QUANTA SERVICES, INC.

12. INCOME TAXES:

The components of income before income taxes were as follows (in thousands):

The components of the provision for income taxes were as follows (in thousands):

There wasno tax on foreign currency translation adjustment within other comprehensive income (loss) for the years ended December 31, 2025, 2024 and 2023.

The actual income tax provision differed from the income tax provision computed by applying the U.S. federal statutory corporate rate to income before provision for income taxes as follows (in thousands, except percentages):

(1) State taxes in California, Florida, Illinois, Indiana, Iowa, New Mexico, New York, Texas and Wisconsin made up the majority (greater than 50 percent) of the tax effect in this category.

(1) Stock-based compensation for the years ended December 31, 2024 and 2023, include state tax benefits of $7.2 million and $5.4 million.

Deferred income taxes result from temporary differences in the recognition of income and expenses for financial reporting purposes and tax purposes. The tax effects of these temporary differences, representing deferred tax assets and liabilities, result principally from the following (in thousands):

The net deferred income tax assets and liabilities comprised the following in the accompanying consolidated balance sheets (in thousands):

The valuation allowances for deferred income tax assets at December 31, 2025, 2024 and 2023 were $34.8 million, $42.6 million and $40.0 million. These valuation allowances relate to state and foreign net operating loss carryforwards and foreign tax credits. The valuation allowances were established primarily as a result of uncertainty as to the amount of future taxable income in particular jurisdictions. Quanta believes it is more likely than not that it will realize the benefit of its deferred income tax assets, net of existing valuation allowances.

At December 31, 2025, Quanta had federal, state and foreign net operating loss carryforwards, the tax effect of which was $128.5 million. These carryforwards will expire as follows: 2026, $0.5 million; 2027, $1.3 million; 2028, $0.1 million; 2029, $1.1 million; 2030, $0.9 million and $124.6 million after 2030. A valuation allowance of $28.4 million has been recorded against certain foreign and state net operating loss carryforwards.

Quanta generally does not provide for taxes related to undistributed earnings of its foreign subsidiaries because such earnings either would not be taxable when remitted or they are considered to be indefinitely reinvested. Quanta could also be subject to additional foreign withholding taxes if it were to repatriate cash that is indefinitely reinvested outside the United States, but it does not expect such amount to be material.

A reconciliation of unrecognized tax benefit balances is as follows (in thousands):

The balances of unrecognized tax benefits, the amount of related interest and penalties are as follows (in thousands):

Quanta classifies interest and penalties within the provision for income taxes. Quanta recognized interest expense of $1.5 million, $1.7 million and $0.5 million in the provision for income taxes for the years ended December 31, 2025, 2024 and 2023.

Quanta’s consolidated federal income tax returns for tax years 2022 through 2024 remain open to examination by the IRS, as the applicable statute of limitations periods have not yet expired. Additionally, various state and foreign tax returns filed by Quanta and certain subsidiaries for multiple periods remain under examination by various U.S. state and foreign tax authorities. Quanta does not consider any U.S. state in which it does business to be a major tax jurisdiction.

On July 4, 2025, the U.S. government enacted new tax legislation pursuant to Public Law No: 119-21 (the One Big Beautiful Bill). Among other provisions, the legislation extends 100% bonus depreciation for qualifying property effective January 19, 2025 and modifies certain provisions of the Tax Cuts and Jobs Act previously scheduled to expire or change after 2025. Quanta incorporated the effects of the legislation within its financial statements for the year ended December 31, 2025, which did not have a material impact on its effective annual tax rate.