Income Taxes

12 Months Ended

Dec. 31, 2024

Income Taxes

Income Taxes

Note 18—Income Taxes

The Company files U.S. federal and state corporate income tax returns for PFSI and partnership returns for PNMAC. The Company’s federal tax returns are subject to examination for 2021 and forward and its state tax returns are generally subject to examination for 2020 and forward. PNMAC’s federal partnership returns are subject to examination for 2021 and forward, and its state tax returns are generally subject to examination for 2020 and forward. The Internal Revenue Service has recently concluded their examination of the Company’s federal income tax return for 2020 and issued a no change letter. California has opened an audit for tax years 2019 and 2020. The Company does not expect any material changes from these examinations as of December 31, 2024.

The following table details the Company’s provision for income taxes:

	Year ended December 31,
	2024		2023		2022
	(in thousands)
Current (benefit) expense:
Federal	$	(44)	$	1,436	$	(2,944)
State		258		620		(249)
Total current expense (benefit)		214		2,056		(3,193)
Deferred expense:
Federal		70,877		31,375		131,670
State		18,512		5,544		61,263
Total deferred expense		89,389		36,919		192,933
Total provision for income taxes	$	89,603	$	38,975	$	189,740

The following table is a reconciliation of the Company’s provision for income taxes at statutory rates to the provision for income taxes at the Company’s effective income tax rate:

	Year ended December 31,
	2024	2023	2022
Federal income tax at statutory rate	21.0%	21.0%	21.0%
State income taxes, net of federal benefit	5.2%	4.7%	5.9%
Tax rate revaluation	(1.9) %	(2.2) %	1.2%
Other	(2.0) %	(2.3) %	0.4%
Effective income tax rate	22.3%	21.2%	28.5%

The components of the Company’s provision for deferred income taxes are as follows:

	Year ended December 31,
	2024		2023		2022
	(in thousands)
Mortgage servicing rights	$	231,892	$	186,628	$	326,378
Net operating loss		(181,759)		(111,496)		(160,605)
Reserves and losses		39,071		(41,641)		13,480
Additional tax basis in partnership from exchanges of partnership units into the Company's common stock		3,841		3,803		4,517
Compensation accruals		(451)		7,403		10,473
California franchise taxes		—		—		4,447
Other		(3,205)		(7,778)		(5,757)
Total provision for deferred income taxes	$	89,389	$	36,919	$	192,933

The components of Income taxes payable are as follows:

	December 31,
	2024		2023
	(in thousands)
Current income tax (receivable) payable	$	(45)	$	1,230
Deferred income tax liability, net		1,131,045		1,041,656
Income taxes payable	$	1,131,000	$	1,042,886

The tax effects of temporary differences that gave rise to deferred income tax assets and liabilities are presented below:

	December 31,
	2024		2023
	(in thousands)
Deferred income tax assets:
Net operating loss carryforward	$	454,936	$	273,178
Reserves and losses		36,365		75,436
Compensation accruals		35,718		35,266
Additional tax basis in partnership from exchanges of partnership units into the Company's common stock		18,116		21,957
Other		8,588		9,943
Gross deferred income tax assets		553,723		415,780
Deferred income tax liabilities:
Mortgage servicing rights		1,678,702		1,446,810
Other		6,066		10,626
Gross deferred income tax liabilities		1,684,768		1,457,436
Net deferred income tax liability	$	1,131,045	$	1,041,656

The Company recorded a deferred tax asset of $454.9 million for net operating losses, of which $181.3 million related to net operating losses incurred in 2024 and the remaining balance of $273.6 million related to net operating losses incurred between 2018 and 2023. The $355.7 million related to federal net operating loss carry forward has no expiration date but is subject to an annual utilization limitation of up to 80% of taxable income. Of the remaining $99.2 million in deferred tax assets, relating to state net operating losses, $12.3 million expires between 2032 and 2037, $68.9 million expires in 2042 and $18.0 million has no expiration date. The Company expects to fully utilize these net operating losses before their expiration dates.

At December 31, 2024 and 2023, the Company had no unrecognized tax benefits and does not anticipate any unrecognized tax benefits. Should the recognition of any interest or penalties relative to unrecognized tax benefits be necessary, it is the Company’s policy to record such expenses in the Company’s income tax accounts. No such accruals existed at December 31, 2024 and 2023.

The Company made dividend payments of $52.2 million to holders of common stock in 2024. For tax purposes, the entire distribution is a return of capital to the stockholders.