CCC Intelligent Solutions Holdings Inc. Income Taxes Disclosure
6. INCOME TAXES
The components of pretax income (loss) attributable to domestic and foreign operations are as follows (in thousands):
|
Year Ended December 31, |
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|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Domestic |
|
$ |
25,333 |
|
|
$ |
46,557 |
|
|
$ |
(80,486 |
) |
|
Foreign |
|
|
(3,804 |
) |
|
|
(2,243 |
) |
|
|
(4,061 |
) |
|
Pretax income (loss) |
|
$ |
21,529 |
|
|
$ |
44,314 |
|
|
$ |
(84,547 |
) |
|
The goodwill and intangible asset impairment charges (see Note 11) recognized during the year ended December 31, 2023 are included in the domestic pretax loss in the table above.
The Company’s income tax provision consisted of the following (in thousands):
|
Year Ended December 31, |
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|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|||
Current provision: |
|
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
(919 |
) |
|
$ |
38,378 |
|
|
$ |
41,804 |
|
|
State |
|
|
2,263 |
|
|
|
5,217 |
|
|
|
10,053 |
|
|
Total current provision |
|
|
1,344 |
|
|
|
43,595 |
|
|
|
51,857 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
Deferred provision (benefit): |
|
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
13,703 |
|
|
|
(24,566 |
) |
|
|
(36,253 |
) |
|
State |
|
|
4,794 |
|
|
|
(5,955 |
) |
|
|
(10,080 |
) |
|
Foreign |
|
|
1,338 |
|
|
|
115 |
|
|
|
(502 |
) |
|
Change in valuation allowance |
|
|
(1,338 |
) |
|
|
(115 |
) |
|
|
502 |
|
|
Total deferred expense (benefit) |
|
|
18,497 |
|
|
|
(30,521 |
) |
|
|
(46,333 |
) |
|
Total income tax provision |
|
$ |
19,841 |
|
|
$ |
13,074 |
|
|
$ |
5,524 |
|
|
Beginning in the 2025 annual reporting period, we adopted ASU 2023-09 prospectively. See Note 2 - Summary of Significant Accounting Policies - Recently Adopted Accounting Pronouncements for additional details on the adoption of ASU 2023-09. A reconciliation of the U.S. federal statutory income tax rate to our effective tax rate pursuant to the disclosure requirements of ASU 2023-09 is as follows (in thousands, except percentages):
|
Year Ended December 31, |
|
|||||
|
2025 |
|
|||||
|
|
|
|
|
|
||
U.S. federal statutory tax rate |
$ |
4,521 |
|
|
|
21.0 |
% |
State and local income tax, net of federal (national) income tax effect (1) |
|
5,716 |
|
|
|
26.6 |
|
Foreign tax effects |
|
|
|
|
|
||
Foreign Jurisdiction (China) |
|
|
|
|
|
||
Adjustments to deferred attributes |
|
(781 |
) |
|
|
(3.6 |
) |
Changes in valuation allowance |
|
1,326 |
|
|
|
6.2 |
|
Other |
|
(234 |
) |
|
|
(1.1 |
) |
Foreign Jurisdiction (Cayman) |
|
|
|
|
|
||
Foreign tax rate differential |
|
481 |
|
|
|
2.2 |
|
Other foreign jurisdictions |
|
7 |
|
|
|
— |
|
Effects of changes in tax laws or rates enacted in the current period |
|
— |
|
|
|
— |
|
Effects of cross-border tax laws |
|
— |
|
|
|
— |
|
Tax credits |
|
|
|
|
|
||
Research and development tax credits |
|
(7,496 |
) |
|
|
(34.8 |
) |
Changes in valuation allowances |
|
— |
|
|
|
— |
|
Nontaxable or nondeductible items |
|
|
|
|
|
||
Executive compensation |
|
(4,489 |
) |
|
|
(20.8 |
) |
Stock-based compensation |
|
19,137 |
|
|
|
88.9 |
|
Transaction costs |
|
495 |
|
|
|
2.3 |
|
Meals and entertainment |
|
690 |
|
|
|
3.2 |
|
Other |
|
7 |
|
|
|
— |
|
Changes in unrecognized tax benefits |
|
699 |
|
|
|
3.2 |
|
Other adjustments |
|
(238 |
) |
|
|
(1.1 |
) |
Effective Tax Rate |
$ |
19,841 |
|
|
|
92.2 |
% |
(1) The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in the category include Illinois, Pennsylvania, New Jersey, and Wisconsin.
A reconciliation of the U.S. federal statutory income tax rate to our effective tax rate for the years ended December 31, 2024 and 2023 (in thousands, except percentages:
|
Year Ended December 31, |
|
|||||||||||||
|
2024 |
|
|
2023 |
|
||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||
Federal income tax provision (benefit) at statutory rate |
$ |
9,306 |
|
|
|
21.0 |
% |
|
$ |
(17,755 |
) |
|
|
21.0 |
% |
Executive compensation |
|
20,788 |
|
|
|
46.9 |
|
|
|
12,555 |
|
|
|
(14.8 |
) |
Stock-based compensation |
|
(11,386 |
) |
|
|
(25.7 |
) |
|
|
(3,844 |
) |
|
|
4.5 |
|
Research and experimentation credit |
|
(6,950 |
) |
|
|
(15.7 |
) |
|
|
(6,920 |
) |
|
|
8.2 |
|
Fair value of warrants |
|
(3,019 |
) |
|
|
(6.8 |
) |
|
|
3,170 |
|
|
|
(3.7 |
) |
Goodwill impairment |
|
— |
|
|
|
— |
|
|
|
16,255 |
|
|
|
(19.2 |
) |
Impact of foreign operations |
|
653 |
|
|
|
1.5 |
|
|
|
1,794 |
|
|
|
(2.1 |
) |
Valuation allowance |
|
(115 |
) |
|
|
(0.3 |
) |
|
|
502 |
|
|
|
(0.6 |
) |
State and local taxes-net of federal income tax effect |
|
(583 |
) |
|
|
(1.3 |
) |
|
|
(22 |
) |
|
|
0.0 |
|
Other nondeductible expenses |
|
2,195 |
|
|
|
5.0 |
|
|
|
836 |
|
|
|
(1.0 |
) |
Uncertain tax positions |
|
926 |
|
|
|
2.1 |
|
|
|
396 |
|
|
|
(0.5 |
) |
Foreign rate difference |
|
(67 |
) |
|
|
(0.2 |
) |
|
|
(164 |
) |
|
|
0.2 |
|
Other—net |
|
1,326 |
|
|
|
3.0 |
|
|
|
(1,279 |
) |
|
|
1.5 |
|
Income tax provision |
$ |
13,074 |
|
|
|
29.5 |
% |
|
$ |
5,524 |
|
|
|
(6.5 |
)% |
Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 is as follows (in thousands):
|
Year Ended December 31, |
||||
|
|
2025 |
|
|
|
|
|
|
|
|
|
Federal |
|
$ |
22,200 |
|
|
State |
|
|
6,395 |
|
|
Foreign |
|
|
— |
|
|
Income taxes paid, net of refunds |
|
$ |
28,595 |
|
|
The Company made income tax payments of $51.1 million and $43.0 million for the years ended December 31, 2024 and 2023, respectively. The Company received insignificant refunds from various states during the years ended December 31, 2024 and 2023, respectively.
The approximate income tax effect of each type of temporary difference giving rise to deferred income tax assets and liabilities as of December 31, 2025 and 2024 was as follows (in thousands):
|
Year Ended December 31, |
|
|||||
|
2025 |
|
|
2024 |
|
||
Deferred income tax assets: |
|
|
|
|
|
||
Stock-based compensation |
$ |
33,226 |
|
|
$ |
35,539 |
|
Capitalized R&E—net of amortization |
|
7,359 |
|
|
|
43,083 |
|
Operating lease liabilities |
|
14,454 |
|
|
|
13,142 |
|
Net operating losses—foreign |
|
12,266 |
|
|
|
10,468 |
|
Accrued compensation |
|
10,000 |
|
|
|
8,203 |
|
Sales allowances and doubtful accounts |
|
946 |
|
|
|
1,160 |
|
Research and experimental credit |
|
9,491 |
|
|
|
785 |
|
Net operating losses—domestic (federal) |
|
4,617 |
|
|
|
— |
|
Net operating losses—domestic (state) |
|
2,388 |
|
|
|
— |
|
Other |
|
3,262 |
|
|
|
1,563 |
|
Total deferred income tax assets |
|
98,009 |
|
|
|
113,943 |
|
Valuation allowance for deferred tax asset |
|
(12,266 |
) |
|
|
(10,468 |
) |
Net deferred income tax assets |
|
85,743 |
|
|
|
103,475 |
|
Deferred income tax liabilities: |
|
|
|
|
|
||
Intangible asset amortization |
|
258,315 |
|
|
|
234,362 |
|
Software, equipment and property depreciation and amortization |
|
6,165 |
|
|
|
16,813 |
|
Deferred contract costs |
|
11,880 |
|
|
|
10,149 |
|
Operating lease assets |
|
8,694 |
|
|
|
6,995 |
|
Total deferred income tax liabilities |
|
285,054 |
|
|
|
268,319 |
|
Net deferred income tax liabilities |
$ |
199,311 |
|
|
$ |
164,844 |
|
Valuation Allowance—The Company has accumulated net operating losses related to its foreign subsidiaries of $12.3 million and $10.5 million at December 31, 2025 and 2024, respectively. A valuation allowance equal to 100% of the related tax benefit has been established as
of December 31, 2025 and 2024. The valuation allowance changed $1.8 million, $(0.4) million and $0.5 million during the years ended December 31, 2025, 2024 and 2023, respectively. The changes in the valuation allowance during each year were due to foreign subsidiaries’ net operating losses in the current year and the expiration of prior year’s net operating losses. No amounts were released during the years ended December 31, 2025, 2024 and 2023. The net operating losses are set to expire in 2026 through 2030 as China allows for a five-year carryforward.
The change in unrecognized tax benefits excluding interest and penalties for the years ended December 31, 2025 and 2024 was as follows (in thousands):
|
Year Ended December 31, |
|
|||||
|
2025 |
|
|
2024 |
|
||
Balance at beginning of year |
$ |
6,192 |
|
|
$ |
4,415 |
|
Additions based on tax positions related to the current year |
|
1,628 |
|
|
|
1,700 |
|
Additions based on adjustments to tax positions related to prior years |
|
1,501 |
|
|
|
862 |
|
Reductions based on adjustments to tax positions related to prior years |
|
(470 |
) |
|
|
(221 |
) |
Reductions as a result of a lapse of statutes of limitations |
|
(798 |
) |
|
|
(564 |
) |
Balance at end of year |
$ |
8,053 |
|
|
$ |
6,192 |
|
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2025 and 2024, the amount accrued for interest and penalties was not material. The Company reflects its liability for unrecognized tax benefits within income taxes payable and other liabilities in its consolidated balance sheets. The amounts included in “reductions for tax positions of prior years” represent expirations of statutes of limitation and decreases in the unrecognized tax benefits relating to settlements reached with taxing authorities during each year shown.
With few US State exceptions, the major jurisdictions subject to examination by the relevant taxing authorities and open tax years, stated as the Company’s fiscal years, are as follows:
Jurisdiction |
|
Open Tax Years |
US Federal |
|
2022 - 2024 |
US States |
|
2022 - 2024 |
China |
|
2022 - 2024 |
Canada |
|
2022 |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 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.