Company: LGN
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0002052568-25-000018
Chunk: 160

Company: Legence Corp.
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 1
Chunk 160
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 from estimates.As of September 30, 2025, the Company recorded a deferred tax asset of $17.2 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 September 30, 2025, the Company recorded a valuation allowance of $9.1 million. The deferred tax asset and related valuation allowance are recorded in Other assets on the Condensed Consolidated Balance Sheets. The Company continues to assess and adjust the valuation allowance each reporting period, as necessary.

Note 15 - Income Taxes

The income tax expense and effective income tax rate were as follows (in thousands):Three Months Ended September 30,Nine Months Ended September 30,2025202420252024Income tax expense$4,078 $4,564 $13,662$9,500Effective income tax rate91.5 %117.4 %(152.4)%16,666.7 %The Company evaluates its estimated annual effective income tax rate based on current and forecasted business results and enacted tax laws on a quarterly basis, adjusted for discrete events arising in each respective quarter, and applies this tax rate to ordinary income or loss to calculate the estimated tax liability or benefit. Due to the nature of the legal structure, the effective tax rate is impacted by changes in the mix of earnings because some of the pass-through earnings are taxed at the Company level or through other corporations.For the three months ended September 30, 2025 and 2024, the effective tax rate was higher than the U.S. federal statutory rate of 21%, primarily due to earnings incurred prior to the IPO and Corporate Reorganization from pass-through business not subject to income taxes at the Company level.For the nine months ended September 30, 2025, the effective tax rate was lower than the U.S. federal statutory rate of 21%, primarily due to the loss before income tax from pass-through business not subject to income taxes at the Company level. For the nine months ended September 30, 2024, the effective tax rate was higher than the U.S. federal statutory rate of 21%, primarily due to the loss before income tax from pass-through business not subject to income taxes at the Company level.

35

Legence Corp.Notes to Condensed Consolidated Financial Statements - (Continued)(Unaudited)

A valuation allowance is