Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

10. INCOME TAXES:

Quanta’s effective tax rates for the three months ended September 30, 2024 and 2023 were 21.6% and 22.1%. The effective tax rate for the three months ended September 30, 2024 was favorably impacted by the recognition of a $25.3 million tax benefit that resulted from equity incentive awards vesting at a higher fair market value than their grant date fair value as compared to the recognition of $1.6 million associated with this tax benefit for the three months ended September 30, 2023. Quanta’s effective tax rates for the nine months ended September 30, 2024 and 2023 were 22.5% and 21.1%. The tax rates for the nine months ended September 30, 2024 and 2023 were favorably impacted by the recognition of $47.8 million and $34.0 million of benefits that resulted from equity incentive awards vesting at a higher fair market value than their grant date fair value. Additionally, the tax rates for the three and nine months ended September 30, 2023 were favorably impacted by a $22.7 million change in valuation allowance as described below.

Quanta regularly evaluates valuation allowances established for deferred tax assets (DTAs) for which future realization is uncertain, including in connection with changes in tax laws. The estimation of required valuation allowances includes estimates of future taxable income. The ultimate realization of DTAs is dependent upon the generation of future taxable income in the jurisdiction of the DTAs during the periods in which those temporary differences become deductible. Quanta considers projected future taxable income and tax planning strategies in making this assessment. If actual future taxable income differs

from these estimates, Quanta may not realize DTAs to the extent estimated. During the year ended December 31, 2022, Quanta recognized $91.5 million of unrealized losses on its investment in Starry Group Holdings, Inc. (Starry) and recorded a valuation allowance against such unrealized losses. On August 31, 2023, the equity securities of Starry held by Quanta were cancelled pursuant to an approved plan of reorganization pursuant to a bankruptcy proceeding. As a result, Quanta’s $91.5 million loss was realized, and the related $22.7 million valuation allowance was released during the three months ended September 30, 2023. This realized loss can be utilized to offset gains from tax years 2020 through 2023, and can be carried forward to offset future capital gains realized in tax years 2024 through 2028.

As of September 30, 2024, the total amount of unrecognized tax benefits relating to uncertain tax positions was $57.0 million, a net increase of $11.9 million from December 31, 2023, of which $7.4 million relates to positions expected to be taken in 2024 and $5.5 million resulted from positions taken by an acquired company in periods prior to the acquisition. These increases were partially offset by reductions due to the lapse in statute of limitations. Quanta’s consolidated federal income tax returns for tax years 2017, 2018, and 2021 through 2023 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. Quanta believes it is reasonably possible that within the next 12 months unrecognized tax benefits may decrease by up to $11.3 million as a result of settlement of these examinations or as a result of the expiration of certain statute of limitations periods.