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Income Taxes (Notes)
 6 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Baldwin is the sole managing member of Baldwin Holdings, which is treated as a partnership for U.S. federal, state and local income tax purposes. As a partnership, Baldwin Holdings is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Baldwin Holdings is passed through to and included in the taxable income or loss of its partners, including Baldwin. Baldwin is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to Baldwin’s allocable share of income of Baldwin Holdings.
Effective Tax Rate
The Company’s effective tax rate was 71.4% and 3.4% for the six months ended June 30, 2026 and 2025, respectively. The effective tax rate for the six months ended June 30, 2026 exceeded the U.S. federal statutory rate primarily due to the first quarter 2026 partial valuation allowance release. During the first quarter of 2026, the deferred tax accounting for both the CAC Group and Obie partnerships drove the partial release in valuation allowance, which is also driving the 68.0% increase in the effective tax rate between the two periods. The effective tax rate for the six months ended June 30, 2025 was lower than the U.S. federal statutory rate primarily due to the change in valuation allowance as a result of operating activity and the impact of partnership income allocations.
The Company’s effective tax rate was (0.2)% and (15.4)% for the three months ended June 30, 2026 and 2025, respectively. The effective tax rate for the three months ended June 30, 2026 was lower than the U.S. federal statutory rate primarily due to the impact of the change in valuation allowance as a result of operating activity and partnership income allocations. The effective tax rate for the three months ended June 30, 2025 was lower than the U.S. federal statutory rate primarily due to the change in valuation allowance as a result of operating activity and the impact of partnership income allocations. The 15.2% decrease in the effective tax rate between periods was primarily due to a change in pre-tax loss between the quarters ended June 30, 2025 and June 30, 2026.
The Company does not believe it has any significant uncertain tax positions and therefore has no unrecognized tax benefits as of June 30, 2026, that, if recognized, would affect the annual effective tax rate.
Deferred Taxes
The ultimate realization of deferred tax assets depends on the generation of future taxable income during the periods in which the related temporary differences become deductible, as well as the Company’s ability to implement feasible tax‑planning strategies. The Company has historically maintained a full valuation allowance on its deferred tax assets due to uncertainty regarding the generation of sufficient future taxable income necessary to realize those assets.
Each reporting period, the Company evaluates both positive and negative evidence that could affect its assessment of the realizability of its deferred tax assets. Our reassessment in the first quarter of 2026 included the consideration of additional evidence arising from the Company’s acquisition of the outstanding equity interests of CAC Group on January 1, 2026 and Obie on January 2, 2026, which resulted in the recognition of $142.2 million of deferred tax liabilities. The recognition of deferred tax liabilities associated with acquired intangible assets provided a source of future taxable income, which supported the realizability of certain deferred tax assets and resulted in a shift from a net deferred tax asset position to a net deferred tax liability position. Based on the evaluation of all available positive and negative evidence, the Company concluded that sufficient positive evidence existed to support the realizability of the majority of its deferred tax assets.
As of December 31, 2025, the Company maintained a full valuation allowance on its deferred tax assets of $210.7 million. As previously discussed, and due in part to the acquisitions of CAC Group and Obie, we have determined that it is more likely than not that a portion of our deferred tax assets will be realized. During the first quarter of 2026, we released $167.1 million of the valuation allowance previously recorded and recorded an increase in net deferred tax liabilities of $30.0 million, with $144.5 million recognized as income tax benefit in the condensed consolidated statements of comprehensive income (loss) and $7.3 million recognized as a reduction to additional paid-in capital on the condensed consolidated statements of stockholders’ equity and mezzanine equity. As of June 30, 2026, the Company was in a net deferred tax liability position of $4.7 million.
The Company’s income tax benefit was $144.4 million for the six months ended June 30, 2026, which reflects the release of the majority of the valuation allowance, partially offset by the change in deferred tax liabilities, which were recognized in connection with the CAC Group and Obie partnerships.
Tax Receivable Agreement
Baldwin Holdings makes an election under Section 754 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the “Code”) effective for each taxable year in which a redemption or exchange of LLC Units and corresponding Class B common stock for shares of Class A common stock occurs. Exchanges result in tax basis adjustments to the assets of Baldwin Holdings, which produce favorable tax attributes and reduce the amount of tax that Baldwin is required to pay.
Baldwin is a party to the Tax Receivable Agreement with Baldwin Holdings’ LLC Members that provides for the payment by Baldwin to Baldwin Holdings’ LLC Members of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that Baldwin actually realizes as a result of (i) any increase in tax basis in Baldwin Holdings’ assets resulting from (a) previous acquisitions by Baldwin of LLC Units from Baldwin Holdings’ LLC Members, (b) the acquisition of LLC Units from Baldwin Holdings’ LLC Members using the net proceeds from any future offering, (c) redemptions or exchanges by Baldwin Holdings’ LLC Members of LLC Units and the corresponding number of shares of Class B common stock for shares of Class A common stock or cash or (d) payments under the Tax Receivable Agreement, and (ii) tax benefits related to imputed interest resulting from payments made under the Tax Receivable Agreement.
This payment obligation is an obligation of Baldwin and not of Baldwin Holdings. For purposes of the Tax Receivable Agreement, the cash tax savings in income tax will be computed by comparing the actual income tax liability of Baldwin (calculated with certain assumptions) to the amount of such taxes that Baldwin would have been required to pay had there been no increase to the tax basis of the assets of Baldwin Holdings as a result of the redemptions or exchanges and had Baldwin not entered into the Tax Receivable Agreement.
The Company accounts for amounts payable under the Tax Receivable Agreement in accordance with Topic 450. Estimating the amount of payments that may be made under the Tax Receivable Agreement is by its nature imprecise, insofar as the calculation of amounts payable depends on a variety of factors. The actual increase in tax basis, as well as the amount and timing of any payments under the Tax Receivable Agreement, will vary depending upon a number of factors, including the timing of redemptions or exchanges, the price of shares of our Class A common stock at the time of the redemption or exchange, the extent to which such redemptions or exchanges are taxable and the amount and timing of our income. Any such changes in these factors or changes in the Company’s determination of the need for a valuation allowance related to the tax benefits acquired under the Tax Receivable Agreement, including changes in the expected realization of tax benefits, which may be informed by, but not solely determined by, valuation allowance assessments, could adjust the Tax Receivable Agreement liabilities recognized on the condensed consolidated balance sheets.
The Company accounts for the effects of these increases in tax basis and associated payments under the Tax Receivable Agreement arising from future redemptions or exchanges as follows:
•records an increase in deferred tax assets through additional paid-in capital for the estimated income tax effects of the increases in tax basis based on enacted federal and state tax rates at the date of the redemption or exchange;
•to the extent it is estimated that the Company will not realize the full benefit represented by the deferred tax asset, based on an analysis that will consider, among other things, our expectation of future earnings, the Company reduces the deferred tax asset with a valuation allowance, also recorded to additional paid-in capital; and
•records 85% of the estimated realizable tax benefit as defined in the Tax Receivable Agreement as an increase to the liability due under the Tax Receivable Agreement, with the offset to additional paid-in capital.
Subsequent changes to the initial recognition of the increases in deferred tax assets and Tax Receivable Agreement liability between reporting periods will be recognized in the condensed consolidated statements of stockholders’ equity and mezzanine equity as the exchanges represent transactions among stockholders. Subsequent changes in any of our estimates after the date of the redemption or exchange, as well as any interest accrued on the Tax Receivable Agreement between the Company’s annual tax filing date and the Tax Receivable Agreement payment date, are recognized in the condensed consolidated statements of comprehensive income (loss). In the unlikely event of an early termination of the Tax Receivable Agreement, the Company is required to pay to each holder of the Tax Receivable Agreement an early termination payment equal to the discounted present value of all unpaid Tax Receivable Agreement payments.
Following the Company’s assessment of the realizability of its deferred tax assets during the six months ended June 30, 2026 discussed above, and after concluding that the related tax benefits were more likely than not to be realized, the Company determined that the Tax Receivable Agreement liabilities associated with these basis increases generated to date were probable of being payable. Accordingly, the Company recorded Tax Receivable Agreement liabilities equal to 85% of the tax benefits expected to be realized from the redemptions. The Company anticipates having sufficient taxable income to be able to realize the benefits and has recorded Tax Receivable Agreement liabilities based on the undiscounted estimated future payments under the Tax Receivable Agreement. The amounts payable under the Tax Receivable Agreement will vary depending upon a number of factors, including the amount, character, and timing.
During the six months ended June 30, 2026, 3,644,056 LLC Units were redeemed by the Pre‑IPO LLC Members in exchange for an equal number of newly issued shares of Class A common stock. These exchanges resulted in an increase in the tax basis of Baldwin’s investment in Baldwin Holdings, generating additional deferred tax assets subject to the provisions of the Tax Receivable Agreement.
As of June 30, 2026 and December 31, 2025, the Company had Tax Receivable Agreement liabilities of $144.6 million and $4.5 million, respectively, representing amounts payable to current or former Baldwin Holdings LLC Members under the Tax Receivable Agreement. These amounts are included in Tax Receivable Agreement liabilities on the condensed consolidated balance sheets.
During the six months ended June 30, 2026, increases to the Tax Receivable Agreement liabilities of $130.0 million due to the initial recognition were recognized in other operating expenses on the condensed consolidated statements of comprehensive income (loss). During the six months ended June 30, 2026, increases to the Tax Receivable Agreement liabilities of $14.6 million due to exchanges of LLC Units for Class A common stock were recognized as a reduction to additional paid-in capital on the condensed consolidated statements of stockholders’ equity and mezzanine equity.