position liabilities represent the aggregate tax effect of differences between the tax return positions and the amounts otherwise recognized in the consolidated financial statements and are recognized in “Income taxes payable” in the Consolidated Balance Sheets. A reconciliation of the beginning and ending amount, excluding interest and penalties is as follows:

	As of December 31,
	2024		2023		2022
Balance, January 1	$	258	$	1,014	$	1,587
Decrease related to prior year tax positions		(228)		(756)		(882)
Increase related to prior period tax positions		—		—		309
Balance, December 31 (a)	$	30	$	258	$	1,014

(a) Excludes accrued interest and penalties of $0.1 million and $0.3 million for the year ended December 31, 2023 and 2022, respectively. As of December 31, 2024, accrued interest and penalties were immaterial. These related interest and penalties are recognized in “Income taxes payable” within the Consolidated Balance Sheets.

A portion of the Company’s uncertain tax positions have a reasonable possibility of being settled within the next 12 months.