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Income Taxes | 6 Months Ended
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Jun. 30, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | 12. Income Taxes The Company uses the Annual Effective Tax Rate ("ETR") approach of ASC 740-270, Interim Reporting, to calculate its interim tax provision. Income tax expense was $4.2 million for the three months ended June 30, 2025 and income tax benefit was $2.5 million for the three months ended June 30, 2024. Income tax expense was $11.3 million and $0.8 million for the six months ended June 30, 2025 and 2024, respectively. Income tax expense/benefit primarily relates to tax expense as calculated for taxpaying entities, including the tax expense/benefit associated with the INNOVATE Corp. U.S. consolidated group due to the Tax Cut and Jobs Act's 80 percent limitation on net operating losses incurred after 2017. Additionally, the tax benefits associated with losses generated by certain other businesses have been reduced by a full valuation allowance as management does not believe it is more-likely-than-not that the losses will be utilized. On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the U.S., which contains a broad range of tax reform provisions affecting businesses. The Company is evaluating the full effects of the legislation on its estimated annual effective tax rate and cash tax position; however, the Company expects that the legislation will likely not have an overall material impact on its consolidated financial statements. As the legislation was signed into law after the end of the second quarter, the impacts are not included within the Company's operating results for the six months ended June 30, 2025. Net Operating Losses At December 31, 2024, the Company had gross U.S. net operating loss ("NOL") carryforwards available to reduce future taxable income of the U.S. consolidated group in the amount of $174.3 million. The Company expects that approximately $117.7 million of the gross U.S. NOL carryforwards would be available to offset taxable income in 2025 and later periods. This estimate may change based on changes to actual results reported on the 2024 U.S. tax return. The amount of U.S. NOL carryforwards reflected in the financial statements differ from the amounts reported on the U.S. tax return due to uncertain tax positions related to tax laws and regulations that are subject to varied interpretation by the Internal Revenue Service ("IRS"). Additionally, as of December 31, 2024, the Company had $149.4 million of gross U.S. NOL carryforwards from its subsidiaries that do not qualify to be included in the INNOVATE U.S. consolidated income tax return, including $102.8 million from R2, $44.1 million from DTV, and other entities of $2.5 million. Of the $149.4 million of gross U.S. NOL carryforwards, $113.3 million was generated after 2017 and will have an indefinite carryforward period; the remaining $36.1 million was generated prior to 2018 and will expire, if unused, by 2037. Unrecognized Tax Benefits The Company follows the provision of ASC 740 which prescribes a comprehensive model for how a company should recognize, measure, present, and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on a tax return. The Company is subject to challenge from various taxing authorities relative to certain tax planning strategies, including certain intercompany transactions as well as regulatory taxes. The Company did not have any unrecognized tax benefits as of June 30, 2025 and 2024, related to uncertain tax positions that would impact the effective income tax rate if recognized. The Company has reduced the NOL carryforward by $58.7 million for uncertain tax positions based on our interpretation of tax laws and regulations that are subject to varied interpretations by the IRS. Examinations The Company conducts business globally, and as a result, INNOVATE or one or more of its subsidiaries files income tax returns in the United States federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. Tax years 2002-2023 remain open for examination. The Company is currently under examination in various domestic and foreign tax jurisdictions. The open tax years contain matters that could be subject to differing interpretations of applicable tax laws and regulations as they relate to the amount, character, timing or inclusion of revenue and expenses or the applicability of income tax credits for the relevant tax period. Given the nature of tax audits, there is a risk that disputes may arise.

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