Alight, Inc. / DelawareALIT
Alight, Inc. / Delaware Income Taxes Disclosure
7. Income Taxes
Provision for Income Taxes
Income (Loss) from continuing operations before taxes consists of the following (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Income (Loss) from continuing operations before taxes | |||||||||||||||||
| U.S. (loss) income | $ | (3,095) | $ | (149) | $ | (314) | |||||||||||
| Non-U.S. (loss) income | 33 | 1 | (23) | ||||||||||||||
| Total | $ | (3,062) | $ | (148) | $ | (337) | |||||||||||
Income (Loss) from continuing operations before taxes shown above is based on the location of the business unit to which such earnings are attributable for tax purposes. In addition, because the earnings shown above may in some cases be subject to taxation in more than one country, the income tax provision shown below as federal, state, or foreign may not correspond to the geographic attribution of the earnings.
The provision for income tax consists of the following (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Income tax expense (benefit): | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 6 | $ | (4) | $ | (21) | |||||||||||
| State | 1 | 5 | 9 | ||||||||||||||
| Foreign | 1 | 10 | 1 | ||||||||||||||
| Total current tax expense (benefit) | $ | 8 | $ | 11 | $ | (11) | |||||||||||
| Deferred tax expense (benefit): | |||||||||||||||||
| Federal | $ | 8 | $ | (9) | $ | (1) | |||||||||||
| State | 11 | (12) | (8) | ||||||||||||||
| Foreign | (11) | 2 | — | ||||||||||||||
| Total deferred tax expense (benefit) | $ | 8 | $ | (19) | $ | (9) | |||||||||||
| Total income tax expense (benefit) | $ | 16 | $ | (8) | $ | (20) | |||||||||||
Effective Tax Rate Reconciliation
Below is a tabular reconciliation of the effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 (in millions):
| Year Ended | |||||||||||
| December 31, 2025 | |||||||||||
| Amount | Percentage | ||||||||||
| Income (Loss) from continuing operations before taxes | $ | (3,062) | |||||||||
| United States Statutory Tax Rate | $ | (643) | 21 | % | |||||||
State and Local Income Taxes, Net of Federal Income Tax Effect (1) | 10 | — | % | ||||||||
| Foreign Tax Effects | (15) | — | % | ||||||||
| Tax Credits | (9) | — | % | ||||||||
| Changes in Valuation Allowances | 332 | (11) | % | ||||||||
| Nontaxable or Nondeductible items | |||||||||||
| Goodwill impairment | 361 | (12) | % | ||||||||
| Other | (16) | 1 | % | ||||||||
| Other Adjustments | (4) | — | % | ||||||||
| Effective Tax Rate | $ | 16 | (1) | % | |||||||
(1) State and local income tax expense in Illinois, New York, New York City, New Jersey, and Minnesota made up the majority (greater than 50%) of the tax effect in this category.
Below is a reconciliation of the effective tax rate for the years ended December 31, 2024 and 2023 (in millions):
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| Amount | % | Amount | % | |||||||||||||||||||||||
| Income (Loss) from continuing operations before taxes | $ | (148) | $ | (337) | ||||||||||||||||||||||
| Provision for income taxes at the statutory rate | $ | (31) | 21 | % | $ | (71) | 21 | % | ||||||||||||||||||
| State income taxes, net of federal benefit | 2 | (1) | % | (1) | — | % | ||||||||||||||||||||
| Jurisdictional rate differences | 5 | (3) | % | (4) | 1 | % | ||||||||||||||||||||
| Changes in valuation allowances | 26 | (18) | % | 14 | (4) | % | ||||||||||||||||||||
| Benefit of income not allocated to the Company | — | — | % | 3 | (1) | % | ||||||||||||||||||||
| Income in separate U.S. tax consolidations | 1 | (1) | % | 1 | — | % | ||||||||||||||||||||
| Adjustments based on filed tax returns | (2) | 1 | % | — | — | % | ||||||||||||||||||||
| Non-deductible expenses | 6 | (4) | % | 45 | (13) | % | ||||||||||||||||||||
| Tax credits | (17) | 11 | % | (14) | 4 | % | ||||||||||||||||||||
| Change in uncertain tax positions | — | — | % | — | — | % | ||||||||||||||||||||
| Other | 2 | (1) | % | 7 | (2) | % | ||||||||||||||||||||
| Total income tax expense (benefit) | $ | (8) | 5 | % | $ | (20) | 6 | % | ||||||||||||||||||
The Company’s effective tax rate for the years ended December 31, 2025, 2024, and 2023 were (1)%, 5% and 6%, respectively.
The Company’s income tax expense varies from the expense that would be expected based on statutory rates due principally to its organizational structure. The Company is taxed as a corporation and is subject to corporate federal, state, and local taxes on the income allocated to it from Alight Holdings, based upon the Company’s economic interest in Alight Holdings, and any stand-alone income or loss generated by the Company. Alight Holdings and certain subsidiaries combine to form a single entity taxable as a partnership for U.S. federal and most applicable state and local income tax purposes. As such, Alight Holdings is not subject to U.S. federal and certain state and local income taxes. The partners of Alight Holdings, including the Company, are liable for federal, state, and local income taxes based on their allocable share
of Alight Holdings’ pass-through taxable income, which includes income of Alight Holdings’ subsidiaries that are treated as disregarded entities separate from Alight Holdings for income tax purposes. The effective tax rate for the year ended December 31, 2025 was lower than the 21% U.S. statutory corporate income tax rate primarily due to changes in valuation allowances, tax credits, non-deductible expenses, and certain non-recurring items, including non-deductible goodwill impairment.
The Tax Cuts and Jobs Act established global intangible law-taxed income ("GILTI") provisions that impose a tax on foreign income in excess of a deemed return on intangible assets of foreign corporations. The Company recognizes the taxes on GILTI as a period expense rather than recognizing deferred taxes for basis differences that are expected to affect the amount of GILTI inclusion upon reversal.
Deferred Income Taxes
The components of the Company’s deferred tax assets and liabilities are as follows (in millions):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Interest expense carryforward | $ | 132 | $ | 124 | |||||||
| Other credits | 79 | 65 | |||||||||
| Tax receivable agreement | 118 | 132 | |||||||||
| Other accrued expenses | 1 | — | |||||||||
| Seller Earnouts | — | 5 | |||||||||
| Interest rate swap | 3 | — | |||||||||
| Investment in partnership | 67 | — | |||||||||
| Fixed assets | 9 | — | |||||||||
| Capital loss carryforward | 5 | — | |||||||||
| Intangible assets | 16 | 3 | |||||||||
| Net operating losses | 104 | 30 | |||||||||
| Other | 3 | 3 | |||||||||
| Total | $ | 537 | $ | 362 | |||||||
| Valuation allowance on deferred tax assets | (495) | (86) | |||||||||
| Total | $ | 42 | $ | 276 | |||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets | $ | (26) | $ | (29) | |||||||
| Investment in partnership | — | (207) | |||||||||
| Interest rate swap | — | (5) | |||||||||
| Other | (15) | (16) | |||||||||
| Total | $ | (41) | $ | (257) | |||||||
| Net deferred tax (liability) asset | $ | 1 | $ | 19 | |||||||
As of December 31, 2025 and 2024, the Company had U.S. and foreign net operating losses ("NOL") of $104 million and $30 million, respectively. The net operating loss carryforwards will begin to expire in 2033 with certain jurisdictions having indefinite carryforward terms. The company also generated and utilized foreign and research and development tax credits which have an expiration of 10 and 20 years respectively.
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 and adjusts the valuation allowance accordingly. In evaluating the Company's ability to recover its deferred tax assets within the jurisdiction from which they arise, the Company considers all available positive and negative evidence, including the period of expiration, scheduled reversals of deferred tax liabilities, tax-planning strategies, and three years of cumulative operating income (loss). Management judgment is required in determining the assumptions and estimates related to the amount and timing of future taxable income by jurisdiction to which the tax asset relates. The Company maintains valuation allowances with regard to the tax benefits on certain deferred tax assets, and periodically assesses the adequacy thereof. During the year ended December 31, 2025, the valuation allowance increased by $409 million compared to the prior year, including $9 million in non-U.S.
jurisdictions. During the year ended December 31, 2024, the valuation allowance increased by $26 million compared to the prior year, of which $23 million related to U.S. tax credits and $3 million related to NOLs in non-U.S. jurisdictions.
In July 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted into law in the U.S. The OBBBA made several changes to business tax provisions including modifications to the Section 163j interest expense limitation and immediate expensing of domestic research and development expenditures. After considering impacts associated with the Company’s valuation allowance for the year ended December 31, 2025, the impact was immaterial for the year ended December 31, 2025. The Company will continue to monitor any developments and guidance related to the OBBBA.
Cash Paid for Income Taxes
The table below provides the updated requirements of ASU 2023-09 for cash paid for income taxes, net of refunds (in millions):
| Year ended December 31, 2025 | |||||
| Cash paid for income taxes, net of refunds: | |||||
| Federal | $ | 12 | |||
| State | 18 | ||||
| Foreign | 6 | ||||
| Total cash paid for income taxes, net of refunds | $ | 36 | |||
In 2025, cash paid for income taxes in California, New York, and Pennsylvania was $6 million. Cash paid for income taxes in India and Puerto Rico was $5 million.
Uncertain Tax Positions
The following is a reconciliation of the Company’s beginning and ending amount of uncertain tax positions (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning Balance | $ | — | $ | 2 | $ | 1 | |||||||||||
| Additions for tax positions of prior years | — | — | 1 | ||||||||||||||
| Lapse of statute of limitations | — | (2) | — | ||||||||||||||
| Ending Balance | $ | — | $ | — | $ | 2 | |||||||||||
There were no material liabilities for uncertain tax positions as of December 31, 2025 and 2024.
The Company records interest and penalties related to uncertain tax positions in its provision for income taxes. There were no material accrued potential interest and penalties as of December 31, 2025 and 2024. The Company and its subsidiaries file income tax returns in their respective jurisdictions. Based on the jurisdictions the Company operates in, 2017 - 2021 remain open for examinations.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 10, 2022 | |
| 2020 | Feb 26, 2021 | |
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.