Income Taxes

6 Months Ended

Jun. 30, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We provide for income taxes under the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of differences between the tax basis of assets or liabilities and their carrying amounts in the financial statements. We provide a valuation allowance for deferred tax assets if it is more likely than not that these items will expire before we are able to realize their benefit. We calculate the valuation allowance in accordance with the authoritative guidance relating to income taxes, which requires an assessment of both positive and negative evidence regarding the realizability of these deferred tax assets, when measuring the need for a valuation allowance. Significant judgment is required in determining any valuation allowance against deferred tax assets. We continue to record a full valuation allowance against our deferred tax assets and intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal.

Intraperiod tax allocation rules require us to allocate our provision for income taxes between continuing operations and other categories of comprehensive income, such as discontinued operations.

For the three months ended June 30, 2025, we recorded an income tax expense of $457 thousand. For the three months ended June 30, 2024, we recorded an income tax benefit of $39 thousand. For the six months ended June 30, 2025, we recorded an income tax benefit of $1.7 million. For the six months ended June 30, 2024, we recorded an income tax benefit of $4 thousand.

The income tax benefit for the six months ended June 30, 2025, includes a discrete benefit of $2.0 million related to the valuation allowance release associated with Star’s pre-existing tax attributes in relation to purchase accounting. Deferred tax liabilities were recorded in the ADT purchase accounting which provided support for the release of a portion of Star’s valuation allowance when the entities were combined. An additional income tax expense of $268 thousand was recorded for the estimated cash taxes for which NOLs are limited during current tax law.

As of June 30, 2025, we had unrecognized tax benefits of approximately $300 thousand related to uncertain tax positions. Included in the unrecognized tax benefits were $300 thousand of tax benefits that, if recognized, would reduce our annual effective tax rate, subject to the valuation allowance.