Priority Technology Holdings, Inc.

9. Income Taxes

The Company's consolidated effective income tax rate for the three and nine months ended September 30, 2025 was (273.5)% and (40.7)%, respectively, compared to a consolidated effective income tax rate of 31.6% and 37.3% for the three and nine months ended September 30, 2024, respectively. The effective rates differed from the statutory rate of 21.0% primarily due to a decrease in the valuation allowance against certain business interest carry over deferred tax assets.

Valuation Allowance for Deferred Income Tax Assets

The Company considers all available positive and negative evidence to determine whether sufficient taxable income will be generated in the future to permit realization of the existing deferred tax assets. In accordance with the provisions of ASC 740, Income Taxes, the Company is required to provide a valuation allowance against deferred income tax assets when it is "more likely than not" that some portion or all of the deferred tax assets will not be realized.

Based on management's assessment, as of September 30, 2025, the Company continues to record a full valuation allowance against certain transaction costs, and net deferred tax assets acquired as part of the Payslate acquisition. The Company will continue to evaluate the realizability of the net deferred tax asset on a quarterly basis and, as a result, the valuation allowance may change in future periods.

On July 4, 2025, the U.S. government enacted legislation known as the One Big Beautiful Bill Act ("OBBBA") into law. The OBBBA, among other provisions, extends or reinstates certain provisions of the 2017 Tax Cuts and Jobs Act ("TCJA"), including but not limited to, 100% bonus depreciation on eligible property, immediate expensing of domestic research and development costs, and the restoration of an EBITDA based interest expense limitation calculation. As a result of the OBBBA interest expense limitation provision changes, the Company has released its valuation allowance against its interest limitation deferred tax assets.