BILL Holdings, Inc.BILL
BILL Holdings, Inc. Income Taxes Disclosure
INCOME TAXES
The components of income (loss) before provision for income taxes were as follows during the periods presented (in thousands):
Year ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | (43,567) | $ | 5,312 | $ | (199,452) | |||||||||||
| Foreign | 73,977 | (31,631) | (23,465) | ||||||||||||||
| Total income (loss) before provision for income taxes | $ | 30,410 | $ | (26,319) | $ | (222,917) | |||||||||||
The components of provision for income taxes were as follows during the periods presented (in thousands):
Year ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 3,850 | $ | 1,650 | $ | 572 | |||||||||||
| State | 2,758 | 1,251 | 1,583 | ||||||||||||||
| Foreign | 80 | 19 | 14 | ||||||||||||||
| Total current | 6,688 | 2,920 | 2,169 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (32) | (262) | (995) | ||||||||||||||
| State | (45) | (99) | (366) | ||||||||||||||
| Total deferred | (77) | (361) | (1,361) | ||||||||||||||
| Provision for income taxes | $ | 6,611 | $ | 2,559 | $ | 808 | |||||||||||
The items accounting for the difference between the income taxes computed at the federal statutory rate and the provision for income taxes consisted of the following during the periods presented (in thousands):
Year ended June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected provision (benefit) at U.S. federal statutory rate | $ | 6,386 | $ | (5,528) | $ | (46,813) | |||||||||||
| State income taxes, net of federal benefit | 7,325 | 9,134 | 8,087 | ||||||||||||||
Stock-based compensation (1) | 19,204 | 24,300 | 4,253 | ||||||||||||||
| Research and development tax credits | (23,383) | (24,039) | (19,974) | ||||||||||||||
Change in valuation allowance (2) | 10,939 | 4,943 | 48,321 | ||||||||||||||
| Restructuring | — | (13,769) | — | ||||||||||||||
| Foreign rate differential | (15,455) | 6,658 | 4,942 | ||||||||||||||
| Other | 1,595 | 860 | 1,992 | ||||||||||||||
| Provision for income taxes | $ | 6,611 | $ | 2,559 | $ | 808 | |||||||||||
(1) The rate impact during the year ended June 30, 2025, 2024 and 2023 relates to the impact of non-deductible stock compensation and shortfalls related to tax deductions being smaller than the associated stock compensation expense.
(2) The rate impact during the year ended June 30, 2025, 2024 and 2023 pertains to an increase in valuation allowance due to the increase in net deferred tax assets, capitalized R&D expense and tax credits generated during the year.
The components of deferred tax assets and liabilities were as follows as of the dates presented (in thousands):
| June 30, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accruals and reserves | $ | 17,888 | $ | 13,966 | |||||||
| Capitalized research and development | 160,755 | 120,882 | |||||||||
| Deferred revenue | 28 | 1,084 | |||||||||
| Stock-based compensation | 19,532 | 17,093 | |||||||||
| Net operating and other loss carryforwards | 280,004 | 360,592 | |||||||||
| Research and development credits | 99,626 | 85,910 | |||||||||
| Accrued rewards | 154 | 40 | |||||||||
| Operating lease liabilities | 17,874 | 19,139 | |||||||||
| Other | 3,660 | 598 | |||||||||
Total deferred tax assets before valuation allowance | 599,521 | 619,304 | |||||||||
| Valuation allowance | (503,692) | (494,424) | |||||||||
| Deferred tax assets | $ | 95,829 | $ | 124,880 | |||||||
| Deferred tax liabilities: | |||||||||||
| Deferred contract costs | $ | (6,603) | $ | (5,868) | |||||||
| Property and equipment | (22,253) | (15,853) | |||||||||
| Intangible assets | (53,280) | (68,218) | |||||||||
| Operating right of use assets | (14,066) | (14,992) | |||||||||
| Other reserve | — | (20,399) | |||||||||
| Total deferred tax liabilities | (96,202) | (125,330) | |||||||||
| Net deferred tax liabilities | $ | (373) | $ | (450) | |||||||
Accounting Standards Codification 740 requires that the tax benefit of net operating losses, temporary differences, and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability
to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. The change in valuation allowance was approximately $9.3 million, $15.0 million, and $95.3 million during the years ended June 30, 2025, 2024, and 2023, respectively. The increase in the June 30, 2025 valuation allowance is primarily from the application of the Tax Cuts and Jobs Act of 2017 effective fiscal year 2023 and thereafter, that requires companies to capitalize and amortize research and development expenses rather than deduct the costs as incurred, offset by a reduction in a deferred tax liabilities. The net deferred tax liability is included as other long-term liabilities in the accompanying consolidated balance sheets.
The Tax Cuts and Job Act subjects a U.S. company to tax on its Global Intangible Low Tax Income (GILTI). Under GAAP, the Company can make an accounting policy election to either treat taxes due on the GILTI inclusion as a current period expense or factor such amounts into the measurement of deferred taxes. The Company elected the period expense method.
The Company does not currently operate under any tax holiday in any country in which it operates.
The Company does not have foreign earnings available to distribute. As such, there is no unrecorded deferred tax liability associated with an outside basis of foreign subsidiaries.
As of June 30, 2025, the Company had NOL carryforwards of $944.3 million, $881.6 million, and $13.4 million for federal, state, and foreign tax purposes, respectively, that are available to reduce future taxable income. If not utilized, the state NOL carryforwards will begin to expire in 2025. As of June 30, 2025, the federal and foreign NOL carryforwards do not expire and will carry forward indefinitely until utilized. As of June 30, 2025, the Company had capital loss carryforwards of $74.3 million for foreign tax purposes. The foreign capital loss carryforwards do not expire and will carry forward indefinitely until utilized. As of June 30, 2025, the Company also had research and development tax credit carryforwards of $89.4 million and $66.2 million for federal and state tax purposes, respectively. If not utilized, the federal tax credits will expire at various dates beginning in 2041. The majority of the state tax credits do not expire and will carry forward indefinitely until utilized.
Utilization of the NOL and tax credit carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Code and other similar state provisions. The annual limitation may result in the expiration of NOLs and tax credits before utilization.
Below is the reconciliation of the unrecognized tax benefits related to federal and California research and development credits during the periods presented (in thousands):
| Year e ded June 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at the beginning of the year | $ | 35,128 | $ | 23,300 | $ | 16,724 | |||||||||||
Add: | |||||||||||||||||
Tax positions related to the current year | 10,622 | 9,134 | 6,642 | ||||||||||||||
| Purchase of intangible assets | 209 | — | — | ||||||||||||||
Tax positions related to the prior year | — | 2,714 | 226 | ||||||||||||||
Less: | |||||||||||||||||
| Statute of limitations lapse | — | (20) | (292) | ||||||||||||||
| Balance at the end of the year | $ | 45,959 | $ | 35,128 | $ | 23,300 | |||||||||||
The Company had unrecognized tax benefits of $46.0 million and $35.1 million as of June 30, 2025 and 2024, respectively, all of which are offset by a full valuation allowance. If the unrecognized tax benefits as of June 30, 2025 were recognized, they would not have an impact to the effective tax rate due to the Company’s valuation allowance.
The amount of interest and penalties accrued as of each of June 30, 2025 and 2024 were not material.
The Company files income tax returns in the U.S. for U.S. federal, California, and various states and foreign jurisdictions. The Company’s U.S. federal, state, and foreign tax returns for all years remain subject to examination by taxing authorities as a result of unused tax attributes being carried forward. The Company records liabilities related to uncertain tax positions, which provide adequate reserves for income tax uncertainties in all open tax years. The Company’s management evaluates the realizability of the Company’s deferred tax assets based on all available evidence, both positive and negative. The realization of net deferred tax assets is dependent on the Company’s ability to generate sufficient future taxable income during the foreseeable future. The Company does not anticipate any material change on its unrecognized tax benefits over the next 12 months.
Subsequent to the Company’s fiscal year ended June 30, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025. The legislation includes tax related provisions that may impact the Company, including a repeal of Section 174 of the Internal Revenue Code relating to the capitalization and amortization of domestic research and experimental expenditures, applicable to the Company starting fiscal year ending June 30, 2026. The Company is in the process of evaluating the impacts of the OBBBA to its consolidated financial statements. A quantitative estimate of the OBBBA's effects cannot be reasonably determined at this time due to the complexity of the changesHistorical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 28, 2025 | Showing above |
| 2024 | Aug 23, 2024 | |
| 2023 | Aug 29, 2023 | |
| 2022 | Aug 22, 2022 | |
| 2021 | Aug 30, 2021 | |
| 2020 | Aug 31, 2020 | |
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.