Income Taxes

12 Months Ended

Dec. 31, 2025

(4) Income Taxes

The provision for income taxes includes the following components (in thousands):


	Year ended December 31,
	2025		2024		2023
Current tax provision (benefit):
Federal	$	4,838	$	5,917	$	4,962
State		9,350		2,776		1,794
		14,188		8,693		6,756
Deferred tax provision (benefit):
Federal		105,693		86,301		(678)
State		17,376		14,187		(111)
		123,069		100,488		(789)
Provision for income taxes	$	137,257	$	109,181	$	5,967

The following is a reconciliation between the federal income tax rate of 21.0% and the effective tax rate which is derived by dividing the provision for income taxes by the income before income taxes (in thousands). As a result of adopting ASU 2023-09, the disaggregated components for the years ended December 31, 2024 and 2023 were recast to conform with the presentation for the 2025 year.


	Year ended December 31,
	2025				2024				2023
	Amount		Percent		Amount		Percent		Amount		Percent
U.S. federal statutory tax rate	$	118,774	21.0	%	$	90,750	21.0	%	$	8,465	21.0	%
Domestic federal reconciling items:
Tax credits		(541)	(0.1)	%		(107)	0.0	%		(356)	(0.9)	%
Nontaxable and nondeductible items, net:
Section 162(m) limit on compensation		8,911	1.6	%		4,007	0.9	%		1,734	4.3	%
Other employee non-deductible expenses		2,645	0.5	%		2,138	0.5	%		1,862	4.6	%
Other		5	0.0	%		(4)	0.0	%		(15)	0.0	%
Other reconciling items:
Excess tax benefits from stock based compensation		(11,784)	(2.1)	%		(913)	(0.2)	%		939	2.3	%
Other		(894)	(0.2)	%		(524)	(0.1)	%		(523)	(1.3)	%
Domestic state and local income taxes, net of federal benefit		20,141	3.6	%		14,488	3.4	%		1,417	3.5	%
Change in prior year unrecognized tax benefits		—	—	%		(654)	(0.2)	%		(7,556)	(18.7)	%
Provision for income taxes	$	137,257	24.3	%	$	109,181	25.3	%	$	5,967	14.8	%

For the year ended December 31, 2025, the Company's state and local income taxes from California, Colorado, Illinois, and Oregon comprised the majority of the state and local income taxes, net of federal benefit category. For the years ended December 31, 2024 and 2023, the Company's state and local income taxes from California, Colorado, and Illinois comprised the majority of the state and local income taxes, net of federal benefit category.

The following are the income taxes paid, net of refunds by the Company for the years ended December 31, 2025, 2024 and 2023 (in thousands):


	Year ended December 31,
	2025		2024		2023
US Federal	$	5,000	$	12,500	$	12,000
Domestic state and local:
California		5,050		1,850		—
Illinois		1,300		760		450
Other		5,513		3,478		1,160
Total income taxes paid, net of refunds	$	16,863	$	18,588	$	13,610

The significant components of the Company’s net deferred tax assets and liabilities as of December 31, 2025 and 2024, are as follows (in thousands):


	As of December 31,
	2025		2024
Deferred tax assets:
Accrued benefits	$	34,033	$	34,096
Net operating loss carryforward		64,774		89,030
Aircraft maintenance contracts		93,737		86,965
Deferred revenue		70,525		83,724
Operating lease liabilities		20,037		21,452
Interest deduction limitation		—		2,333
Accrued reserves and other		59,459		47,486
Total deferred tax assets		342,565		365,086
Valuation allowance		—		—
Deferred tax liabilities:
Accelerated depreciation		(1,214,016)		(1,131,670)
Operating lease right-of-use assets		(20,037)		(21,384)
Other		(19,243)		—
Total deferred tax liabilities		(1,253,296)		(1,153,054)
Net deferred tax liability	$	(910,731)	$	(787,968)

The Company’s deferred tax liabilities were primarily generated through accelerated depreciation, combined with shorter depreciable tax lives, allowed under the IRS tax code for purchased aircraft and support equipment compared to the Company’s depreciation policy under GAAP for such assets (see Note 1, “Nature of Operations and Summary of Significant Accounting Policies”).

At December 31, 2025 and 2024, the Company had federal net operating losses of approximately $269.1 million and $377.9 million and state net operating losses of approximately $239.4 million and $280.3 million, respectively. The estimated effective tax rate applicable to the federal and state net operating losses at December 31, 2025, was 21.0% and 3.45%, respectively. The Company anticipates that the federal and state net operating losses will start to expire in 2035 and 2026, respectively. The Company has no ongoing federal examination and has one ongoing state examination. Federal tax years 2022, 2023 and 2024 are open to examination.

Under ASC Topic 740, the accounting guidance related to uncertainty in tax positions requires that the impact of a tax position be recognized in the financial statements if that position is more likely than not of being sustained on

audit, based on the technical merits of the position. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the year ended December 31, 2025, 2024 and 2023 is as follows (in thousands):


	Year ended December 31,
	2025		2024		2023
Unrecognized tax benefits at the beginning of year	$	—	$	654	$	8,210
Gross increases - current year tax positions		—		—		—
Gross increases - prior year tax positions		—		—		191
Gross decreases - prior year tax positions		—		(654)		(7,747)
Unrecognized tax benefits at end of year	$	—	$	—	$	654

Interest and penalties in year-end balance	$	—	$	—	$	—

For the year ended December 31, 2023, the Company recorded $191,000 of interest expense related to uncertain tax positions not offset by the Company's tax attributes. The Company did not record a similar expense for the years ended December 31, 2025 and 2024.

- Definition

The entire disclosure for income tax.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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+ Details

SKYWEST INC 10-K