Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes

Income Taxes

12. Income Taxes

CWH is organized as a Subchapter C corporation (“C-Corp”) and, as of December 31, 2024, is a 61.0% owner of CWGS, LLC (see Note 19 — Stockholders’ Equity and Note 20 — Non-Controlling Interests). CWGS, LLC is organized as a limited liability company (“LLC”) and treated as a partnership for U.S. federal and most applicable state and local income tax purposes and as such, is generally not subject to any U.S. federal entity-level income taxes. However, certain active CWGS, LLC subsidiaries, including Americas Road and Travel Club, Inc., Camping World, Inc. (“CW”) prior to the LLC Conversion (defined below), and FreedomRoads RV, Inc. and their wholly-owned subsidiaries, are subject to entity-level taxes as they are C-Corps.

Income Tax Expense

The components of the Company’s income tax (benefit) expense from operations for the years ended December 31, 2024, 2023 and 2022 consisted of (in thousands):

	2024		2023		2022
Current:
Federal	$	880	$	9,123	$	44,613
State		689		1,558		11,170
Deferred:
Federal		(10,377)		(11,173)		28,543
State		(2,569)		(3,035)		27,957
Income tax (benefit) expense	$	(11,377)	$	(3,527)	$	112,283

A reconciliation of income tax (benefit) expense from operations to the federal statutory rate for the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands):

	2024		2023		2022
Income taxes computed at federal statutory rate(1)	$	(18,955)	$	10,374	$	94,524
State income taxes – net of federal benefit(1)		(1,774)		(2,645)		8,362
Other differences:
State and local taxes on pass-through entities		674		1,948		3,736
Income taxes computed at the effective federal and state statutory rate for pass-through entities not subject to tax for the Company(2)		9,411		(3,927)		(53,461)
Effect of LLC Conversion(3)		—		(85,790)		208,833
(Decrease) increase in valuation allowance(4)		(1,568)		64,351		(151,058)
Impact of other state tax rate changes		(241)		4,900		967
Accrual to return		420		8,314		(1,135)
Tax credits		(501)		(582)		(743)
Uncertain Tax Positions		(128)		(547)		1,519
Other		1,285		77		739
Income tax (benefit) expense	$	(11,377)	$	(3,527)	$	112,283

(1) Federal and state income tax includes $0.6 million and $0.1 million of income tax expense relating to the revaluation in the Tax Receivable Agreement liability due to fluctuations in state income tax rates for 2023, and 2022, respectively. There were no changes to the Tax Receivable Agreement liability due to fluctuations in state tax rate for the year ended December 31, 2024.

(2) The related income is taxable to the non-controlling interest.

(3) For 2023, these amounts represent a reduction of $81.7 million to CWH’s outside basis deferred tax assets as a result of the LLC Conversion and $4.1 million related to the entity classification election, which was filed in the third quarter of 2023 with an effective date of January 2, 2023 (defined and discussed below). For 2022, these amounts represent the tax impact of the LLC Conversion, which is comprised of a $209.4 million adjustment to CW’s deferred tax assets inclusive of tax operating losses, net of a $0.6 million reduction to CWH’s outside basis deferred tax asset.

(4) For 2024, the decrease in valuation allowance was primarily related to utilization of a portion of the capital loss carryforward. For 2023, the valuation allowance increased by $64.4 million. The valuation allowance increased by $132.2 million related to capital loss carryforward. Additionally, valuation allowance decreased by $52.5 million as a result of the LLC Conversion and its impact on realization of the CWH’s outside basis deferred tax asset and decreased by $15.3 million for activities not related to the LLC Conversion. For 2022, these amounts include a $180.4 million decrease in valuation allowance associated with the LLC Conversion, partially offset by $16.8 million of increases to the valuation allowance for activity not related to the LLC conversion, which is primarily

resulting from losses of CW for which no benefit is recognized for the U.S. federal and non-unitary states. Additionally, the valuation allowance increased by $12.5 million associated with CWH’s outside basis deferred tax asset in CWGS, LLC.

LLC Conversion

Prior to 2023, CW, including certain of its subsidiaries, were taxable as C-Corps and subject to entity-level taxes. CW had historically generated operating losses for tax purposes. Only losses subject to taxes in certain state jurisdictions were available to offset taxable income generated by the Company’s other businesses. The Company completed the steps necessary to convert CW and certain of its subsidiaries from C-Corps to LLCs with an effective date of January 2, 2023 (the “LLC Conversion”). All required filings for conversion to LLC were made by December 31, 2022. Accordingly, certain effects of the LLC Conversion were recorded during the year ended December 31, 2022, as the filings were perfunctory pursuant to the rules prescribed under ASC 740, Income Taxes. Beginning with the year ending December 31, 2023, the operating losses of CW and its subsidiaries have and will offset taxable income generated by the Company’s other LLC businesses. As a result, both income tax expense recognized by CWH and the amount of required tax distributions paid to holders of common units in CWGS, LLC, under the CWGS LLC Agreement, have and will decrease. The LLC Conversion has allowed the Company to more easily integrate its retail and dealership operations and more seamlessly share resources within the RV and Outdoor Retail segment, while providing an expected future cash flow benefit for the operating companies.

For the year ended December 31, 2023, the Company recorded an additional tax benefit of $2.0 million related to the LLC Conversion. Additionally, the Company recorded an income tax benefit of $4.1 million related to an entity classification election that was filed in the third quarter of 2023 with a January 2, 2023 effective date. The LLC Conversion resulted in additional income tax expense in the year ended December 31, 2022 of $28.4 million, which was comprised of $208.8 million of gross deferred tax assets written off, partially offset by the release of $180.4 million of valuation allowance (see table above for reconciliation of income tax expense from operations to the federal statutory rate).

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and operating loss and tax credit carryforwards. Significant items comprising the net deferred tax assets at December 31, 2024 and 2023 were (in thousands):

	2024		2023
Deferred tax liabilities
Operating lease assets	$	(6,068)	$	(5,375)
Other		(105)		(101)
		(6,173)		(5,476)
Deferred tax assets
Investment in partnership ("Outside Basis Deferred Tax Asset")(1)		216,572		194,764
Capital loss carryforward		131,371		132,248
Tax Receivable Agreement liability		37,639		40,702
Operating lease liabilities		6,482		5,678
Business interest expense carryforward		21,164		5,597
Net operating loss and tax credit carryforward		17,472		2,061
Other investments		17,011		17,011
Other reserves		1,207		1,195
		448,918		399,256
Valuation allowance		(227,605)		(192,686)
Net deferred tax assets	$	215,140	$	201,094

(1) This amount is the deferred tax asset the Company recognizes for its book to tax basis difference in its investment in CWGS, LLC.

The Company evaluates its deferred tax assets on a quarterly basis to determine if they can be realized and establishes valuation allowances when it is not more likely than not that all or a portion of the deferred tax

assets can be realized. At December 31, 2024 and 2023, the Company recorded a valuation allowance on the Outside Basis Deferred Tax Asset and the capital loss carryforward that are not more likely than not to be realized. The capital loss has a five-year carryforward period. The Company maintains a valuation allowance against the Outside Basis Deferred Tax Asset pertaining to the portion that is not amortizable for tax purposes, since the Company would likely only realize the non-amortizable portion of the Outside Basis Deferred Tax Asset if the investment in CWGS, LLC was divested.

Net Operating Loss and Tax Carryforwards

As of January 2, 2023, certain subsidiaries of CWH had federal and state net operating loss carryforwards of approximately $151.7 million and $3.9 million, respectively, which are no longer available after the LLC Conversion. The conversion loss generated a net operating loss that was immediately written off as CW’s net operating losses are lost as a result of the conversion. Accordingly, the tax effect of 2023 conversion loss was zero. At December 31, 2024, the Company accumulated $11.4 million of federal net operating losses which can be carried forward indefinitely and $5.5 million of state net operating losses which will begin to expire in 2028. At December 31, 2024, the Company had federal general business credit carryforwards of $0.5 million that can be carried forward through 2044.

Tax Legislation

On December 22, 2017, the Tax Cuts and Jobs Act (“TCJA”) was signed into law. One of the provisions of the TCJA was to amend Section 163(j) of the Internal Revenue Code, which, beginning for tax years after December 31, 2021, limits the amount of net interest expense that can be deducted by a percentage of adjusted taxable income. For the years ended December 31, 2024 and 2023, the reduction in earnings along with an increase in interest expense resulted in excess business interest expense of $110.7 million and $42.6 million, respectively, at CWGS, LLC. Additionally, this limitation on net interest expense deductibility applied to the calculation of tax distributions to common unit holders of CWGS, LLC, including CWH, under the CWGS LLC Agreement in 2023, which increased the tax distributions required to be paid. During the years ended December 31, 2024 and 2023, the Company recorded an income tax benefit of $15.6 million and $5.6 million, respectively, related to its business interest expense carryforward.

On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was signed into law. The IRA contains several revisions to the Internal Revenue Code, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022 with certain exclusions for (a) repurchased shares for withholding taxes on vested restricted stock units (“RSUs”) and (b) treasury shares reissued in the same tax year for settlement of stock option exercises or vesting of RSUs. While these tax law changes have no immediate effect and are not expected to have a material adverse effect on our results of operations going forward, the Company will continue to evaluate its impact as further information becomes available.

Uncertain Tax Positions

As of December 31, 2024 and 2023, the balance of the Company’s uncertain tax positions was $3.0 million and $3.3 million, respectively. The Company does not expect the total amount of unrecognized tax benefits to significantly change in the next 12 months.

Tax Receivable Agreement

The Company is party to a tax receivable agreement (the “Tax Receivable Agreement”) that provides for the payment by the Company to the Continuing Equity Owners and Crestview Partners II GP, L.P. of 85% of the amount of tax benefits, if any, the Company actually realizes, or in some circumstances is deemed to realize, as a result of (i) increases in the tax basis from the purchase of common units from Crestview Partners II GP, L.P. in exchange for Class A common stock in connection with the consummation of the IPO and the related transactions and any future redemptions that are funded by the Company and any future redemptions of common units by Continuing Equity Owners as described above and (ii) certain other tax benefits attributable to payments made under the Tax Receivable Agreement. The above payments are predicated on CWGS, LLC making an election under Section 754 of the Internal Revenue Code effective for each tax year in which a

redemption of common units for cash or stock occur. These tax benefit payments are not conditioned upon one or more of the Continuing Equity Owners or Crestview Partners II GP, L.P. maintaining a continued ownership interest in CWGS, LLC. In general, the Continuing Equity Owners’ or Crestview Partners II GP, L.P.’s rights under the Tax Receivable Agreement are assignable, including to transferees of its common units in CWGS, LLC (other than the Company as transferee pursuant to a redemption of common units in CWGS, LLC). The Company expects to benefit from the remaining 15% of the tax benefits, if any, which may be realized.

During the twelve months ended December 31, 2024 and 2023,149,143 and 2,000,000 common units in CWGS, LLC, respectively, were redeemed for Class A common stock subject to the provisions of the Tax Receivable Agreement. The Company recognized a liability for the Tax Receivable Agreement payments due to those parties that redeemed common units, representing 85% of the aggregate tax benefits the Company expects to realize from the tax basis increases related to the redemption, after concluding it was probable that the Tax Receivable Agreement payments would be paid based on estimates of future taxable income. During the year ended December 31, 2024 and 2023, the Tax Receivable Agreement liability increased $0.9 million and $5.6 million, respectively, as a result of common unit redemptions.

As of December 31, 2024, and December 31, 2023, the amount of Tax Receivable Agreement payments due under the Tax Receivable Agreement was $150.4 million and $162.8 million, respectively, of which $13.4 million of the December 31, 2023 balance was paid during the year ended December 31, 2024. The Company does not expect a cash tax reduction for tax benefits subject to the Tax Receivable Agreement during the year ended December 31, 2024 and, therefore, does not expect a payment under the Tax Receivable Agreement to be made during the year ending December 31, 2025.

Income Tax Audits

For tax years beginning on or after January 1, 2018, CWGS, LLC is subject to partnership audit rules enacted as part of the Bipartisan Budget Act of 2015 (the “Centralized Partnership Audit Regime”). Under the Centralized Partnership Audit Regime, any IRS audit of CWGS, LLC would be conducted at the CWGS, LLC level, and if the IRS determines an adjustment, the default rule is that CWGS, LLC would pay an “imputed underpayment” including interest and penalties, if applicable. CWGS, LLC may instead elect to make a “push-out” election, in which case the partners for the year that is under audit would be required to take into account the adjustments on their own personal income tax returns. If CWGS, LLC does not elect to make a “push-out” election, CWGS, LLC has agreements in place requiring former partners to indemnify CWGS, LLC for their share of the imputed underpayment. The partnership agreement does not stipulate how CWGS, LLC will address imputed underpayments. If CWGS, LLC receives an imputed underpayment, a determination will be made based on the relevant facts and circumstances that exist at that time. Any payments that CWGS, LLC ultimately makes on behalf of its current partners will be reflected as a distribution, rather than tax expense, at the time such distribution is declared.

The Company and its subsidiaries file U.S. federal income tax returns and tax returns in various states. During the year ended December 31, 2024, the Company was notified by the state of New York that its 2021 and 2022 state income tax returns were under examination. The Company finalized its 2020 and 2021 California income tax audits with no adjustments. The Company is not under any other material audits in any jurisdiction. With few exceptions, the Company is no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years before 2021.