Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The Company is a member of American Oncology Network, LLC, which is treated as a partnership for U.S. federal and certain state and local income taxes. As a partnership, American Oncology Network, LLC is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by American Oncology Network, LLC is passed through to and included in the taxable income or loss of its members, including the Company.

The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to the allocable share of any taxable income of American Oncology Network, LLC. Additionally, other corporate entities within the Company's structure are subject to income taxes. These corporate entities continue to generate losses and continue to maintain a valuation allowance against their net deferred tax assets.

The Company’s effective income tax rate was 0.0% and (1.1)% for the three months ended September 30, 2024 and 2023, respectively. The provision for income taxes was $0 and $315 for the three months ended September 30, 2024 and 2023, respectively.

The Company’s effective income tax rate was (9.6)% and (0.8)% for the nine months ended September 30, 2024 and 2023, respectively. The provision for income taxes was $2,570 and $315 for the nine months ended September 30, 2024 and 2023, respectively.

The change to the income tax provision for the nine months ended September 30, 2024 compared to the income tax provision for the nine months ended September 30, 2023 was primarily a result of the full valuation allowance recorded against the Company’s net deferred tax assets as of September 30, 2024. As of December 31, 2023, the Company recognized a deferred tax asset related to its investment in the American Oncology Network, LLC partnership. As of September 30, 2024, the Company updated its valuation allowance assessment based on new factors including its year-to-date loss and forecasted loss at the American Oncology Network, LLC partnership legal entity. Based on its updated valuation allowance assessment, the Company recorded a discrete full valuation allowance against its investment in partnership deferred tax asset during the nine months ending September 30, 2024.

The effective income tax rate for the three and nine months ended September 30, 2024 and 2023 differed from the federal statutory rate primarily due to certain legal entities in the Company's structure being treated as partnerships for income tax purposes and, therefore, a significant portion of its income not being subject to income tax. Additionally, as of September 30, 2024, all corporate entities within the Company's structure maintain a full valuation allowance against their net deferred tax assets.