BigBear.ai Holdings, Inc.BBAI
BigBear.ai Holdings, Inc. Income Taxes Disclosure
Income Taxes
The components of loss before taxes were attributable to the following regions:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic loss | $ | (315,296) | $ | (296,010) | $ | (70,879) | |||||||||||
| Foreign (loss) income | (340) | 207 | — | ||||||||||||||
| Loss before taxes | $ | (315,636) | $ | (295,803) | $ | (70,879) | |||||||||||
The table below presents the components of income tax benefit for the following periods
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Current: | |||||||||||||||||
U.S. federal | $ | — | $ | — | $ | — | |||||||||||
| U.S. state and local | 25 | 16 | 13 | ||||||||||||||
Foreign | (87) | (235) | — | ||||||||||||||
| Total current | (62) | (219) | 13 | ||||||||||||||
Deferred: | |||||||||||||||||
U.S. federal | (17,701) | — | (323) | ||||||||||||||
| U.S. state and local | (3,959) | (37) | 88 | ||||||||||||||
| Total deferred | (21,660) | (37) | (235) | ||||||||||||||
| Income tax benefit | $ | (21,722) | $ | (256) | $ | (222) | |||||||||||
The following table provides the reconciliation of the amounts computed using the U.S. federal statutory income tax rate and the amounts computed using the effective income tax rate under the requirements of ASU 2023-09 for the year ended December 31, 2025. Refer to Note 2—Summary of Significant Accounting Policies—Recent Accounting Pronouncements Adopted for additional details on the adoption of ASU 2023-09:
| Years Ended December 31, 2025 | |||||||||||
Amount | % | ||||||||||
Tax benefit at U.S. federal statutory rates | $ | (66,236) | 21.0% | ||||||||
U.S. state and local income taxes, net of U.S. federal income tax effect(1) | (3,934) | 1.2% | |||||||||
Foreign tax effects | |||||||||||
United Kingdom | |||||||||||
Statutory tax rate difference between United Kingdom and United States | 9 | —% | |||||||||
Other | (140) | —% | |||||||||
Changes in valuation allowance | 41,936 | (13.3)% | |||||||||
Nontaxable or Nondeductible Items | |||||||||||
Equity-based compensation | (6,103) | 1.9% | |||||||||
Non-deductible compensation | 1,819 | (0.6)% | |||||||||
| Non-deductible debt interest | 1,831 | (0.6)% | |||||||||
Net increase in fair value of derivatives | 2,460 | (0.8)% | |||||||||
| Goodwill impairment | 6,599 | (2.1)% | |||||||||
Other | 37 | —% | |||||||||
Income tax benefit and effective tax rate | $ | (21,722) | 6.7% | ||||||||
(1) State taxes in Virginia and New Jersey made up the majority (greater than 50%) of the tax effect in this category.
The following table provides the reconciliation of the amounts computed using the U.S. federal statutory income tax rate and the amounts computed using the effective income tax rate as previously disclosed for the years ended December 31, 2024 and December 31, 2023, prior to the adoption of ASU 2023-09:
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Amount | Amount | ||||||||||
Tax benefit at U.S. federal statutory rates | $ | (62,118) | $ | (14,881) | |||||||
U.S. state income tax, net of U.S. federal tax benefit | (11,422) | (5,070) | |||||||||
| Class B Incentive Unit equity-based compensation | (4) | 727 | |||||||||
| Valuation allowance | 46,739 | 17,248 | |||||||||
Net increase in fair value of derivatives | 11,281 | 1,559 | |||||||||
| Goodwill impairment | 15,544 | — | |||||||||
Other permanent differences | (276) | 195 | |||||||||
Income tax benefit | $ | (256) | $ | (222) | |||||||
| Effective tax rate | 0.1 | % | 0.3 | % | |||||||
The table below presents the components of net deferred tax assets and deferred liabilities:
| December 31, 2025 | December 31, 2024 | ||||||||||
Deferred tax assets: | |||||||||||
Net operating loss carryforwards | $ | 101,923 | $ | 62,811 | |||||||
Interest carryforwards | 12,621 | 12,755 | |||||||||
| Amortizable transaction costs | 2,479 | 2,121 | |||||||||
Accrued expenses | 1,727 | 1,643 | |||||||||
| Equity-based compensation | 4,185 | 3,175 | |||||||||
Derivative liability | 34,073 | 30,824 | |||||||||
| Depreciation and amortization | 8,569 | 7,083 | |||||||||
| Lease liabilities | 2,186 | 2,741 | |||||||||
| Section 174 costs | 7,788 | 8,327 | |||||||||
Other assets | 110 | 109 | |||||||||
Total deferred tax assets | 175,661 | 131,589 | |||||||||
Valuation allowance | (160,454) | (112,003) | |||||||||
Net deferred tax assets | 15,207 | 19,586 | |||||||||
Deferred tax liabilities: | |||||||||||
Depreciation and amortization | — | — | |||||||||
Discount on debt | 11,021 | 16,340 | |||||||||
Prepaid expenses | 2,222 | 752 | |||||||||
| Right-of-use assets | 1,964 | 2,494 | |||||||||
Total deferred tax liabilities | 15,207 | 19,586 | |||||||||
| Net deferred tax (liabilities) assets | $ | — | $ | — | |||||||
As of December 31, 2025, the Company has $339.6 million of U.S. federal net operating losses, all of which can be carried forward indefinitely.
As of December 31, 2025, the Company has $426.6 million of U.S. state net operating losses which will begin to expire in 2031.
Pursuant to Internal Revenue Code §382, the Company experienced an ownership change on December 2, 2024, as defined under §382(g). As a result, $170.6 million of federal net operating losses and $41.5 million of interest expense carryforward generated prior to that date are subject to limitation of $52.9 million per year through 2028.
A valuation allowance is provided for deferred income tax assets when it is more likely than not that future tax benefits will not be realized. The Company assesses whether a valuation allowance should be established against deferred tax assets based upon consideration of all available evidence, both positive and negative, using a more likely than not standard. This assessment considers, among other matters, the Company’s history of losses, the duration of statutory carryforward periods, the Company’s experience with tax attributes expiring, impacts of enacted changes in tax laws and tax planning strategies, and the taxable income generated through the future reversals of deferred tax liabilities. In making such judgments, significant weight is given to evidence that can be objectively verified. After analyzing all available evidence, the Company determined it was more likely that it would not be able to utilize all of its deferred tax assets, and has therefore established a full valuation allowance. The Company had valuation allowances against net deferred tax assets of $160.5 million and $112.0 million as of December 31, 2025 and December 31, 2024, respectively. During the year ended December 31, 2025, the increase in the valuation allowance was primarily attributable to net operating losses.
The table below presents the change of the valuation allowance for the following periods:
Valuation allowance as of December 31, 2023 | $ | 46,569 | |||
Net additions | 65,434 | ||||
Valuation allowance as of December 31, 2024 | $ | 112,003 | |||
Net additions | 70,111 | ||||
Reduction due to acquired deferred tax liabilities of Ask Sage | (21,660) | ||||
Valuation allowance as of December 31, 2025 | $ | 160,454 | |||
Unrecognized Tax Benefits
As of December 31, 2025 and December 31, 2024, the Company had gross unrecognized tax benefits of $0.8 million and $0.8 million, respectively. The unrecognized tax benefit was recorded as a reduction in our gross deferred tax assets, offset by a corresponding reduction in our valuation allowance. None of the unrecognized tax benefits, if recognized, would affect the effective tax rate because of the valuation allowance. There are no interest and penalties associated with the unrecognized tax benefits. For the year ended December 31, 2025 and prior periods, we were subject to income taxes only in the United States, and all tax years since the Company’s inception are open for examination.
The table below presents the Company’s gross unrecognized tax benefits:
Unrecognized tax benefits as of December 31, 2023 | $ | 785 | |||
Increases related to positions taken on prior year items | — | ||||
Unrecognized tax benefits as of December 31, 2024 | $ | 785 | |||
Increases related to positions taken on prior year items | — | ||||
Unrecognized tax benefits as of December 31, 2025 | $ | 785 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 25, 2025 | |
| 2023 | Mar 15, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 31, 2022 | |
| 2020 | Mar 31, 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.