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Income Taxes
 9 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company calculates its provision for income taxes during interim reporting periods by applying an estimate of the annual effective tax rate to its year-to-date pre-tax book income or loss. The tax effects of discrete items are recognized in the period in which they occur. The effective tax rate (income taxes as a percentage of income from operations before income taxes) including discrete items was (56.7)% and 32.2% for the three and nine months ended September 30, 2025, respectively, compared to 23.1% and 18.6% for the three and nine months ended September 30, 2024, respectively.
The change in the effective tax rate for the three and nine months ended September 30, 2025, as compared to the prior-year periods, was primarily driven by (i) the exclusion of certain foreign losses for which no tax benefit can be recognized in the Company’s worldwide effective tax rate calculation; (ii) non-deductible permanent items; (iii) state income taxes; and (iv) changes in the valuation allowance. The effective tax rate may vary from period to period depending on, among other factors, the geographic and business mix of the Company’s earnings, changes in its valuation allowance assessment, and other factors, including the Company’s historical and projected pre-tax earnings, which are considered in evaluating the realizability of deferred tax assets.
As of each reporting date, the Company evaluates all available positive and negative evidence in assessing the realizability of deferred tax assets, in accordance with ASC Topic 740, “Income Taxes” (“ASC 740”). As of September 30, 2025, the Company continues to maintain a valuation allowance on deferred tax assets not considered “more likely than not” to be realized. A reduction in the valuation allowance could result in a significant decrease in income tax expense in the period the release is recorded. The timing and amount of any reversal will depend on actual earnings achieved in 2025 and projected future income levels.
During the three and nine months ended September 30, 2025, the Company recognized a non-cash impairment charge of $825.0 million related to its PENN Interactive reporting unit (as discussed in Note 5, “Goodwill and Other Intangible Assets”). The impairment represents a non-deductible permanent item and had no impact on the Company’s effective tax rate, deferred taxes, or valuation allowance.
As of September 30, 2025 and December 31, 2024, the Company had prepaid income taxes of $34.0 million and $31.9 million, respectively, which were included in “Prepaid expenses” within the unaudited Consolidated Balance Sheets.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBB”) was enacted. Key business income tax provisions of the OBBB applicable to the Company include (i) reinstatement of immediate deduction for domestic research or experimental expenditures; (ii) extension of 100% accelerated tax bonus depreciation for qualifying depreciable assets; and (iii) restoration of the favorable EBITDA-based business interest expense limitation. The impacts of the OBBB are reflected in the Company’s results for the quarter and did not have a material impact on the Company’s effective tax rate for the three and nine months ended September 30, 2025.