ACV Auctions Inc.ACVA
ACV Auctions Inc. Income Taxes Disclosure
Income Taxes
The Company’s management evaluates its tax positions to determine whether it is more likely than not that a tax position will be sustained upon examination, including resolution of any related appeals or litigation, based on the technical merits of the tax position. Management has analyzed the Company’s tax positions, and concluded that, as of December 31, 2025 , 2024 and 2023, there are no uncertain tax positions taken or expected to be taken that would require recognition or disclosure in the consolidated financial statements. The Company recorded no material interest expense or penalties in its Consolidated Statements of Operations during the years ended December 31, 2025, 2024 and 2023. The Company believes it is no longer subject to examination by United States federal and state taxing authorities for years prior to December 31,
2022 and December 31, 2021, respectively. The Company believes it is no longer subject to examination by foreign taxing authorities for years prior to December 31, 2021.
The components of loss from continuing operations before income taxes for the years ended December 31, 2025, 2024 and 2023 are summarized below (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Loss before income taxes: | |||||||||||||||||
| Domestic | $ | (57,523) | $ | (64,655) | $ | (68,000) | |||||||||||
| Foreign | (7,280) | (14,357) | (6,735) | ||||||||||||||
| Total loss before income taxes | $ | (64,803) | $ | (79,012) | $ | (74,735) | |||||||||||
The components of income tax expense for the years ended December 31, 2025, 2024 and 2023 are summarized below (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Current expense (benefit): | |||||||||||||||||
| Federal | $ | 1 | $ | 62 | $ | 28 | |||||||||||
| Foreign | 344 | 51 | 244 | ||||||||||||||
| State | 436 | 463 | 252 | ||||||||||||||
| Total current expense | 781 | 576 | 524 | ||||||||||||||
| Deferred expense (benefit): | |||||||||||||||||
| Federal | 384 | 164 | 201 | ||||||||||||||
| Foreign | (153) | (265) | (499) | ||||||||||||||
| State | 326 | 213 | 300 | ||||||||||||||
| Total deferred expense | 557 | 112 | 2 | ||||||||||||||
| Total income tax expense | $ | 1,338 | $ | 688 | $ | 526 | |||||||||||
The Company’s deferred tax assets and liabilities consisted of the following at December 31, 2025 and 2024 (in thousands):
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 96,103 | $ | 91,471 | |||||||
| Excess depreciation and amortization | 19,289 | 15,427 | |||||||||
| Deferred compensation | 6,861 | 8,058 | |||||||||
| Lease liability | 11,173 | 9,867 | |||||||||
| Accruals and reserves | 13,637 | 6,061 | |||||||||
| Total gross deferred tax asset | 147,063 | 130,884 | |||||||||
| Less valuation allowance | (129,267) | (116,175) | |||||||||
| Total net deferred tax assets, net of allowance | 17,796 | 14,709 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right of use asset | (10,943) | (9,734) | |||||||||
| Indefinite lived intangible | (9,283) | (6,977) | |||||||||
| Net deferred tax liability | $ | (2,430) | $ | (2,002) | |||||||
The Company measures deferred tax assets and liabilities using enacted tax rates that apply in the year in which the temporary differences are expected to be recovered or paid. A valuation allowance is provided for deferred tax assets (excluding certain deferred tax liabilities related to indefinite lived intangibles) if management believes that it is more likely than not that these items will either expire before the Company is able to realize their benefit or that future realizability is uncertain. The Company recorded valuation allowances of $129.3 million and $116.2 million at
December 31, 2025 and 2024, respectively, against its deferred tax assets due to the uncertainty surrounding the recoverability of such deferred tax assets, which is an increase of $13.1 million and $15.7 million in the total valuation allowance during 2025 and 2024, respectively. In 2024, the Company recognized an income tax benefit of $0.2 million from changes in its valuation allowance for its previously existing deferred tax assets as a result of acquisitions.
A reconciliation of income taxes at the federal statutory rate of 21% to actual income taxes for the years ended December 31, 2025, 2024 and 2023 is as follows (in thousands):
| Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| U.S. Federal Statutory Tax Rate | $ | (13,609) | 21.0 | % | $ | (16,592) | 21.0 | % | $ | (15,694) | 21.0 | % | |||||||||||||||||||||||
| State and Local Income Taxes, Net of Federal Income Tax Effect* | 602 | (0.9) | % | 535 | (0.7) | % | 436 | (0.6) | % | ||||||||||||||||||||||||||
| Foreign Tax Effects | |||||||||||||||||||||||||||||||||||
| Canada | |||||||||||||||||||||||||||||||||||
| Research and development tax credits | (848) | 1.3 | % | (359) | 0.5 | % | (521) | 0.7 | % | ||||||||||||||||||||||||||
| Other | 471 | (0.7) | % | 352 | (0.4) | % | 339 | (0.5) | % | ||||||||||||||||||||||||||
| France | |||||||||||||||||||||||||||||||||||
| Changes in valuation allowances | 1,329 | (2.1) | % | 1,418 | (1.8) | % | 918 | (1.2) | % | ||||||||||||||||||||||||||
| Share-based payment awards | 463 | (0.7) | % | 845 | (1.1) | % | 581 | (0.8) | % | ||||||||||||||||||||||||||
| Other | (1,133) | 1.7 | % | (287) | 0.4 | % | (163) | 0.2 | % | ||||||||||||||||||||||||||
| Ireland | |||||||||||||||||||||||||||||||||||
| Changes in valuation allowances | 822 | (1.3) | % | 284 | (0.4) | % | 0 | — | % | ||||||||||||||||||||||||||
| Other | 504 | (0.8) | % | 439 | (0.6) | % | 0 | — | % | ||||||||||||||||||||||||||
| Other foreign jurisdictions | 120 | (0.2) | % | 114 | (0.1) | % | 7 | — | % | ||||||||||||||||||||||||||
| Changes in Valuation Allowances | 8,905 | (13.7) | % | 10,998 | (13.9) | % | 11,953 | (16.0) | % | ||||||||||||||||||||||||||
| Nontaxable or Nondeductible Items | |||||||||||||||||||||||||||||||||||
| Share-based payment awards | (1,527) | 2.4 | % | (6,626) | 8.4 | % | (1,619) | 2.2 | % | ||||||||||||||||||||||||||
| Executive compensation disallowance | 4,641 | (7.2) | % | 8,828 | (11.2) | % | 4,010 | (5.4) | % | ||||||||||||||||||||||||||
| Other | 610 | (0.9) | % | 894 | (1.1) | % | 494 | (0.7) | % | ||||||||||||||||||||||||||
| Other Adjustments | (12) | — | % | (155) | 0.1 | % | (215) | 0.4 | % | ||||||||||||||||||||||||||
| Effective Income Tax Rate | $ | 1,338 | (2.1) | % | $ | 688 | (0.9) | % | $ | 526 | (0.7) | % | |||||||||||||||||||||||
* The states that contribute to the majority (greater than 50%) of the tax effect in this category include Texas for 2025 and 2024, and Oregon, New York, and Texas for 2023.
For the year ended December 31, 2025, the provision for income taxes includes a non-cash tax charge of approximately $0.7 million relating to changes in the Company's long-term deferred tax liability for indefinite-lived intangibles that are not available to offset certain deferred tax assets in determining changes to the Company's income tax valuation allowance.
At December 31, 2025, the Company had US federal, state, and Foreign net operating loss ("NOL") carryforwards for income tax purposes of approximately $360.9 million, $318.6 million and $22.5 million, respectively. These carryforwards may be used to offset future taxable income, with a portion of the federal carryforwards starting to expire in 2035 and the remainder of the US federal carryforwards and foreign carryforwards available indefinitely. A portion of state carryforwards will expire in 2026 and the remainder expiring in future periods or available indefinitely.
Utilization of the net operating loss and credit carryforwards may be subject to an annual limitation due to the ownership limitations provided by the Internal Revenue Code of 1986, as amended (the “Code”), and similar state provisions. Any annual limitation may result in the expiration of net operating losses and credits before utilization.
At December 31, 2025, any undistributed earnings of the Company's foreign subsidiaries are considered to be indefinitely reinvested and, accordingly, no deferred taxes have been provided thereon.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 23, 2022 | |
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.