Adeia Inc. Income Taxes Disclosure

NOTE 14 – INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.

At December 31, 2025 and 2024, the Company had a valuation allowance of $110.8 million and $115.5 million, respectively, related to state, and foreign deferred tax assets that the Company believes will not be realizable on a more-likely-than-not basis. The $4.7 million decrease from the prior year is primarily comprised of foreign valuation allowance adjustments.

The need for a valuation allowance requires an assessment of both positive and negative evidence when determining whether it is more-likely-than-not that deferred tax assets are realizable. Such assessment is required on a jurisdiction-by-jurisdiction basis. In making such an assessment, significant weight is given to evidence that can be objectively verified. Given its history of sustained profitability, the Company concluded that it was more-likely-than-not that it would realize its U.S. federal and certain state deferred tax assets. The Company continues to maintain a valuation allowance against tax attributes in California and other state tax attributes that can only be utilized against the income of specific legal entities.

As of December 31, 2025, the Company had federal net operating loss carryforwards of approximately $2.1 million and state net operating loss carryforwards of approximately $847.9 million. The state net operating loss carryforwards, if not utilized, will begin to expire on various dates beginning in 2026 and will continue to expire through 2045. The Company has research tax credit carryforwards of approximately $56.3 million for federal purposes. The federal research tax credit will start to expire in 2026 and will continue to expire through 2045. The Company also has research tax credit carryforwards of approximately $75.5 million for state purposes, which do not expire. The Company has $45.3 million of foreign tax credit carryforwards which will begin to expire in 2029 and will continue to expire through 2031. Under the provisions of the Code, substantial ownership changes may limit the amount of net operating loss and tax credit carryforwards that can be utilized annually in the future to offset taxable income. The aforementioned attribute carryforward amounts have been presented on a tax return basis.

At December 31, 2025, the Company asserts that it will not permanently reinvest its foreign earnings outside the U.S. The Company anticipates that the cash from its foreign earnings may be used domestically to fund operations, settle a portion of the outstanding debt obligation, or used for other business needs. The accumulated undistributed earnings generated by its foreign subsidiaries were insignificant.

The Korea Supreme Court issued a decision overturning the long-standing territorial sourcing framework for royalty income, under which royalty income was sourced by reference to the place of patent registration, and adopted a new sourcing rule based on where a licensed patent is used. In the fourth quarter of 2025, the Company was notified by Korea tax authorities that its pending withholding tax refund claims were denied, reducing the likelihood of the recovery of withholding tax receivables in Korea. Given this development, the Company determined that it could not sufficiently demonstrate eligibility for a refund under the revised sourcing rule. As a result, the Company concluded that realization of the related income tax receivable was no longer more-likely-than-not and derecognized the asset. The derecognition contributed $1.6 million in income tax expense for the year ended December 31, 2025.

On July 4, 2025, H.R. 1, the “One Big Beautiful Bill Act,” was enacted into law, bringing significant amendments to the U.S. tax code. This legislation extends and modifies provisions from the 2017 Tax Cuts and Jobs Act and introduces new tax measures affecting both businesses and individuals. The enacted legislation had an immaterial impact on the Company’s effective tax rate for the year ended December 31, 2025. The Company will continue to monitor any future changes in its business or interpretations of the new tax law that could affect its tax position in subsequent periods.

As of December 31, 2025, unrecognized tax benefits were $96.3 million, of which $62.0 million would impact the effective tax rate if recognized. As of December 31, 2024, unrecognized tax benefits were $229.5 million, of which $193.8 million would impact the effective tax rate if recognized.

It is the Company’s policy to classify accrued interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company recognized accrued interest and penalty tax benefits of $0.1 million, $0.3 million and $0.2 million for the years ended December 31, 2025, 2024, and 2023, respectively. Accrued interest and penalties of $2.2 million and $2.3 million were included in long-term income taxes payable as of December 31, 2025, and 2024, respectively.

At December 31, 2025, the Company’s 2021 through 2025 tax years are generally open and subject to potential examination in one or more jurisdictions. In the U.S., any net operating losses or credits that were generated in prior years but not yet fully utilized in a year that is closed under the statute of limitations may also be subject to examination. The Company has no significant income tax audits at this time.