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Tax Receivable Agreement | 12 Months Ended
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Dec. 31, 2025
Income Tax Disclosure [Abstract] |
Tax Receivable Agreement | Tax Receivable Agreement In connection with the IPO and Corporate Reorganization, the Company entered into the TRA with the TRA Members, which are related parties. The TRA generally provides for the payment by the Company to the TRA Members of 85% of the net cash tax savings, if any, in U.S. federal, state and local income tax the Company realizes, or is deemed to realize, as a result of the Company’s (i) allocable share of existing tax basis acquired in connection with the IPO and increases to such allocable share of existing tax basis; (ii) the utilization of certain tax attributes of the blocker entities; (iii) increases in tax basis resulting from future redemptions or exchanges (or deemed exchanges in certain circumstances) of Legence Holdings LGN B Units for Class A Common Stock or cash and certain distributions (or deemed distributions) by Legence Holdings pursuant to the Exchange Agreement; and (iv) certain additional tax benefits arising from payments made under the TRA. The Company retains the benefit of the remaining 15% of these cash savings, if any. Payments under the TRA are not conditioned upon any continued ownership interest in Legence Holdings or the Company. The Company recognizes an undiscounted liability related to TRA obligations that are both probable and reasonably estimable under ASC 450. In connection with the IPO and Corporate Reorganization, the Company recognized a TRA liability of $146.5 million. On December 16, 2025, the Company completed a secondary offering that involved an exchange of LGN B Units and shares of Class B Common Stock for an equal number of shares of Class A common stock. As a result of the exchange, the Company recorded an additional TRA liability of $58.0 million. The secondary offering also increased the deferred tax asset and valuation allowance related to the TRA liability by $7.2 million and $2.7 million, respectively. Refer to “Note 1—Nature of Operations” and “Note 12—Stockholders' Equity / Member's Equity” for additional information related to the TRA Members and the secondary offering. During the year ended December 31, 2025, the Company recognized a $2.9 million increase in the TRA liability as Other expense (income), net on the Consolidated Statements of Operations related to changes in state tax rates. The Company's total undiscounted TRA liability as of December 31, 2025 is $207.4 million and is recorded in Tax receivable agreement liability - related party on the Consolidated Balance Sheets. The timing and amount of aggregate payments under the TRA may vary based on a number of factors, including the Company’s future taxable income, future exchanges of LGN B Units for Class A Common Stock, the fair market value of assets at the time of each exchange, and the enacted tax rates applicable in the periods when deductions are realized. The Company estimates its obligation under the TRA utilizing these factors and other assumptions, including expected exchange activity and the fair value of underlying assets. Payments are generally due within a specified period after the filing of the Company’s federal income tax return for the relevant taxable year. Under the TRA, interest accrues on unpaid amounts at a rate equal to the SOFR plus 100 basis points beginning on the original due date of the related tax return and continuing until payment. If the TRA terminates early, the Company could be required to make a substantial, immediate lump-sum payment. The TRA may be terminated early at the Company’s election or will automatically accelerate upon certain events as defined in the TRA, including (i) a change of control, (ii) a material breach of the TRA, or (iii) bankruptcy or insolvency of the Company. Upon early termination or acceleration, the Company is required to make a lump-sum payment equal to the present value of all remaining expected TRA payments. The term of the TRA continues until all related tax benefits have been utilized or expired and all required payments have been made, unless earlier terminated as described above. Because the timing and amount of realized tax savings depend on future taxable income, stock price, and exchange activity, actual TRA payments could differ materially from estimates. As of December 31, 2025, the Company recorded a deferred tax asset of $25.4 million arising from future TRA payments. The Company assesses the realizability of deferred tax assets associated with the TRA liability, considering projected taxable income, character of the deductions, temporary differences, tax planning strategies, and recent operating results. As of December 31, 2025, the Company recorded a valuation allowance of $12.0 million. The deferred tax asset and related valuation allowance are recorded in Other assets on the Consolidated Balance Sheets. The Company continues to assess and adjust the valuation allowance each reporting period, as necessary.

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