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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company is subject to U.S. federal, state, and local income taxes. For the years ended December 31, 2024, 2023 and 2022, the Company recorded income tax expense of $41.2 million, an income tax benefit of $49.0 million, and income tax expense of $24.8 million, respectively. For the year ended December 31, 2024, the Company recognized a $1.0 million income tax benefit, and corresponding increase to net deferred tax assets, related to non-cash goodwill impairment charges of $13.1 million. For the year ended December 31, 2023, the Company recognized a $64.8 million income tax benefit, and corresponding increase to net deferred tax assets, related to non-cash goodwill impairment charges of $830.8 million. See Note 7, Goodwill and Identifiable Intangible Assets, for additional details.
The current and deferred income tax (benefit) expense for the years ended December 31, 2024, 2023 and 2022 is as follows (in thousands):
Year Ended December 31,
202420232022
Current: 
Federal$3,792 $5,689 $(197)
State5,398 7,902 6,930 
9,190 13,591 6,733 
Deferred:   
Federal25,330 (42,720)12,205 
State6,719 (19,875)5,831 
32,049 (62,595)18,036 
Income tax expense (benefit)$41,239 $(49,004)$24,769 
A reconciliation of the effective income tax rate with the applicable statutory federal income tax rate for the years ended December 31, 2024, 2023 and 2022 is as follows:
Year Ended December 31,
202420232022
Federal statutory rate21.0 %21.0 %21.0 %
State income taxes, net of federal benefit3.0 %1.0 %3.6 %
Equity-based compensation1.6 %(0.4)%(0.5)%
Change in valuation allowance3.8 %(0.3)%— %
Change in fair value of warrant liability(0.6)%1.0 %(3.7)%
Goodwill impairment1.4 %(16.6)%— %
Deferred tax only adjustment(0.8)%1.1 %(2.6)%
Deferred tax impact of state effective tax rate changes— %— %8.6 %
Other0.9 %— %(1.1)%
Effective income tax rate 30.3 %6.8 %25.3 %
Deferred income tax assets and liabilities are comprised of the following at December 31, 2024 and 2023 (in thousands):
December 31,
20242023
Deferred income tax assets:
Accounts receivable18,915 35,009 
Goodwill and intangible assets259,976 293,022 
Inventory1,321 1,926 
Accruals14,361 16,909 
Net operating losses and credits14,162 23,978 
Transaction costs522 455 
Equity-based compensation4,220 5,379 
Excess business interest expense64,429 46,273 
Lease liability36,158 37,069 
Capital losses — 792 
Other132 7 
Total deferred income tax assets414,196 460,819 
Valuation allowance(8,916)(3,788)
Net deferred income tax assets$405,280 $457,031 
Deferred income tax liabilities:  
Right-of-use assets$(34,841)$(36,011)
Contingent consideration(2,328)(2,112)
Investment in partnership(812)(582)
Unrealized gains(779)(1,479)
Equipment and other fixed assets(52,015)(70,993)
Total deferred income tax liabilities(90,775)(111,177)
Noncurrent net deferred income tax assets$314,505 $345,854 

Deferred income taxes are determined based on the temporary differences between the financial statement book basis and the tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. In assessing the realizability of deferred income tax assets, management considers whether it is more likely than not that all, or some portion, of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred income tax liabilities and projected future taxable income in making this assessment. Management evaluates the need for valuation allowances on the deferred income tax assets according to the provisions of FASB ASC 740, Income Taxes. In making this determination, management assesses all available evidence, both positive and negative, available at the time balance sheet date. This includes, but is not limited to, recent earnings, internally prepared income projections, and historical financial performance. A history of cumulative losses is a significant piece of negative evidence used in the assessment. As of December 31, 2024 and 2023, the Company had a valuation allowance recorded against net deferred tax assets of $8.9 million, and $3.8 million, respectively.
As of December 31, 2024 and 2023, the Company had federal net operating losses ("NOLs") carryforwards of $4.8 million and $72.4 million, respectively and state NOLs of $293.4 million and $281.1 million, respectively. The Company believes $4.8 million of federal NOLs are fully limited as a result of ownership changes within the meaning of Internal Revenue Code Section 382 ("Section 382") and has maintained a valuation allowance against these NOL deferred
tax assets. As of December 31, 2024 and 2023, the Company had interest expense carryforwards of $262.4 million and $177.3 million, which may be carried forward indefinitely.
The Company will recognize a tax benefit in the financial statements for an uncertain tax position only if management’s assessment is that the position is “more likely than not” (i.e., a likelihood greater than 50 percent) to be allowed by the tax jurisdiction based solely on the technical merits of the position. The term “tax position” refers to a position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for financial reporting purposes.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2024, 2023 and 2022 is as follows (in thousands).
Balance, December 31, 2021$4,047 
Additions for tax positions acquired2,670 
Reductions due to lapse of statute of limitations(78)
Balance, December 31, 20226,639 
Additions for tax positions acquired— 
Reductions due to lapse of statute of limitations(43)
Balance, December 31, 20236,596 
Additions for tax positions acquired12 
Reductions due to lapse of statute of limitations(3,868)
Balance, December 31, 2024$2,740 
The unrecognized tax benefit of $2.7 million at December 31, 2024 relates to tax positions taken in pre-closing tax periods of companies acquired in 2021, for which the Company received tax indemnifications against any losses. As such, the Company recognized a corresponding asset on its consolidated balance sheet and no amount of the Company’s uncertain tax positions, if recognized, would impact the effective tax rate of the Company. As of December 31, 2024 and 2023, the Company’s accrued liability for interest and penalties is $1.7 million and $2.8 million, respectively.
The Company files income tax returns in the U.S. federal jurisdiction and in various state jurisdictions. The Company generally is no longer subject to U.S. or state examinations by tax authorities for taxable years prior to 2020, based on the U.S. statute of limitations. However, net operating losses utilized from prior years in subsequent years’ tax returns are subject to examination until three years after the filing of subsequent years’ tax returns.
Tax Receivable Agreement

At the closing of the Business Combination, the Company and AdaptHealth Holdings entered into a Tax Receivable Agreement (TRA) with certain sellers and AdaptHealth Holdings members. The TRA will generally provide for the payment by the Company to the corresponding sellers and AdaptHealth Holdings members of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the closing of the Business Combination as a result of: (i) certain tax attributes of the corresponding sellers existing prior to the Business Combination; (ii) certain increases in tax basis resulting from exchanges of New AdaptHealth Units and shares of Class B Common Stock; (iii) imputed interest deemed to be paid by the Company as a result of payments it makes under the TRA; and (iv) certain increases in tax basis resulting from payments the Company makes under the TRA. Under the TRA, the benefits deemed realized by the Company as a result of the increase in tax basis attributable to the AdaptHealth Holdings members generally will be computed by comparing the actual income tax liability of the Company to the amount of such taxes that the Company would have been required to pay had there been no such increase in tax basis.
Estimating the amount of payments that may be made under the TRA depends on a variety of factors. The actual increase in tax basis and deductions, as well as the amount and timing of any payments under the TRA, will vary depending upon several factors, including:
•The timing of such exchanges – for instance, the increase in any tax deductions will vary depending on the fair value of the depreciable or amortizable assets of AdaptHealth Holdings at the time of each exchange;
•The price of the Company’s Common Stock at the time of the exchange – the increase in any tax deductions, and the tax basis increase in other assets of AdaptHealth Holdings is directly proportional to the price of the Company’s Common Stock at the time of the exchange;
•The amount and timing of the Company’s income – the Company is required to pay 85% of the deemed benefits as and when deemed realized. If AdaptHealth Holdings does not have taxable income, the Company is generally not required (absent a change in control or circumstances requiring an early termination payment) to make payments under the TRA for that taxable year because no benefit will have been realized. However, any tax benefits that do not result in realized benefits in a given tax year likely will generate tax attributes that may be utilized to generate benefits in previous or future tax years. The utilization of such tax attributes will result in payments under the TRA; and
•Future tax rates of jurisdictions in which the Company has tax liability.
The TRA also provides that upon certain mergers, asset sales, other forms of business combinations or other changes of control, AdaptHealth Holdings’ (or its successor’s) obligations under the TRA would be based on certain assumptions defined in the TRA. As a result of these assumptions, AdaptHealth could be required to make payments under the TRA that are greater or less than the specified percentage of the actual benefits realized by the Company that are subject to the TRA. In addition, if AdaptHealth Holdings elects to terminate the TRA early, it would be required to make an early termination payment, which upfront payment may be made significantly in advance of the anticipated future tax benefits.
Payments generally are due under the TRA within a specified period following the filing of AdaptHealth Holdings’ U.S. federal and state income tax returns for the taxable year with respect to which the payment obligation arises. Payments under the TRA generally will be based on the tax reporting positions that AdaptHealth Holdings will determine. Although AdaptHealth Holdings does not expect the Internal Revenue Service (IRS) to challenge the Company’s tax reporting positions, AdaptHealth Holdings will not be reimbursed for any overpayments previously made under the TRA, but instead the overpayments will reduce future payments. As a result, in certain circumstances, payments could be made under the TRA in excess of the benefits that AdaptHealth Holdings realizes in respect of the tax attributes subject to the TRA.
The term of the TRA generally will continue until all applicable tax benefits have been utilized or expired, unless the Company exercises its right to terminate the TRA and make an early termination payment.
In certain circumstances (such as certain changes in control, the election of the Company to exercise its right to terminate the agreement and make an early termination payment or an IRS challenge to a tax basis increase) it is possible that cash payments under the TRA may exceed actual cash savings.
At December 31, 2024, the Company’s liability relating to the TRA was $290.4 million, of which $25.0 million and $265.4 million is included in other liabilities and other long-term liabilities, respectively, in the accompanying consolidated balance sheets. At December 31, 2023, the Company's liability relating to the TRA was $291.6 million, of which $1.5 million and $290.1 million is included in other liabilities and other long-term liabilities, respectively, in the accompanying consolidated balance sheets. During the year ended December 31, 2024, the Company recognized a loss of $0.2 million related to changes in the estimated TRA liability, which is included in other loss, net in the accompanying consolidated statement of operations. During the year ended December 31, 2023, the Company recognized income of $2.5 million related to changes in the estimated TRA liability primarily as a result of a decrease in estimated effective tax rates in future years, which is included in other loss, net in the accompanying consolidated statements of operations.