ALKAMI TECHNOLOGY, INC.ALKT
ALKAMI TECHNOLOGY, INC. Income Taxes Disclosure
Income Taxes
The components of the (benefit from) provision for income taxes are as follows:
| Year ended December 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Income (loss) before income tax provision (benefit): | ||||||||||||||||||||
| US | $ | (59,558) | $ | (40,527) | $ | (62,869) | ||||||||||||||
| Foreign | 596 | — | — | |||||||||||||||||
| Total income (loss) before income tax provision (benefit) | $ | (58,962) | $ | (40,527) | $ | (62,869) | ||||||||||||||
| Current income tax provision (benefit): | ||||||||||||||||||||
| Federal | $ | — | $ | — | $ | — | ||||||||||||||
| State | 305 | 199 | 76 | |||||||||||||||||
| Foreign | 179 | — | — | |||||||||||||||||
| Total current income tax provision (benefit) | 484 | 199 | 76 | |||||||||||||||||
| Deferred income tax provision (benefit): | ||||||||||||||||||||
| Federal | (9,083) | 89 | 145 | |||||||||||||||||
| State | (2,711) | 20 | (177) | |||||||||||||||||
| Foreign | — | — | — | |||||||||||||||||
| Total deferred income tax provision (benefit) | (11,794) | 109 | (32) | |||||||||||||||||
Total (Benefit from) provision for income taxes | $ | (11,310) | $ | 308 | $ | 44 | ||||||||||||||
The (benefit from) provision for income taxes results in effective rates that differ from the statutory rates. The following is a reconciliation of income tax expense (benefit) computed at the statutory federal income tax rate to the total tax expense (benefit) computed at the effective tax rate:
| Year ended December 31, | ||||||||||||||||||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||||
| US federal statutory tax rate | $ | (12,382) | 21.0 | % | $ | (8,511) | 21.0 | % | $ | (13,203) | 21.0 | % | ||||||||||||||||||||||||||
State and local income taxes, net of federal income tax effect(1) | (1,896) | 3.2 | % | 175 | (0.4) | % | (64) | 0.1 | % | |||||||||||||||||||||||||||||
Foreign tax effects(2) | 54 | (0.1) | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
| Changes in valuation allowances | 1,637 | (2.8) | % | 14,933 | (36.9) | % | 11,639 | (18.5) | % | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | (3,556) | 6.0 | % | (17,400) | 42.9 | % | (1,539) | 2.4 | % | |||||||||||||||||||||||||||||
| Executive compensation | 4,088 | (6.8) | % | 10,620 | (26.2) | % | 2,970 | (4.7) | % | |||||||||||||||||||||||||||||
| Meals & entertainment | 641 | (1.1) | % | 460 | (1.1) | % | 362 | (0.6) | % | |||||||||||||||||||||||||||||
| Other | 247 | (0.4) | % | 288 | (0.7) | % | 107 | (0.1) | % | |||||||||||||||||||||||||||||
| Other adjustments: | ||||||||||||||||||||||||||||||||||||||
| Other | (143) | 0.2 | % | (257) | 0.6 | % | (228) | 0.3 | % | |||||||||||||||||||||||||||||
| Total | $ | (11,310) | 19.2 | % | $ | 308 | (0.8) | % | $ | 44 | (0.1) | % | ||||||||||||||||||||||||||
(1) In 2025, state taxes in California, Illinois, Maryland, New York, and Wisconsin made up the majority (greater than 50 percent) of the tax effect in this category.
(2) In 2025, foreign tax effects represent the federal statutory tax rate difference between India and United States.
Significant components of the Company’s net deferred tax assets and liabilities were as follows as of December 31, 2025 and 2024:
December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Deferred revenue | $ | 9,242 | $ | 7,240 | |||||||
| Accrued expenses | 4,116 | 2,189 | |||||||||
| Stock-based compensation | 3,834 | 2,422 | |||||||||
| Net operating loss carryforward (federal and state) | 113,044 | 76,213 | |||||||||
| Reserve for client credits | 230 | 164 | |||||||||
| Capitalized research and development costs | 39,652 | 47,396 | |||||||||
| Lease liabilities | 4,359 | 4,639 | |||||||||
| Interest limitation carryforward | 9,346 | — | |||||||||
| Other | 332 | 293 | |||||||||
| Total deferred tax assets | 184,155 | 140,556 | |||||||||
| Valuation allowance for deferred tax assets | (137,813) | (127,102) | |||||||||
| Deferred tax assets, net of valuation allowance | 46,342 | 13,454 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Fixed assets | (154) | (158) | |||||||||
| Right-of-use assets | (3,389) | (3,661) | |||||||||
| Goodwill | (5,645) | (4,997) | |||||||||
| Intangible assets | (36,630) | (4,625) | |||||||||
| Deferred costs | (3,149) | (1,835) | |||||||||
| Total deferred tax liabilities | (48,967) | (15,276) | |||||||||
| Deferred income tax liabilities, net of deferred tax assets | $ | (2,625) | $ | (1,822) | |||||||
At December 31, 2025 and 2024, the Company had federal net operating loss carryforwards of $454.2 million and $298.5 million, respectively. Of these, $70.5 million for both December 31, 2025 and 2024 are subject to limited carryforward periods and will begin to expire in 2034. At December 31, 2025 and 2024, the Company had various state net operating loss carryforwards with a tax effect of approximately $22.4 million and $17.1 million, respectively, which are subject to varying carryforward periods that begin to expire in 2027. Additionally, the Company had $0.3 million of federal general business credit carryforwards as of both December 31, 2025 and 2024, which will begin to expire in 2035.
The Company’s ability to utilize net operating loss carryforwards and other tax attributes to reduce future federal taxable income is subject to potential limitations under Internal Revenue Code Section 382 (“Section 382”) and Section 383 and its related tax regulations. The utilization of these attributes may be limited if certain ownership changes by 5% stockholders (as defined in Treasury regulations pursuant to Section 382) and the effects of stock issuances by the Company during any three-year period result in a cumulative change of more than 50% in the beneficial ownership of the Company. At December 31, 2025, $117.5 million of the Company’s combined federal net operating loss carryforwards remain subject to the annual Section 382 utilization limitation, including $79.9 million acquired from MANTL. Of these, $10.0 million are subject to limited carryforward periods and will begin to expire in 2034. At December 31, 2025, $0.3 million of the Company’s federal general business credit carryforwards are subject to Section 382 limitation, of which $0.2 million are expected to expire unutilized. Subsequent ownership changes may further impact the limitation in future years.
The Company assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of existing deferred tax assets. As part of the evaluation, the Company considered historical losses, future reversals of taxable temporary differences, the duration of statutory carryback and carryforward periods, and ongoing prudent and feasible tax planning strategies. As a result, at December 31, 2025 and 2024, the Company established a valuation allowance of $137.8 million and $127.1 million, respectively, for its net deferred tax assets as realization of the net deferred tax assets is not reasonably assured based upon a “more likely than not” threshold. The Company excluded the deferred tax liabilities related to certain indefinite-lived intangibles when calculating the valuation allowance, as these liabilities cannot be considered as a source of income when determining the realizability of the net definite-lived deferred tax assets. In addition to these indefinite-lived deferred tax liabilities, the Company also has indefinite-lived deferred tax assets which were considered as part of the Company’s net deferred tax position. The valuation allowance increased by $10.7 million and $17.9 million during the years ended December 31, 2025 and 2024, respectively.
The Company files income tax returns in the U.S. federal jurisdiction and several state jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state or local income tax examinations by tax authorities for tax years before 2020. Operating losses generated in years prior to 2020 remain open to adjustment until the statute of limitations closes for the tax year in which the net operating losses are utilized. The tax years 2022 and forward remain open to examination by all the major taxing jurisdictions to which the Company is subject, though the Company is not currently under examination by any major taxing jurisdiction. The Company did not have any uncertain tax positions as of December 31, 2025 and 2024. The Company’s policy is to accrue interest and penalties related to uncertain tax positions as a component of income tax expense. For the
years ended December 31, 2025 and 2024, the Company did not recognize any interest or penalties.
On July 4, 2025, H.R. 1, the One Big Beautiful Bill Act (“OBBBA”), was enacted in the United States. Most notably, OBBBA retroactively repeals the Tax Cuts and Jobs Act's requirement to capitalize and amortize domestic Section 174 research and development expenditures over five years. For tax years beginning after December 31, 2024, the Company will be permitted to immediately deduct domestic research and development expenditures in the year incurred, while the requirement to capitalize and amortize foreign research and development expenditures over 15 years remains in effect. This repeal is expected to increase the Company’s net operating loss carryforwards; however, due to the Company’s valuation allowance on the related deferred tax assets, it does not have a material impact on the Company’s consolidated financial statements. The provisions of OBBBA did not have a material impact on the Company’s consolidated financial statements.
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.