Cipher Digital Inc.CIFR
Cipher Digital Inc. Income Taxes Disclosure
INCOME TAXES
For the years ended December 31, 2025, 2024, the Company recorded a deferred tax benefit, and for the year ended December 31, 2023 the Company recorded a deferred tax expense, related to changes in deferred tax liabilities associated with derivatives and joint venture instruments (refer to Note 8. Investments In Joint Ventures for more details on the Company’s joint ventures). Current income taxes are based upon the current period’s income taxable for federal and state tax reporting purposes. The Company does not have any foreign operations or tax effects. The Company’s state taxes are primarily driven from Texas. Deferred income taxes (benefits) are provided for certain income and expenses, which are recognized in different periods for tax and financial reporting purposes. Deferred tax assets and liabilities are computed for differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the period in which the differences are expected to affect taxable income, and net operating loss (“NOL”) carryforwards.
The components of the Company’s income tax provision are listed below (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| State | $ | 956 | $ | 1,255 | $ | 201 | |||||||||||
| Total current | 956 | 1,255 | 201 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | $ | (4,269) | $ | (937) | $ | 3,366 | |||||||||||
| Total deferred | (4,269) | (937) | 3,366 | ||||||||||||||
| Income tax provision | $ | (3,313) | $ | 318 | $ | 3,567 | |||||||||||
Under adoption of ASU 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”), as described in Note 2, Summary of Significant Accounting Policies, the reconciliation of the expected tax computed at the U.S. statutory federal income tax rate to the total expense for income taxes for the year ended December 31, 2025 is shown below (in thousands, except for percentages):
| Amount | Percent | ||||||||||
Tax expense (benefit) at the U.S. statutory rate | $ | (173,367) | 21.0 | % | |||||||
State income taxes, net of federal income tax effect | 761 | (0.1) | % | ||||||||
Nontaxable or nondeductible items | |||||||||||
Stock compensation | (29,200) | 3.5 | % | ||||||||
162m limitations | 32,192 | (3.9) | % | ||||||||
MTM adjustments | 82,931 | (10.0) | % | ||||||||
Non-deductible interest on convertible debt | 3,812 | (0.5) | % | ||||||||
Investment in joint ventures | (409) | 0.0 | % | ||||||||
Other permanent differences | 27 | 0.0 | % | ||||||||
Other adjustments | (5) | 0.0 | % | ||||||||
| Change in valuation allowance | 79,945 | (9.7) | % | ||||||||
| Income tax provision | $ | (3,313) | 0.3 | % | |||||||
The state and local tax jurisdiction that makes up the majority of the effect of the state and local tax line item in 2025 is Texas.
The reconciliation of taxes as the federal statutory rate to our provision for (benefit from) income taxes for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Income tax benefit at federal statutory rate | 21.0 | % | 21.0 | % | |||||||
| State taxes, net of federal benefit | (2.3) | % | (0.7) | % | |||||||
| 162m limitations | (20.3) | % | (5.3) | % | |||||||
| Stock compensation | 9.7 | % | (30.3) | % | |||||||
| Permanent differences | (0.1) | % | (0.5) | % | |||||||
| Difference and changes in tax rates | — | % | — | % | |||||||
| RTP and other | 2.5 | % | (16.2) | % | |||||||
| Change in valuation allowance | (11.2) | % | 16.1 | % | |||||||
| Income tax provision | (0.7) | % | (15.9) | % | |||||||
Under adoption of ASU 2023-09, cash paid for income taxes, net of refunds for the year ended December 31, 2025 was as follows:
| Year Ended December 31, | |||||
| 2025 | |||||
Federal | $ | — | |||
State | |||||
Texas | 798 | ||||
New York | (259) | ||||
Other States | 16 | ||||
Foreign | — | ||||
Total cash paid for income taxes, net of refunds | $ | 555 | |||
Significant components of the Company’s deferred tax assets and liabilities were as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 51,187 | $ | 25,521 | |||||||
| Share-based compensation | 4,386 | 2,117 | |||||||||
| Accruals and other temporary differences | 2,588 | 3,517 | |||||||||
| Intangible assets | 3,385 | 3,432 | |||||||||
| Lease liability | 3,777 | 5,113 | |||||||||
| Property and equipment, net | 47,646 | 5,440 | |||||||||
| Bitcoin holdings | 3,451 | — | |||||||||
| Non-deductible interest | — | 59 | |||||||||
| Gross deferred tax assets | 116,420 | 45,199 | |||||||||
| Valuation allowance | (95,054) | (13,461) | |||||||||
| Net deferred tax assets | 21,366 | 31,738 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right-of-use asset | (4,725) | (5,305) | |||||||||
| Derivatives | (12,176) | (18,316) | |||||||||
| Joint venture investments | (4,465) | (9,430) | |||||||||
| Bitcoin holdings | — | (2,956) | |||||||||
| Property and equipment, net | — | — | |||||||||
| Gross deferred tax liabilities | (21,366) | (36,007) | |||||||||
| Net deferred tax liabilities | $ | — | $ | (4,269) | |||||||
As required by ASC 740, management of the Company has evaluated the evidence bearing upon the realizability of its deferred tax assets. Based on the weight of available evidence, both positive and negative, management has determined that it is more likely than not that the Company will not realize the benefits of these assets. Accordingly, the Company recorded a valuation allowance of $95.1 million as of December 31, 2025. The valuation allowance increased by $81.6 million during the year ended December 31, 2025. primarily as a result of the increased tax basis over book basis in property and equipment and the net operating losses generated in the current year.
As of December 31, 2025, the Company had federal, and state and local NOL carryforwards of approximately $236.4 million and $30.4 million, respectively. The federal NOL carryforwards do not expire, but the state and local NOL carryforwards expire if not utilized prior to 2045.
Utilization of the U.S. federal and state NOL carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax liabilities, respectively. The Company has not completed a study to assess whether a change of ownership has occurred, or whether there have been multiple ownership changes since its formation, due to the significant cost and complexity associated with such a study. Any limitation may result in expiration of a portion of the NOL carryforwards before utilization. Further, until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position.
At December 31, 2025 and December 31, 2024, the Company did not have any significant uncertain tax positions. The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. The Company had no accrued interest or penalties related to uncertain tax positions in either period.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Mar 14, 2023 | |
| 2021 | Mar 4, 2022 | |
| 2020 | Feb 17, 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.