Coinbase Global, Inc.COIN
Coinbase Global, Inc. Income Taxes Disclosure
18. INCOME TAXES
The components of income (loss) before income taxes were attributable to the following regions (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 1,618,923 | $ | 2,909,765 | $ | (113,067) | |||||||||||
| Foreign | (96,858) | 32,879 | 36,222 | ||||||||||||||
| Total income (loss) before income taxes | $ | 1,522,065 | $ | 2,942,644 | $ | (76,845) | |||||||||||
Provision for (benefit from) income taxes consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | (29,158) | $ | 120,412 | $ | 8,761 | |||||||||||
| State | 1,942 | 59,961 | 24,236 | ||||||||||||||
| Foreign | 50,646 | 31,890 | 11,621 | ||||||||||||||
| Total current | 23,430 | 212,263 | 44,618 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 209,981 | 134,719 | (218,165) | ||||||||||||||
| State | 40,185 | 22,376 | 416 | ||||||||||||||
| Foreign | (11,858) | (5,780) | 1,415 | ||||||||||||||
| Total deferred | 238,308 | 151,315 | (216,334) | ||||||||||||||
| Total provision for (benefit from) income taxes | $ | 261,738 | $ | 363,578 | $ | (171,716) | |||||||||||
The table below provides the updated requirements of ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”) for 2025 and 2024.
The effective income tax rate for the years ended December 31, 2025 and 2024 differs from the statutory federal income tax rate as follows (in thousands, except percentages):
Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| $ | % | $ | % | |||||||||||||||||||||||
| Provision for income taxes at U.S. federal statutory rate | $ | 319,634 | 21.00 | % | $ | 617,955 | 21.00 | % | ||||||||||||||||||
State and local income taxes, net of federal benefit(1) | 33,623 | 2.21 | 66,325 | 2.25 | ||||||||||||||||||||||
| Foreign tax effects | 59,128 | 3.88 | 18,705 | 0.64 | ||||||||||||||||||||||
| Effect of cross-border tax laws: | ||||||||||||||||||||||||||
| Foreign Derived Intangible Income (“FDII”) | (653) | (0.04) | (11,592) | (0.39) | ||||||||||||||||||||||
| Other | (7,899) | (0.53) | (1,472) | (0.05) | ||||||||||||||||||||||
| Tax credits: | ||||||||||||||||||||||||||
| Research and development (“R&D”) credits | (19,068) | (1.25) | (69,603) | (2.37) | ||||||||||||||||||||||
| Valuation allowance | — | — | (7,493) | (0.25) | ||||||||||||||||||||||
| Non-taxable or non-deductible items: | ||||||||||||||||||||||||||
| Equity compensation | (173,119) | (11.37) | (276,645) | (9.40) | ||||||||||||||||||||||
| Non-deductible compensation | 23,328 | 1.53 | 24,114 | 0.82 | ||||||||||||||||||||||
| Uncertain tax positions | (3,555) | (0.23) | 3,244 | 0.11 | ||||||||||||||||||||||
| Adjustment to prior period provision | 12,243 | 0.80 | (1,110) | (0.04) | ||||||||||||||||||||||
| Other adjustments | 18,076 | 1.20 | 1,150 | 0.04 | ||||||||||||||||||||||
| Total tax provision and effective tax rate | $ | 261,738 | 17.20 | % | $ | 363,578 | 12.36 | % | ||||||||||||||||||
________________
(1)State and local taxes in California, Texas, and New York City made up the majority (greater than 50%) of the tax effect in this category.
The Company’s effective tax rate of 17.20% for the year ended December 31, 2025 is due primarily to tax benefits related to stock-based compensation, partially offset by state taxes and nondeductible expenses, including the impact of certain non-US losses.
The Company’s effective tax rate of 12.36% for the year ended December 31, 2024 is due primarily to tax benefits related to stock-based compensation and federal R&D credits, reduced by state taxes and certain nondeductible compensation.
As previously disclosed for the year ended December 31, 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
| Year Ended December 31, 2023 | ||||||||
| % | ||||||||
| U.S. statutory rate | 21.00 | % | ||||||
| State income taxes, net of federal benefit | 6.08 | % | ||||||
| Foreign rate differential | (0.14) | % | ||||||
| Non-deductible compensation | (48.93) | % | ||||||
| Equity compensation | 43.51 | % | ||||||
| Adjustment to prior year provision | 24.85 | % | ||||||
| R&D | 62.20 | % | ||||||
| Change in valuation allowance | 195.59 | % | ||||||
| Foreign tax credit | 6.31 | % | ||||||
| FDII | 0.65 | % | ||||||
| Global Intangible Low Taxed Income | (18.55) | % | ||||||
| Uncertain tax positions | (56.06) | % | ||||||
| Other | (13.05) | % | ||||||
Effective income tax rate | 223.46 | % | ||||||
The Company’s effective tax rate of 223.46% for the year ended December 31, 2023 is due primarily to a reduction of a valuation allowance related to impairment charges on crypto assets held and strategic investments and tax benefits related to federal R&D credits, reduced by certain nondeductible compensation, tax on non-U.S. earnings, and other nondeductible expenses related to political contributions.
The Company’s effective tax rate can be volatile based on the amount of pretax income or loss in the reporting period. For example, when pretax income is lower, the effect of reconciling items to the U.S. statutory rate, such as nondeductible expenses, will have a greater impact on the effective tax rate.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities consisted of the following (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets | |||||||||||
| Obligation to return crypto assets held as collateral | $ | 154,998 | $ | 163,452 | |||||||
| Accruals and reserves | 36,745 | 27,262 | |||||||||
| Net operating loss carryforward | 68,444 | 53,107 | |||||||||
| Lease liability | 46,217 | 22,645 | |||||||||
| Tax credit carryforward | 150,837 | 240,977 | |||||||||
| Stock-based compensation | 33,109 | 30,663 | |||||||||
| Intangibles | — | 48,641 | |||||||||
| Capitalized expenses | 653,138 | 951,665 | |||||||||
| Gross deferred tax assets | 1,143,488 | 1,538,412 | |||||||||
Less: valuation allowance | (135,361) | (124,202) | |||||||||
| Total deferred tax assets | 1,008,127 | 1,414,210 | |||||||||
| Deferred tax liabilities | |||||||||||
| Crypto assets held as collateral | (154,998) | (163,452) | |||||||||
| State taxes | (24,623) | (40,141) | |||||||||
| Depreciation and amortization | (13,836) | (33,370) | |||||||||
| Intangibles | (82,931) | — | |||||||||
Lease ROU assets | (39,800) | (20,369) | |||||||||
Capital gains - unrealized | (108,769) | (184,473) | |||||||||
| Other | (12,351) | (31,107) | |||||||||
| Total deferred tax liabilities | (437,308) | (472,912) | |||||||||
| Total net deferred tax assets | $ | 570,819 | $ | 941,298 | |||||||
At each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. On the basis of this evaluation, only the portion of the deferred tax asset that is more likely than not to be realized was recognized. However, if the Company is not able to generate sufficient taxable income from its operations in the future, then a valuation allowance to reduce the Company’s U.S. deferred tax assets may be required, which would increase the Company’s expenses in the period the allowance is recognized.
On July 4, 2025, One Big Beautiful Bill Act (“OBBB”) was signed into law in the United States. OBBB includes significant changes to U.S. federal tax law, such as an elective deduction for domestic research and experimental expenditures, and changes to the tax rate on income from non-U.S. sources and subsidiaries. OBBB did not have a material impact on our current year effective tax rate. However, it did contribute to a decrease in the Company’s net deferred tax asset balance due to current year expensing of previously capitalized research and experimentation expenditures.
Activity related to the Company’s valuation allowance consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance, beginning of period | $ | 124,202 | $ | 102,250 | $ | 252,258 | |||||||||||
| Charged (credited) to expenses | 11,159 | 21,952 | (150,008) | ||||||||||||||
| Balance, end of period | $ | 135,361 | $ | 124,202 | $ | 102,250 | |||||||||||
The Company’s valuation allowance as of December 31, 2025 was higher compared to 2024 due primarily to an increase in the valuation allowance related to foreign losses, partially offset by a decrease in the valuation allowance related to California R&D credits.
As of December 31, 2025, the Company also had R&D credits of $38.1 million and $112.4 million for federal and state income tax purposes, respectively. If not utilized, the federal R&D credits will expire in various amounts beginning in 2043. However, the state of California R&D credits can be carried forward indefinitely. The Company also had U.S. federal net operating loss carryforwards of $48.8 million as of December 31, 2025, and an estimated $45.8 million as of December 31, 2024. The U.S. federal net operating losses carry forward indefinitely. Additionally, the Company had U.S. state net operating losses of approximately $401.6 million as of December 31, 2025. Generally, California and other significant U.S. states have a twenty-year carryforward for net operating losses.
Activity related to the Company’s unrecognized tax benefits consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Balance, beginning of period | $ | 190,944 | $ | 171,693 | $ | 124,106 | |||||||||||
| Settlements | (1,171) | (67) | — | ||||||||||||||
| Increase related to tax positions taken during a prior year | 36,057 | 2,433 | 30,685 | ||||||||||||||
Decrease related to tax positions taken during a prior year | (13,075) | (18,378) | — | ||||||||||||||
Increase related to tax positions taken during the current year | 11,564 | 35,263 | 16,902 | ||||||||||||||
Effect of foreign currency translation | 161 | — | — | ||||||||||||||
Balance, end of period | $ | 224,480 | $ | 190,944 | $ | 171,693 | |||||||||||
As of December 31, 2025 and 2024, the Company had unrecognized tax benefits of $175.2 million and $136.8 million, respectively, which would reduce income tax expense and affect the effective tax rate, if recognized. The Company accounts for interest and penalties related to exposures as a component of income tax expense. The Company recorded $6.7 million and $1.3 million of accrued interest and penalties, respectively, as of December 31, 2025 and $2.5 million and $3.5 million of accrued interest and penalties, respectively, as of December 31, 2024.
The Company files income tax returns in the U.S. (federal and state) and foreign jurisdictions. The Company is currently under audit by the IRS with respect to its federal income tax returns for 2020 and 2021, and its income tax returns for certain years in state and local jurisdictions such as California and New York. The Company is also under audit for certain years in foreign jurisdictions such as India, Kenya and the Netherlands.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 25, 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.