Company: LGN
Filing Date: 2025-11-14
Form Type: 10-Q
Source: 0002052568-25-000018
Chunk: 81

Company: Legence Corp.
Filing Date: 2025-11-14
Form: 10-Q
Item: Part I, Item 8
Chunk 81
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 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 provided when it is more likely than not that a portion or all of a deferred tax asset will not be realized. Management evaluates the realizability of deferred tax assets by considering all available positive and negative evidence, including forecasted taxable income, charter of deductions, reversals of taxable temporary differences, and tax planning strategies. As of September 30, 2025, the deferred tax asset related to the Company’s investment in Legence Holdings would only be fully realized upon the sale of the Company's interest in Legence Holdings. Accordingly, a full valuation allowance has been recorded against the deferred tax asset associated with this investment. As of September 30, 2025, a partial valuation allowance was also recorded against the deferred tax asset associated with the TRA payments. Refer to "Note 14—Tax Receivable Agreement" for additional information.On July 4, 2025, the One Big Beautiful Bill Act (“the Act”) was enacted into law. The Act includes significant changes to the U.S. tax code, including restoration of immediate recognition of domestic research and development expenditures and reinstatement of 100% bonus depreciation for qualifying property. The Act also removes the deductions under Code Section 179D for energy-efficient commercial buildings, effective for properties where construction begins after