ATN International, Inc. Income Taxes Disclosure
10. INCOME TAXES
The components of income before income taxes for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
| 2025 | | 2024 | | 2023 |
| ||||
Domestic | $ | (63,698) | $ | (101,092) | $ | (57,289) | ||||
Foreign |
| 35,945 |
| 50,126 |
| 29,750 | ||||
Total | $ | (27,753) | $ | (50,966) | $ | (27,539) | ||||
The Company has elected to prospectively adopt the guidance in ASU 2023-09. The following is a reconciliation from the tax computed at statutory income tax rates to the Company’s income tax expense for the year beginning January 1, 2025 (in thousands) in accordance with the guidance pursuant to ASU 2023-09:
Year Ended December 31, 2025 | ||||||
Amount | Percent | |||||
US Federal Statutory Tax Rate | $ | (5,828) | 21.0% | |||
State and Local Income Tax, Net of Federal (National) Income Tax Effect (1) | 244 | (0.9)% | ||||
Foreign tax effects | — | |||||
Bermuda | — | |||||
Statutory income tax rate differential | (9,530) | 34.3% | ||||
British Virgin Islands | — | |||||
Statutory income tax rate differential | (1,488) | 5.4% | ||||
Cayman | — | |||||
Statutory income tax rate differential | 497 | (1.8)% | ||||
Guyana | — | |||||
Statutory income tax rate differential | (950) | 3.4% | ||||
Nontaxable or nondeductible items | 600 | (2.2)% | ||||
Other | (89) | 0.3% | ||||
Singapore | — | |||||
Statutory income tax rate differential | 1,123 | (4.0)% | ||||
US Virgin Islands | — | |||||
Changes in valuation allowance | 1,356 | (4.9)% | ||||
Other | (120) | 0.4% | ||||
Other foreign jurisdictions | 23 | (0.1)% | ||||
Effect of changes in tax laws or rates enacted in the current period | — | 0.0% | ||||
Effect of cross-border tax laws | ||||||
Global Intangible Low-Taxed Income (GILTI) | 775 | (2.8)% | ||||
Tax credits | — | 0.0% | ||||
Changes in Valuation Allowance | 6,217 | (22.4)% | ||||
Nontaxable or nondeductible Items | — | |||||
Stock based compensation | 781 | (2.8)% | ||||
Mark to market | 366 | (1.3)% | ||||
Other | 343 | (1.2)% | ||||
Other adjustments | — | |||||
Withholding tax | 485 | (1.7)% | ||||
Worldwide changes in unrecognized tax benefits | 964 | (3.5)% | ||||
(4,231) | 15.2% | |||||
| (1) | State and local taxes in contributes to the majority (greater than 50%) of the tax effect in this category. |
The following is a reconciliation from the tax computed at statutory income tax rates to the Company’s income tax expense for the years ended December 31, 2024 and 2023 (in thousands) in accordance with the guidance prior to the adoption of ASU 2023-09:
| 2024 | | 2023 |
| |||
Tax computed at statutory US federal income tax rates | $ | (10,703) | $ | (5,783) | |||
Noncontrolling interest | 124 | (62) | |||||
Foreign tax rate differential | (12,321) | (8,853) | |||||
Over (under) provided in prior periods |
| 328 |
| (179) | |||
Nondeductible expenses |
| 1,716 |
| 1,806 | |||
Global intangible low-taxed income | 3,363 | - | |||||
Capitalized transactions costs |
| — |
| 56 | |||
Change in tax reserves | (7,100) | 2,783 | |||||
State Taxes, net of federal benefit |
| (3,819) |
| (1,776) | |||
Change in valuation allowance |
| 6,715 |
| 2,467 | |||
Investment tax credit | 880 | 84 | |||||
Stock-based compensation | 911 | 812 | |||||
Deferred income tax revaluation | 792 | (140) | |||||
Total income tax benefit | $ | (19,114) | $ | (8,785) | |||
The components of cash taxes paid for the year ended December 31,2025 are as follows (in thousands):
2025 | |||
United States | |||
United States - Federal | $ | 566 | |
United States - State | 125 | ||
Total United States | $ | 691 | |
3,195 | |||
Total cash taxes paid | $ | 3,886 |
The components of income tax expense (benefit) for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
\ | ||||||||||
| 2025 | | 2024 | | 2023 | |||||
Current: | ||||||||||
United States—Federal | $ | (160) | $ | (8,730) | $ | 921 | ||||
United States—State |
| (25) |
| (26) |
| 404 | ||||
Foreign |
| 4,476 |
| 2,419 |
| 6,646 | ||||
Total current income tax expense | $ | 4,291 | $ | (6,337) | $ | 7,971 | ||||
Deferred: | ||||||||||
United States—Federal | $ | (4,661) | $ | (8,228) | $ | (7,786) | ||||
United States—State |
| 240 |
| (3,032) |
| (2,781) | ||||
Foreign |
| (4,101) |
| (1,517) |
| (6,189) | ||||
Total deferred income tax expense (benefit) | $ | (8,522) | $ | (12,777) | $ | (16,756) | ||||
Consolidated: | ||||||||||
United States—Federal | $ | (4,822) | $ | (16,958) | $ | (6,865) | ||||
United States—State |
| 215 |
| (3,058) |
| (2,377) | ||||
Foreign |
| 375 |
| 902 |
| 457 | ||||
Total income tax expense (benefit) | $ | (4,231) | $ | (19,114) | $ | (8,785) | ||||
The significant components of deferred tax assets and liabilities are as follows as of December 31, 2025 and 2024 (in thousands):
| 2025 | | 2024 |
| |||
Deferred tax assets: | |||||||
Accounts receivable and inventory allowances | $ | 2,726 | $ | 2,548 | |||
Basis in investments |
| 3,812 |
| 3,925 | |||
Accrued expenses |
| 6,662 |
| 7,565 | |||
Deferred revenue |
| 18,538 |
| 20,774 | |||
Employee benefits |
| 3,019 |
| 2,304 | |||
Other, net |
| 32,851 |
| 28,191 | |||
Net operating losses | 88,865 | 85,926 | |||||
Tax credits | 7,768 | 4,918 | |||||
Operating lease liability | 23,881 | 23,608 | |||||
Total deferred tax asset |
| 188,122 |
| 179,759 | |||
Deferred tax liabilities: | |||||||
Acquired intangible assets, property and equipment | 84,442 | 94,533 | |||||
Right-of-use asset | 28,466 | 27,087 | |||||
Prepaid expense |
| 119 |
| 353 | |||
Total deferred tax liabilities |
| 113,027 |
| 121,973 | |||
Valuation allowance |
| (60,033) |
| (49,774) | |||
Net deferred tax asset | $ | 15,062 | $ | 8,012 | |||
Deferred tax assets and liabilities are reflected in the accompanying consolidated balance sheets as follows (in thousands):
| 2025 | | 2024 |
| |||
Deferred tax assets: | |||||||
Long term | $ | 17,012 | $ | 12,894 | |||
Total deferred tax asset | $ | 17,012 | $ | 12,894 | |||
Deferred tax liabilities: | |||||||
Long term | $ | (1,950) | $ | (4,882) | |||
Total deferred tax liabilities | $ | (1,950) | $ | (4,882) | |||
Net deferred tax asset (liabilities) | $ | 15,062 | $ | 8,012 | |||
The Company’s effective tax rate for the years ended December 31, 2025 and 2024 was 15.2% and 37.5%, respectively.
The effective tax rate for the year ended December 31, 2025 was primarily impacted by the following items: (i) a $10.5 million benefit associated with the mix of income generated among the foreign jurisdictions in which the Company operates, (ii) a $8.0 million net expense related to valuation allowances placed on certain deferred tax assets, (iii) a $2.8 million expense associated with US and foreign nondeductible expenses, and (iv) a $1 million net expense associated with the change in unrecognized tax positions.
The effective tax rate for the year ended December 31, 2024 was primarily impacted by the following items: (i) a $7.1 million net benefit associated with the change in unrecognized tax positions, (ii) a $6.7 million net expense related to valuation allowances placed on certain deferred tax assets, (iii) a $3.4 million expense associated with Global Intangible Low Tax Income inclusion, (iv) a $3.8 million benefit related to state income taxes, net of federal benefit, and (v) a $12.3 million benefit associated with the mix of income generated among the foreign jurisdictions in which the Company operates.
As of December 31, 2025, the Company estimated that it had gross federal, state and foreign net operating loss (“NOL”) carryforwards of $152.0 million, $129.4 million and $203.4 million respectively. Of these, $151.7 million will expire between 2028 and 2044 and $333.1 million may be carried forward indefinitely.
The Company assesses available positive and negative evidence to estimate if sufficient future taxable income will be generated to realize the existing deferred tax assets. A significant piece of negative evidence evaluated is cumulative losses incurred in certain reporting jurisdictions over the three-year period ended December 31, 2025. Other negative evidence examined includes, but is not limited to, losses expected in early future years, a history of tax benefits expiring unused, uncertainties whose unfavorable resolution would adversely affect future results, and brief carryback, carry forward periods. On the basis of this evaluation, the Company believed it was more likely than not that the benefit from some of these federal, state, and foreign deferred taxes would not be realized.
In recognition of this risk, at December 31, 2025, the Company has provided a valuation allowance against certain domestic and foreign deferred tax assets of $60.0 million. The valuation allowance primarily relates to net operating losses, with the remaining amount applicable to other net deferred tax assets which the Company does not expect to be able to realize.
As of December 31, 2025, the Company had an estimated $238.7 million of undistributed earnings attributable to foreign subsidiaries for which no provision for state income taxes or foreign withholding taxes have been made because it is expected that such earnings will be reinvested outside the US indefinitely unless repatriation can be done substantially tax-free. The Company will generally be free of additional US federal tax consequences on distributed foreign subsidiary earnings due to a dividends received deduction implemented as part of the Tax Act for earnings distributed after January 1, 2018. Additionally, due to the one-time transition tax on the deemed repatriation of post-1986 undistributed foreign subsidiary earnings, the majority of previously unremitted earnings have already been subjected to
US federal income tax. The Company continues to assert indefinite reinvestment on outside basis differences in the Company’s non-US subsidiaries. Additionally, any determination of the amount of the unrecognized deferred tax liability on outside basis differences is not practicable because of the complexity of laws and regulations, the varying tax treatment of alternative repatriation scenarios and the variation due to multiple potential assumptions relating to the timing of any future repatriation.
The Company had unrecognized tax benefits (including interest and penalty) of $43.8 million as of December 31, 2025, $42.8 million as of December 31, 2024 and $49.9 million as of December 31, 2023. The net increase of the reserve during the year ended December 31, 2025 was attributable to an increase in tax positions for prior periods of $2.7 million, an increase in tax positions for the current period of $3.2 million, offset by a lapse in statute of prior year positions of $4.9 million.
The following shows the activity related to unrecognized tax benefits (not including interest and penalty) during the three years ended December 31, 2025 (in thousands):
Gross unrecognized uncertain tax benefits at December 31, 2022 | $ | 39,919 | |
Increase in unrecognized tax benefits taken during a prior period | — | ||
Increase in unrecognized tax benefits taken during the current period |
| 2,598 | |
Increase in unrecognized tax benefits acquired as part of a business combination |
| — | |
Lapse in statute of limitations | (2,449) | ||
Settlements | — | ||
Gross unrecognized uncertain tax benefits at December 31, 2023 | $ | 40,068 | |
Increase in unrecognized tax benefits taken during a prior period | 1,505 | ||
Increase in unrecognized tax benefits taken during the current period | 3,020 | ||
Increase in unrecognized tax benefits acquired as part of a business combination | — | ||
Lapse in statute of limitations | (9,557) | ||
Settlements | — | ||
Gross unrecognized uncertain tax benefits at December 31, 2024 | $ | 35,036 | |
Increase in unrecognized tax benefits taken during a prior period | — | ||
Increase in unrecognized tax benefits taken during the current period | 3,189 | ||
Increase in unrecognized tax benefits acquired as part of a business combination | — | ||
Lapse in statute of limitations | (2,967) | ||
Settlements | — | ||
Gross unrecognized uncertain tax benefits at December 31, 2025 | $ | 35,258 |
The Company’s accounting policy is to classify interest and penalties related to income tax matters as part of income tax expense. The accrued amounts for interest and penalties were $8.5 million as of December 31, 2025, $7.8 million as of December 31, 2024, and $9.8 million as of December 31, 2023.
The majority of unrecognized uncertain tax benefits (including interest and penalty) would impact the effective tax rate if recognized.
The Company and its subsidiaries file income tax returns in the US and in various, state and local and foreign jurisdictions. The statute of limitations related to the consolidated US federal income tax return is closed for all tax years up to and including 2021. The expiration of the statute of limitations related to the various state and foreign income tax returns that the Company and subsidiaries file varies by jurisdiction.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Mar 15, 2024 | |
| 2022 | Mar 15, 2023 | |
| 2021 | Mar 16, 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.