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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
INCOME TAXES  
INCOME TAXES

NOTE 15—INCOME TAXES

Select Inc. is subject to U.S. federal and state income taxes as a corporation. SES Holdings and its subsidiaries, with the exception of certain corporate subsidiaries, are treated as flow-through entities for U.S. federal income tax purposes and as such, are generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with respect to their taxable income is passed through to their members or partners. Select Inc. recognizes a tax liability on its allocable share of SES Holdings’ taxable income.

The Company’s effective tax rates for the years ended December 31, 2024, 2023 and 2022 were 27.7%, (316.4%) and 1.7% respectively. The effective tax rate for the year ended December 31, 2024, differs from the statutory rate of 21% for 2024 due to net income allocated to noncontrolling interests, state income taxes and nondeductible items. The effective tax rates for the years ended December 31, 2023 and 2022 differ from the statutory rate of 21% for 2023 and 2022 due to net income allocated to noncontrolling interests, state income taxes and valuation allowances.

The components of the federal and state income tax (benefit) expense are summarized as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

For the year ended

​

​

December 31, 

​

    

2024

    

2023

    

2022

​

​

(in thousands)

Current tax expense (benefit)

 

​

  

 

​

  

 

​

  

Federal income tax expense

​

$

55

​

$

200

​

$

163

State and local income tax expense

​

 

1,013

​

 

1,563

​

 

982

Total current expense

​

 

1,068

​

 

1,763

​

 

1,145

Deferred tax expense (benefit)

​

 

  

​

 

  

​

 

  

Federal income tax expense (benefit)

​

 

13,633

​

 

(57,807)

​

 

—

State and local income tax benefit

​

 

(1,133)

​

 

(4,152)

​

 

(188)

Total deferred expense (benefit)

​

 

12,500

​

 

(61,959)

​

 

(188)

Total income tax expense (benefit)

​

$

13,568

​

$

(60,196)

​

$

957

Tax expense (benefit) attributable to controlling interests

​

$

13,422

​

$

(60,443)

​

$

838

Tax expense attributable to noncontrolling interests

​

 

146

​

 

247

​

 

119

Total income tax expense (benefit)

​

$

13,568

​

$

(60,196)

​

$

957

​

A reconciliation of the Company’s provision for income taxes as reported and the amount computed by multiplying income before taxes, less noncontrolling interest, by the U.S. federal statutory rate of 21% for 2024, 2023 and 2022 is as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

    

For the year ended December 31,

​

​

​

2024

 

​

2023

 

​

2022

​

​

​

(in thousands)

​

Provision calculated at federal statutory income tax rate:

 

​

  

​

​

​

  

​

​

​

  

​

Income before equity in losses of unconsolidated entities and taxes

​

$

49,370

​

​

$

20,823

​

​

$

56,724

​

Equity in losses of unconsolidated entities

​

​

(352)

​

​

​

(1,800)

​

​

​

(913)

​

Income before taxes

​

​

49,018

​

​

​

19,023

​

​

​

55,811

​

Statutory rate

​

 

21

%

​

 

21

%

​

 

21

%

Income tax expense computed at statutory rate

​

 

10,294

​

​

 

3,995

​

​

 

11,720

​

Less: noncontrolling interests

​

 

(1,021)

​

​

 

(1,011)

​

​

 

(1,688)

​

Income tax expense attributable to controlling interests

​

 

9,273

​

​

 

2,984

​

​

 

10,032

​

State and local income taxes, net of federal benefit

​

 

1,220

​

​

 

1,302

​

​

 

699

​

State rate change

​

 

253

​

​

 

644

​

​

 

488

​

Change in subsidiary tax status

​

​

—

​

​

​

—

​

​

​

—

​

Deferred tax adjustments and carryforward expirations

​

​

7,439

​

​

​

1,665

​

​

​

122

​

Change in valuation allowance

​

 

(6,586)

​

​

 

(71,164)

​

​

 

(11,042)

​

Nondeductible items

​

​

1,823

​

​

​

4,126

​

​

​

539

​

Income tax expense (benefit) attributable to controlling interests

​

 

13,422

​

​

 

(60,443)

​

​

 

838

​

Income tax expense attributable to noncontrolling interests

​

 

146

​

​

 

247

​

​

 

119

​

Total income tax expense (benefit)

​

$

13,568

​

​

$

(60,196)

​

​

$

957

​

​

Deferred taxes result from the temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. As of December 31, 2024, the Company had deferred tax assets of $46.3 million and deferred tax liabilities of $0.4 million. As of December 31, 2023, the Company had deferred tax assets of $61.9 million and deferred tax liabilities of $0.3 million. Deferred tax liabilities are recorded in other long-term liabilities on the consolidated balance sheets. The principal components of the deferred tax assets (liabilities) are summarized as follows:

​

​

​

​

​

​

​

​

​

​

For the year ended

​

​

December 31, 

​

    

2024

    

2023

​

​

(in thousands)

Deferred tax assets

 

​

  

 

​

  

Outside basis difference in SES Holdings

​

$

33,695

​

$

69,407

Net operating losses

​

 

89,883

​

 

95,912

Credits and other carryforwards

​

 

20,300

​

 

5,363

Other

​

​

7,827

​

​

3,526

Total deferred tax assets before valuation allowance

​

 

151,705

​

 

174,208

Valuation allowance

​

​

(105,366)

​

​

(112,282)

Total deferred tax assets

​

​

46,339

​

​

61,926

Deferred tax liabilities

​

 

  

​

 

  

Property and equipment

​

 

365

​

 

300

Other

​

 

—

​

 

9

Total deferred tax liabilities

​

 

365

​

 

309

Net deferred tax assets

​

$

45,974

​

$

61,617

​

The change in the valuation allowance is as follows:

​

​

​

​

​

​

​

​

​

​

For the year ended

​

​

December 31, 

​

​

2024

    

2023

​

​

(in thousands)

Balance at the beginning of the year

​

$

112,282

 

$

183,915

Deductions(1)(2)

​

​

(6,916)

 

​

(71,633)

Balance at the end of the year

​

$

105,366

 

$

112,282

​

(1)For the year ended December 31, 2024, the net decrease is primarily a result of adjustments to fully reserved deferred tax assets and expiring tax attributes.
(2)For the year ended December 31, 2023, the net decrease is primarily a result of change in the assessment of realization of deferred income tax assets based on improvement in operating profitability.

We regularly review our deferred tax assets for realization and establish a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. Prior to 2023, we maintained a full valuation allowance against our deferred tax assets. The Company considers all available positive and negative evidence in determining whether realization of the tax benefit is more likely than not. This evidence includes historical income / loss, projected future income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies. As of December 31, 2023, the Company evaluated all available positive and negative evidence and determined that $61.9 million of the valuation allowance as of December 31, 2023, associated with deferred tax assets should be released because the Company believed that it had become more likely than not that the deferred tax assets would be realized. In the Company's evaluation of the need for and amount of a valuation allowance on its deferred tax assets, the Company placed the most weight on objectively verifiable direct evidence, including its recent and historical operating results and the significant improvement in its operating profitability. The specific positive factors and evidence considered in the realizability of its deferred tax assets included the cumulative pre-tax income that the Company generated over the past three-year period and the expectation of income in future periods. The release of the valuation allowance resulted in the recognition of certain deferred tax assets and a decrease to deferred income tax expense for the year ended December 31, 2023. The Company continues to evaluate the realizability of its deferred tax assets as of December 31, 2024 and make adjustments based upon the available positive and negative evidence.

As of December 31, 2024, the Company and certain of its corporate subsidiaries had approximately $167.3 million of tax-affected U.S. federal net operating loss carryforwards (“NOLs”), $87.8 million of which the Company expects will expire unused beginning in 2031 due to applicable IRC Section 382 limitations and such NOLs have not been included in the deferred taxes table above. The Company also has tax-affected state NOLs of approximately $15.9 million, $6.9 million of which the Company expects will expire unused due to state law limitations similar to IRC Section 382 and the remaining $9.0 million of which will begin to expire in 2025, and tax-affected non-U.S. NOLs of approximately $1.4 million, which will begin to expire in 2035. As of December 31, 2024, the Company had approximately $15.2 million of tax-affected capital loss carryforwards which begin to expire in 2025, $2.9 million federal tax credit carryforwards which begin to expire in 2030, and $2.0 million tax-affected disallowed interest expense carryforwards which do not expire.

Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of December 31, 2024 and 2023 there was no liability or expense for the periods then ended recorded for payments of interest and penalties associated with uncertain tax positions or material unrecognized tax positions.

Separate U.S. federal and state income tax returns are filed for Select Inc., SES Holdings and certain consolidated affiliates. The tax years 2020 through 2023 remain open to examination by the major taxing jurisdictions in which the Company is subject to income tax.