CALIX, INCCALX

CALIX, INC Income Taxes Disclosure

10-KFiled Feb 20, 20266 min read
Income Taxes
The domestic and foreign components of income before incomes taxes were as follows (in thousands):
Years Ended December 31,
2025 2024 2023
Domestic$25,846 $(36,990)$30,983 
Foreign8,322 5,344 3,774 
$34,168 $(31,646)$34,757 
Income taxes consisted of the following (in thousands):
Years Ended December 31,
2025 2024 2023
Current:
Federal$(464)$3,181 $(2,407)
State1,773 2,110 6,493 
Foreign2,064 2,779 2,006 
Current income tax3,373 8,070 6,092 
Deferred:
Federal13,573 (8,120)2,050 
State(166)(926)(2,525)
Foreign(496)(923)(185)
Deferred income tax12,911 (9,969)(660)
$16,284 $(1,899)$5,432 
The effective income tax rate for the year ended December 31, 2025 differs from the statutory federal income tax rate as follows (dollars in thousands):
December 31, 2025
Provision for income taxes at U.S. federal statutory rate$7,175 21.0 %
U.S. federal tax:
Non-taxable or non-deductible items:
Share-based compensation8,242 24.1 
Executive compensation666 1.9 
Entertainment517 1.5 
Other70 0.2 
Effects of cross-border tax laws130 0.4 
Tax credits:
Research and development tax credit(3,182)(9.3)
Foreign tax credit384 1.1 
Changes in unrecognized tax benefits238 0.7 
Other Adjustments111 0.3 
State and local income tax, net of federal benefit (1)
1,091 3.2 
Foreign tax effects:
China:
Non-deductible share-based compensation480 1.4 
Other(190)(0.5)
India:
Withholding tax on repatriation457 1.3 
Other44 0.1 
Other foreign jurisdictions51 0.2 
$16,284 47.6 %
(1) During the year ended December 31, 2025, state taxes in Florida, Pennsylvania, South Carolina and Texas comprised greater than 50% of the tax effect in this category.

As previously disclosed, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
Years Ended December 31,
 2024 2023
Federal statutory rate21.0 %21.0 %
Impact of state taxes0.9 2.6 
Foreign operations(4.2)0.8 
R&D tax credits14.0 (13.5)
U.S. tax impact of foreign operations(0.4)(2.4)
Stock-based compensation(24.3)8.8 
Other permanent items(1.7)2.5 
Provision to return adjustments6.4 (9.7)
Valuation allowance(2.1)— 
Attribute expiration(0.1)0.8 
Uncertain tax positions(3.5)4.7 
6.0 %15.6 %
The significant components of our deferred tax assets were as follows (in thousands):
December 31,
2025 2024
Deferred tax assets:
Net operating loss carryforwards$22,836 $1,405 
Tax credit carryforwards59,049 53,788 
Inventory13,090 14,737 
Accruals and reserves4,618 5,017 
Deferred revenue7,093 9,476 
Stock-based compensation14,122 13,787 
Lease liability3,383 1,445 
Capitalized R&D78,801 110,581 
Other1,254 701 
Gross deferred tax assets204,246 210,937 
Valuation allowance(32,325)(30,571)
Total deferred tax assets171,921 180,366 
Deferred tax liabilities:
Fixed assets(3,127)(1,760)
Right of use assets(3,159)(1,006)
Undistributed earnings of foreign subsidiaries(1,056)— 
Total deferred tax liabilities(7,342)(2,766)
$164,579 $177,600 

All deferred taxes, along with any related valuation allowance, are classified in the Consolidated Balance Sheet as long-term.
A valuation allowance is required when, based upon an assessment of various factors, including recent operating loss history, anticipated future earnings, and prudent and reasonable tax planning strategies, it is more likely than not that some portion of the deferred tax assets will not be realized. At each reporting period, we assess the estimated future realizability of the gross carrying value of our deferred tax assets. Our periodic assessments take into consideration both positive evidence (future profitability projections for example and recent financial performance) and negative evidence (historical financial performance for example) as it relates to evaluating the future recoverability of our deferred tax assets. The valuation allowance increased by $1.8 million from 2024 to 2025. We continue to maintain a valuation allowance of $32.3 million on certain California state deferred tax assets that we believe are not more likely than not to be realized in future periods.
As of December 31, 2025, we had a U.S. federal net operating loss of approximately $96.8 million that does not expire and $41.1 million of state net operating losses which will expire at various dates through 2040 if not utilized. Additionally, we have U.S. federal, California and other state research and development credits of approximately $45.5 million, $55.3 million and $2.6 million as of December 31, 2025, respectively. The U.S. federal research and development credits will expire at various dates through 2045 if not utilized. The California research and development credits have no expiration date. The credits related to other various U.S. states have begun to expire and will continue to expire at various dates through 2040.
Income Taxes Paid
Income taxes paid (net of refunds) were as follows (in thousands):
Year Ended
December 31, 2025
Federal$2,294 
States:
Pennsylvania450 
South Carolina359 
Other1,447 
Total state2,256 
Foreign:
China780 
India1,371 
Other183 
Total foreign2,334 
$6,884 
Cash taxes paid prior to the adoption of ASU 2023-09 were $5.9 million in 2024 and $11.9 million in 2023.
Uncertain Tax Positions
ASC 740, “Income Taxes,” prescribes a recognition threshold and measurement attribute to the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The guidance also provides guidance on derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. The standard requires us to recognize the financial statement effects of an uncertain tax position when it is more likely than not that such position will be sustained upon audit. We recognize accrued interest and penalties related to unrecognized tax benefits as interest expense and income tax expense, respectively, in our Consolidated Statements of Comprehensive Income (Loss).
Our unrecognized tax benefits were as follows (in thousands):
Years Ended December 31,
2025 20242023
Balance at beginning of year$34,638 $32,449 $29,215 
    Reduction for tax positions related to prior year(4)(121)(19)
    Additions for tax positions related to prior year275 — 580 
    Additions for tax positions related to current year2,389 2,310 2,673 
Balance at end of year$37,298 $34,638 $32,449 
As of December 31, 2025 and 2024, we had unrecognized tax benefits of $37.3 million and $34.6 million, respectively, $20.6 million of which would affect our effective tax rate if recognized. Accrued interest or penalties for uncertain tax positions as of December 31, 2025 was not significant.
We file tax returns in the United States and various state jurisdictions, China, India, Ireland and the United Kingdom. The tax years 2000 through 2025 remain open and subject to examination by the appropriate governmental agencies due to tax attribute carryforwards. We are currently under examination in India, and no adjustments have been proposed to date.
In December 2021, the Organization for Economic Cooperation and Development enacted model rules for a new global minimum tax framework (“Pillar Two”), and certain governments in countries which we operate have enacted local Pillar Two legislation, with an effective date from January 1, 2024. We currently do not expect Pillar Two to have a material impact on our financial statements.
In July 2025, President Trump signed the One Big Beautiful Bill Act ("OBBBA"), which includes a broad range of tax reform provisions affecting businesses. The OBBBA includes numerous changes to existing tax law including extending or making permanent certain business and international tax measures initially established under the 2017 Tax Cuts and Jobs Act, which were set to expire. Additionally, the OBBBA permanently eliminates the requirement to capitalize and amortize U.S.-based research and experimental expenditures over five years, making these expenditures fully deductible in the period incurred. The Company has accounted for the effects of the OBBBA in the financial statements for the period ended December 31, 2025, of which the primary impact is a reduction of current tax liabilities and a corresponding reduction in deferred tax assets. The
Company will continue to evaluate the impacts of OBBBA including the potential impacts on future periods and tax planning strategies.

Historical Timeline

Fiscal YearFiled
2025Feb 20, 2026Showing above
2016Feb 28, 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.

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