Income Taxes and Tax Receivable Agreement |
3 Months Ended | ||
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Mar. 31, 2026 | |||
| Income Tax Disclosure [Abstract] | |||
| Income Taxes and Tax Receivable Agreement |
The Company is organized as a corporation for income tax purposes and is subject to federal, state and local taxes on its income, which is primarily sourced from its membership interest in SOLV Energy Holdings LLC held for any given reporting period. SOLV Energy Holdings LLC is a partnership for U.S. federal income tax purposes and, as a result, its members, including the Company, will pay income taxes with respect to their allocable shares of its taxable income. As of March 31, 2026, the Company had deferred tax assets of $101,302 and a deferred tax liability of $5,339. For the three months ended March 31, 2026, the Company’s effective tax rate was -17.9%. The difference between the estimated annual effective income tax rate and the U.S. federal statutory rate is primarily attributable to the tax effect of stock based compensation and the exclusion of tax related to non-controlling interests. The Company’s income tax provision was $4,166 for the period from February 12, 2026, to March 31, 2026. On February 12, 2026, the Company recorded a net deferred tax asset of $101,302 related to (i) the temporary difference between the book and tax basis of its investment in SOLV Energy Holdings LLC of $69,866, (ii) $19,423 of tax benefits from future deductions attributable to payments under the Tax Receivable Agreements, and (iii) $12,005 tax deductions for NOL carryovers as a result of the Blocker Companies merger. The initial deferred tax asset were recorded as adjustments to additional paid-in capital in the condensed consolidated balance sheet as of March 31, 2026. Additionally, and concurrent with the Transactions, the Company recorded a liability pursuant to the TRA of $172,344 and a corresponding reduction to additional paid-in capital. The net impact to additional paid-in capital was a reduction of $71,042 and is presented within the Company’s condensed consolidated statements of stockholders’ equity. In connection with the IPO and the Transactions, the Company entered into the TRA with the Continuing Equity Owners that provides for the payment by the Company to such the Continuing Equity Owners of 85% of the benefits, that the Company realizes, or is deemed to realize, as a result of the Company’s allocable share of existing tax basis acquired in its IPO and other tax benefits related to entering into the TRA.
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