Income Taxes

3 Months Ended

Mar. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Note 9. Income Taxes

The provision for income taxes was $4.4 million for the three months ended March 31, 2025 as compared to $0 for the three months ended March 31, 2024:

	Three Months Ended
(in thousands)	March 31, 2025		March 31, 2024
Current
Federal	$	3,650	$	-
State		665		-
Total current income tax expense		4,315		-
Deferred
Federal		55		-
State		10		-
Total deferred income tax expense		65		-
Total income tax expense	$	4,380	$	-

The effective tax rate for the three months ended March 31, 2025 was 24.8%, as compared to an effective tax rate of zero for the three months ended March 31, 2024. A reconciliation of the statutory rate and effective tax rates was as follows:

	Three Months Ended
	March 31, 2025			March 31, 2024
Statutory rate		21.0	%			21.0	%
State income rates, net of federal income tax benefit		3.8	%			4.3	%
Valuation allowance		0.0	%		(25.3)		%
Effective tax rate		24.8	%			0.0	%

Deferred income taxes represent the net tax effects of temporary differences between the financial statement carrying amounts and the corresponding tax basis of certain assets and liabilities related to the initial land basis spun off from Lennar and the acquisition of Rausch land assets. These differences result in the recognition of a deferred tax liability.

The Company’s deferred tax liabilities as of March 31, 2025 and December 31, 2024 were as follows:

(in thousands)	March 31, 2025		December 31, 2024
Deferred tax liabilities
Land basis adjustments, Spin-Off and acquired Rausch land assets	$	56,825	$	-
Homesite takedown adjustments		65		-
Total deferred tax liabilities	$	56,890	$	-

Millrose for the three months ended March 31, 2025

For the three months ended March 31, 2025, the effective tax rate included the income tax expense the Company incurred on the option fee income less any related expenses. The change in the effective tax rate as compared to the three months ended March 31, 2024 was primarily due to a valuation allowance in the first quarter of 2024 for the cumulative loss position of the carve-out Predecessor Millrose Business.

Predecessor Millrose Business for the three months ended March 31, 2024

The Predecessor Millrose Business did not have income taxes during the three months ended March 31, 2024 due to offsetting changes in valuation allowance against its deferred taxes that reduced income taxes and effective tax rate to zero.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. As of March 31, 2024 the Predecessor Millrose Business had federal and state income tax net operating loss carryforwards related to operations that may be carried forward from 10 to 20 years, or indefinitely, depending on the tax jurisdiction.

A reduction of the carrying amounts of deferred tax assets by a valuation allowance is required if, based on the available evidence, it is more likely than not that such assets will not be realized. Accordingly, the need to establish valuation allowances was assessed by the Predecessor Millrose Business based on the consideration of all available positive and negative evidence using a “more- likely-than-not” standard with respect to whether deferred tax assets will be realized. This assessment considered, among other matters, the nature, frequency and severity of current and cumulative losses, actual earnings, forecasts of future profitability, the duration of statutory carryforward periods, the Predecessor Millrose Business’s experience with loss carryforwards not expiring unused and tax planning alternatives. Based on this assessment, the Predecessor Millrose Business determined that it will not be able to realize its net operating loss carryforwards and recorded a valuation allowance against its deferred tax asset, which also reduced income taxes and effective tax rate to zero.

As of March 31, 2024, the Predecessor Millrose Business had no gross unrecognized tax benefits.