BLACKLINE, INC.BL

BLACKLINE, INC. Income Taxes Disclosure

10-KFiled Feb 26, 20267 min read
Income Taxes
The components of loss before income taxes were as follows (in thousands):
Year Ended December 31,
202520242023
United States$36,399 $126,341 $62,745 
International11,829 (1,643)(2,236)
$48,228 $124,698 $60,509 
The components of the total provision for (benefit from) income taxes were as follows (in thousands):
Year Ended December 31,
202520242023
Current
Federal$738 $4,474 $272 
State1,887 3,872 859 
Foreign3,298 3,361 1,844 
Total current tax expense5,923 11,707 2,975 
Deferred
Federal15,076 (35,071)202 
State886 (17,791)100 
Foreign(914)(1,912)(1,827)
Total deferred tax provision15,048 (54,774)(1,525)
Total provision for (benefit from) income taxes$20,971 $(43,067)$1,450 
A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate pursuant to the disclosure requirements of ASU 2023-09 adopted on a prospective basis for the year ended December 31, 2025 was as follows (in thousands, except percentages):
Year Ended December 31,
2025
Federal statutory income tax rate$10,128 21.0 %
State tax, net of federal benefit(1)
2,379 4.9 %
Change in valuation allowance(86)(0.2)%
Foreign tax effects:
Japan
Change in valuation allowance(2,344)(4.9)%
Other 658 1.4 %
Netherlands
Statutory tax rate difference463 1.0 %
Other 109 0.2 %
Other foreign jurisdictions990 2.1 %
Cross-border tax laws:
Base erosion and anti-abuse tax1,280 2.7 %
Subpart F income1,115 2.3 %
Tax credits (3,857)(8.0)%
Nondeductible items:
Officer compensation5,188 10.8 %
Meals & entertainment 625 1.3 %
Stock-based compensation 4,547 9.4 %
Other (224)(0.5)%
Total$20,971 43.5 %
(1) State and local taxes in California, Minnesota, New York City, Pennsylvania, and Texas made up the majority (greater than 50 percent) of the state tax effect.
A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2024 and 2023 prior to the adoption of ASU 2023-09 was as follows:
Year Ended December 31,
20242023
Federal statutory income tax rate21.0 %21.0 %
State tax, net of federal benefit(11.8)%2.7 %
Federal tax credits(2.5)%(9.8)%
De-recognized tax credit carryforwards2.6 %— %
Unrecognized tax benefit remeasurement4.3 %— %
Change in valuation allowance(53.2)%(13.8)%
Foreign tax differential0.9 %2.0 %
Windfall tax benefits, net related to stock-based compensation1.8 %4.1 %
Nondeductible officer compensation3.9 %6.8 %
Nondeductible transaction costs— %0.3 %
Contingent consideration— %(11.6)%
Nondeductible meals and entertainment0.5 %0.7 %
Foreign-derived intangible income tax benefit(1.8)%— %
Other(0.2)%— %
(34.5)%2.4 %
On July 4, 2025, the legislation formally titled “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” and commonly referred to as the “One Big Beautiful Bill” (“OBBB”) was enacted. The OBBB adjusted a number of provisions affecting businesses, including the immediate expensing of domestic research and development costs, limitations on deductions for interest expense, and accelerated fixed asset depreciation. The OBBB provisions did not have a material impact on the Company’s effective tax rate.
The summary of income taxes paid by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 adopted on a prospective basis for the year ended December 31, 2025 (in thousands):
Year Ended December 31,
2025
Federal$650 
State2,676 
Foreign
France424 
India873 
Mexico409 
Netherlands1,751 
United Kingdom(810)
All other foreign550 
Total$6,523 
The amount of cash income taxes paid by the Company during the years ended December 31, 2024 and 2023 was $11.5 million and $3.1 million, respectively.
Significant components of the Company’s deferred tax assets and liabilities were as follows (in thousands):
December 31,
20252024
Deferred tax assets
Net operating loss carryforwards$34,022 $14,906 
Research and other credits21,991 17,288 
Capitalized R&D3,049 40,131 
Stock-based compensation8,028 7,570 
Operating and finance leases2,496 3,382 
Accrued expenses and other current liabilities5,948 7,300 
Other1,114 2,962 
Total deferred tax assets76,648 93,539 
Less: valuation allowance(2,247)(4,677)
Deferred tax assets, net of valuation allowance74,401 88,862 
Deferred tax liabilities
Intangible assets(11,499)(13,801)
Prepaid expenses(26,236)(23,194)
Operating lease right-of-use and finance lease assets(2,453)(3,191)
Other(116)— 
Total deferred tax liabilities(40,304)(40,186)
Net deferred taxes$34,097 $48,676 
ASC 740, Income Taxes, 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.” A valuation allowance is recorded when it is more likely than not that some of the deferred tax assets will not be realized. Realization of future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Accordingly, the Company provided a valuation allowance against certain foreign deferred tax assets.
The changes in the valuation allowance were as follows (in thousands):
Year Ended December 31,
202520242023
Valuation allowance, at beginning of year$4,677 $92,079 $99,476 
Decrease in valuation allowance recorded through earnings(2,430)(87,402)(7,063)
Decrease in valuation allowance recorded through equity— — (334)
Valuation allowance, at end of year$2,247 $4,677 $92,079 
The decrease in valuation allowance recorded through earnings of $2.4 million during the year ended December 31, 2025 resulted primarily from the release of valuation allowance previously recorded against its BlackLine K.K. deferred tax assets.
The decrease in valuation allowance recorded through earnings of $87.4 million during the year ended December 31, 2024 resulted primarily from the release of valuation allowance previously recorded against its U.S. deferred tax assets, partially offset by an increase in valuation allowance recorded against certain foreign deferred tax assets.
The decrease in valuation allowance recorded through earnings of $7.1 million for the year ended December 31, 2023 resulted primarily from the utilization of federal and state net operating loss carryforwards due to domestic profitability, along with the valuation allowance decrease associated with net deferred tax liabilities from the DI Acquisition, which are a source of taxable income to support the recognition of existing UK deferred tax assets. The valuation allowance release resulted in a UK deferred tax benefit of $1.7 million for the year ended December 31, 2023.
The decrease in valuation allowance recorded through equity of $0.3 million during the year ended December 31, 2023 is related to unrealized gains reported in other comprehensive income.
The Company did not provide for U.S. income taxes on the undistributed earnings and other outside temporary differences of foreign subsidiaries at December 31, 2025 and 2024, as they are considered indefinitely reinvested outside the U.S. and determination is not practicable. Upon distribution of those earnings in the form of a
dividend or otherwise, the Company may be subject to both state income taxes and withholding taxes payable to various foreign countries. The amounts of such tax liabilities that might be payable upon repatriation of foreign earnings are not material.
At December 31, 2025, the Company had consolidated federal and state net operating loss carryforwards available to offset future taxable income of approximately $81.4 million and $82.9 million, respectively. The federal losses do not expire, and the state losses will begin to expire between 2031 and 2045, depending on the jurisdiction. The Company has federal research and development credits of $9.8 million, which begin to expire in 2041. The Company has state research and development credits of $12.1 million, which are indefinite in expiration. Pursuant to Internal Revenue Code Section 382, use of the Company’s net operating loss carryforwards may be limited if the Company experiences a cumulative change in ownership of more than 50% over a three-year period.
The following is a rollforward of the Company’s total gross unrecognized tax benefits (in thousands):
Year Ended December 31,
202520242023
Beginning gross unrecognized tax benefits$18,698 $7,104 $5,513 
Increases related to prior year tax positions695 9,243 274 
Increases related to current year tax positions2,665 2,351 1,317 
Settlements(84)— — 
Ending gross unrecognized tax benefits$21,974 $18,698 $7,104 
At December 31, 2025, included in the balance of unrecognized tax benefits is $22.0 million, that if recognized, would affect the effective tax rate. The Company recorded less than $0.1 million interest and penalties in its provision for income taxes for the years ended December 31, 2025, 2024, and 2023, respectively. No interest and penalties were accrued for at December 31, 2025, and less than $0.1 million was accrued in interest and penalties at December 31, 2024.
The Company files U.S. federal, various state, and foreign income tax returns. In the normal course of business, the Company is subject to examination by taxing authorities. The tax years from 2013 forward remain subject to examination for federal purposes. Generally, state and foreign tax authorities may examine the Company’s tax returns for four years and five years, respectively, from the date an income tax return is filed. However, the taxing authorities may continue to examine the Company’s federal and state net operating loss carryforward until the statute of limitations closes on the tax years in which the federal and state net operating losses are utilized.
The Company does not anticipate material changes in the total amount or composition of its unrecognized tax benefits within 12 months of the reporting date.
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Historical Timeline

Fiscal YearFiled
2025Feb 26, 2026Showing above
2024Feb 21, 2025
2023Feb 23, 2024
2022Feb 23, 2023
2021Feb 25, 2022
2020Feb 25, 2021
2019Feb 27, 2020
2018Feb 28, 2019
2017Mar 8, 2018
2016Mar 10, 2017

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.

Other Available Disclosures

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