Company: LGN
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0002052568-25-000018
Chunk: 80

Company: Legence Corp.
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 8
Chunk 80
---
 a detailed TRA model that incorporates these variables 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 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