ACI WORLDWIDE, INC.ACIW
ACI WORLDWIDE, INC. Income Taxes Disclosure
Income Taxes
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into U.S. tax law. OBBBA includes a broad range of tax reform provisions, such as the permanent extension of certain expiring provisions of the 2017 Tax Cuts and Jobs Act and modifications to the international tax framework. The enactment of OBBBA did not have a material impact on the Company’s results of operations, financial position, or cash flows for the year.
For financial reporting purposes, income (loss) before income taxes includes the following components (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | 6,302 | $ | 32,443 | $ | (8,342) | |||||||||||
| Foreign | 300,368 | 217,966 | 155,969 | ||||||||||||||
| Total | $ | 306,670 | $ | 250,409 | $ | 147,627 | |||||||||||
The expense (benefit) for income taxes consists of the following (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | |||||||||||||||||
| Current | $ | 944 | $ | 10,062 | $ | (3,490) | |||||||||||
| Deferred | (348) | (12,919) | (6,306) | ||||||||||||||
| Total | 596 | (2,857) | (9,796) | ||||||||||||||
| State | |||||||||||||||||
| Current | 1,407 | 3,069 | (2,327) | ||||||||||||||
| Deferred | 749 | (2,390) | 797 | ||||||||||||||
| Total | 2,156 | 679 | (1,530) | ||||||||||||||
| Foreign | |||||||||||||||||
| Current | 76,718 | 47,290 | 36,020 | ||||||||||||||
| Deferred | 542 | 2,179 | 1,424 | ||||||||||||||
| Total | 77,260 | 49,469 | 37,444 | ||||||||||||||
| Total | $ | 80,012 | $ | 47,291 | $ | 26,118 | |||||||||||
Differences between the income tax expense computed at the statutory federal income tax rate and per the consolidated statements of operations, after adoption of ASU 2023-09, are summarized as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| Amount | Percent | ||||||||||
| U.S. federal statutory tax rate | $ | 64,401 | 21.00 | % | |||||||
| State and local income taxes, net of federal income tax effect (1) | 1,712 | 0.56 | |||||||||
| Foreign tax effects | |||||||||||
| Ireland | |||||||||||
| Statutory tax rate difference between Ireland and United States | (17,010) | (5.55) | |||||||||
| Withholding tax on royalties and service income | 19,190 | 6.26 | |||||||||
| Other | 1,088 | 0.35 | |||||||||
| India | |||||||||||
| Withholding tax on dividends | 5,926 | 1.93 | |||||||||
| Other | (2,218) | (0.72) | |||||||||
| Other foreign jurisdictions | 7,449 | 2.43 | |||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | |||||||||
| Effect of cross-border tax laws | |||||||||||
| Other | 529 | 0.17 | |||||||||
| Tax credits | |||||||||||
| Other | (3,059) | (1.00) | |||||||||
| Changes in valuation allowances | 1,476 | 0.48 | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Other | 855 | 0.28 | |||||||||
| Changes in unrecognized tax benefits | (627) | (0.20) | |||||||||
| Other | 300 | 0.10 | |||||||||
| Effective tax rate | $ | 80,012 | 26.09 | % | |||||||
(1)The states that contribute to the majority (greater than 50 percent) of the tax effect include California, Maryland, and New Jersey.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the following is a reconciliation of differences between the income tax expense computed at the statutory federal income tax rate and per the consolidated statements of operations are summarized as follows (in thousands):
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Tax expense at federal rate of 21% | $ | 52,586 | $ | 31,002 | |||||||
| State income taxes, net of federal benefit | 1,558 | 1,744 | |||||||||
| Change in valuation allowance | 342 | 1,588 | |||||||||
| Foreign tax rate differential | (8,081) | (7,658) | |||||||||
| Unrecognized tax benefit increase (decrease) | 223 | (5,726) | |||||||||
| Tax effect of foreign operations | 5,911 | 10,350 | |||||||||
| Tax benefit of research & development | (5,492) | (5,104) | |||||||||
| Performance-based compensation | (424) | 3,004 | |||||||||
| Tax effect of divestiture | — | (2,900) | |||||||||
| Other | 668 | (182) | |||||||||
| Income tax provision | $ | 47,291 | $ | 26,118 | |||||||
The following table presents supplemental cash flow information related to income taxes paid (net of refunds) by jurisdiction for the year ended December 31, (in thousands):
| 2025 | |||||
| Federal | $ | 6,807 | |||
| State and local | 2,888 | ||||
| Foreign | |||||
| Ireland | 57,301 | ||||
| India | 9,384 | ||||
| United Kingdom | 6,612 | ||||
| All other foreign | 7,054 | ||||
| Total | $ | 90,046 | |||
The deferred tax assets and liabilities result from differences in the timing of the recognition of certain income and expense items for tax and financial accounting purposes. The sources of these differences at each balance sheet date are as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 11,586 | $ | 13,636 | |||||||
| Tax credits | 30,623 | 23,242 | |||||||||
| Compensation | 16,704 | 16,527 | |||||||||
| Deferred revenue | 9,353 | 11,273 | |||||||||
| Operating lease | 6,138 | 6,796 | |||||||||
| Capitalized research and development | 27,096 | 20,102 | |||||||||
Deferred interest | 29,759 | 27,807 | |||||||||
| Other | 3,072 | 2,455 | |||||||||
| Gross deferred income tax assets | 134,331 | 121,838 | |||||||||
| Less: valuation allowance | (18,215) | (13,310) | |||||||||
| Net deferred income tax assets | $ | 116,116 | $ | 108,528 | |||||||
| Deferred income tax liabilities: | |||||||||||
| Depreciation and amortization | $ | (35,926) | $ | (30,957) | |||||||
| Operating lease right-of-use asset | (5,544) | (6,079) | |||||||||
| Unbilled revenue | (10,381) | (7,938) | |||||||||
| Withholding tax liability | (29,655) | (30,761) | |||||||||
| Total deferred income tax liabilities | (81,506) | (75,735) | |||||||||
| Net deferred income taxes | $ | 34,610 | $ | 32,793 | |||||||
| Deferred income taxes / liabilities included in the balance sheet are: | |||||||||||
| Deferred income tax asset – noncurrent | $ | 73,124 | $ | 72,713 | |||||||
| Deferred income tax liability – noncurrent | (38,514) | (39,920) | |||||||||
| Net deferred income taxes | $ | 34,610 | $ | 32,793 | |||||||
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers projected future taxable income, carryback opportunities, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods which the deferred tax assets are deductible, the Company believes it is more likely than not that it will realize the benefits of these deductible differences, net of the valuation allowances recorded. At December 31, 2025, valuation allowances recorded primarily related to net operating losses, foreign tax credit carryforwards, and future interest deductions.
At December 31, 2025, the Company had domestic federal tax net operating losses (“NOLs”) of $37.6 million, of which $2.9 million may be utilized over an indefinite life, with the remainder beginning to expire in 2027. The Company had deferred tax assets equal to $0.7 million related to domestic state tax NOLs which will begin to expire in 2026. The Company did not have any valuation allowance against the federal tax NOLs but had provided a $0.4 million valuation allowance against the deferred tax asset associated with the state NOLs. The Company had foreign tax NOLs of $11.3 million, of which $11.0 million may be utilized over an indefinite life, with the remainder expiring over the next five years. The Company did not have any valuation allowance against the deferred tax asset associated with the foreign NOLs.
The Company had U.S. foreign tax credit carryforwards at December 31, 2025, of $6.8 million, for which a $4.2 million valuation allowance had been provided. The U.S. foreign tax credits will begin to expire in 2028. The Company had foreign tax credit carryforwards in other foreign jurisdictions at December 31, 2025, of $5.1 million, of which $1.1 million may be utilized over an indefinite life, with the remainder expiring over the next seven years. The Company had provided a $1.7 million valuation allowance against the tax benefit associated with these foreign credits. The Company also had domestic federal general business tax credit carryforwards at December 31, 2025, of $29.8 million, which will begin to expire in 2037 and state general business tax credit carryforwards of $0.5 million, which will begin to expire in 2026.
As of December 31, 2025, deferred taxes for non-United States withholding and other taxes were provided on $74.1 million of unremitted earnings of non-United States subsidiaries that may be remitted to the United States. As of December 31, 2025 and 2024, the Company recorded a deferred tax liability of $5.1 million and $1.0 million, respectively, related to these non-United States earnings that may be remitted.
As of December 31, 2025 and 2024, the Company had a German interest deduction carryforward of $11.2 million and $9.0 million, respectively, for which a full valuation allowance had been provided. The deferred interest deduction has an indefinite life.
As of December 31, 2025 and 2024, the unrecognized tax benefits were $20.3 million and $21.0 million, respectively, of which $8.7 million and $10.7 million, respectively, are included in other noncurrent liabilities in the consolidated balance sheets. Of the total unrecognized tax benefit amounts as of December 31, 2025 and 2024, $19.7 million and $20.4 million, respectively, represent net unrecognized tax benefits that, if recognized, would have a favorable impact on the Company's effective income tax rate.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31 is as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance of unrecognized tax benefits at beginning of year | $ | 21,027 | $ | 20,889 | $ | 26,408 | |||||||||||
| Increases for tax positions of prior years | 190 | 1,159 | 1,568 | ||||||||||||||
| Decreases for tax positions of prior years | (1,699) | (1,080) | (6,560) | ||||||||||||||
| Increases for tax positions established for the current period | 1,989 | 2,418 | 3,941 | ||||||||||||||
| Decreases for settlements with taxing authorities | (299) | (141) | (532) | ||||||||||||||
| Reductions resulting from lapse of applicable statute of limitation | (978) | (2,190) | (4,005) | ||||||||||||||
| Adjustment resulting from foreign currency translation | 78 | (28) | 69 | ||||||||||||||
| Balance of unrecognized tax benefits at end of year | $ | 20,308 | $ | 21,027 | $ | 20,889 | |||||||||||
The Company files income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and many foreign jurisdictions. The United States, Ireland, and the United Kingdom are the main taxing jurisdictions in which the Company operates. The years open for audit vary depending on the tax jurisdiction. In the United States, the Company’s federal tax return for years following 2021 are open for audit. In the foreign jurisdictions, the tax returns open for audit generally vary by jurisdiction between 2017 and 2024.
The Company is being audited by the Canada Revenue Agency for the years ended December 31, 2019 to 2021, and by the Indian tax authority for fiscal years ended March 31, 2021 to 2023. Other foreign subsidiaries could face challenges from various foreign tax authorities. It is not certain that the local authorities will accept the Company’s tax positions. The Company believes its tax positions comply with applicable tax law and intends to vigorously defend its positions. However, differing positions on certain issues could be upheld by tax authorities, which could adversely affect the Company’s financial condition and results of operations.
The Company accrues interest related to uncertain tax positions in interest expense or interest income and recognizes penalties related to uncertain tax positions in other income (expense). As of December 31, 2024, $0.4 million was accrued for the payment of interest and penalties related to income tax liabilities. There was no amount accrued for the payment of interest and penalties related to income tax liabilities as of December 31, 2025. For the years ended December 31, 2025, 2024, and 2023, the total expense (benefit) for interest and penalties recorded in the statements of operations was $(0.4) million, $(0.1) million, and $(0.1) million, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 26, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.