Compass, Inc.COMP
Compass, Inc. Income Taxes Disclosure
Income Taxes
The Company’s loss before income taxes consisted of (in millions):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | (63.6) | $ | (158.6) | $ | (314.1) | |||||||||||
| International | 4.0 | 3.7 | (7.6) | ||||||||||||||
| Total | $ | (59.6) | $ | (154.9) | $ | (321.7) | |||||||||||
For the year ended December 31, 2025, the loss before income taxes of $59.6 million includes $7.1 million of income from the Company’s equity method investments and excludes $0.2 million in net income attributable to non-controlling interests. The businesses in which the Company has equity method investments and other non-controlling interests operate in the United States.
The components of the Company’s income tax benefit (provision) consisted of (in millions):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | (0.4) | (0.3) | (0.3) | ||||||||||||||
| Foreign | (1.3) | (0.4) | (0.1) | ||||||||||||||
| Total current | (1.7) | (0.7) | (0.4) | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 2.9 | 0.5 | 0.8 | ||||||||||||||
| State | 0.7 | — | — | ||||||||||||||
| Foreign | (0.8) | 0.7 | — | ||||||||||||||
| Total deferred | 2.8 | 1.2 | 0.8 | ||||||||||||||
| Total benefit from income taxes | $ | 1.1 | $ | 0.5 | $ | 0.4 | |||||||||||
The Company had an income tax benefit for the years ended December 31, 2025, 2024 and 2023 resulting from a partial reduction in the valuation allowance related to the carryover tax basis in deferred tax liabilities from acquisitions. The
benefit from income taxes is reduced by current taxes in India that are not offset with future alternative minimum tax credits, as well as UK and state income tax expense.
The Company adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025 and have included the following table as a result of this adoption, which presents income taxes paid (net of refunds received) for the year ended December 31, 2025 (in millions):
| Year Ended December 31, 2025 | |||||
| US federal | $ | — | |||
| US state & local: | |||||
| Texas | 0.3 | ||||
| Foreign: | |||||
| India | 1.0 | ||||
| United Kingdom | 0.5 | ||||
| Total | $ | 1.8 | |||
The effective income tax rate differed from the statutory federal income tax rate for the year ended December 31, 2025 as follows (in millions, except percentages):
Amount | Percent | ||||||||||
| Tax at federal statutory rate: | $ | (12.5) | 21.0 | % | |||||||
| State taxes, net of federal effect | (0.3) | 0.5 | |||||||||
| Change in valuation allowance | 13.4 | (22.8) | |||||||||
| Non-taxable or non-deductible items: | |||||||||||
| Stock-based compensation | (6.8) | 11.5 | |||||||||
| Non-deductible executive compensation | 3.1 | (5.1) | |||||||||
| Non-deductible expenses | 0.7 | (1.1) | |||||||||
| Foreign tax effects: | |||||||||||
| India | |||||||||||
| Statutory tax rate difference | 1.2 | (2.0) | |||||||||
| United Kingdom | |||||||||||
| Statutory tax rate difference | 0.1 | (0.1) | |||||||||
| Benefit from income taxes | $ | (1.1) | 1.9 | % | |||||||
The effective income tax rate differed from the statutory federal income tax rate as follows for the years ended December 31, 2024 and December 31, 2023 (in millions, except percentages):
Year Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Tax at federal statutory rate: | 21.0 | % | 21.0 | % | ||||||||||
| State taxes, net of federal effect | 5.8 | 5.2 | ||||||||||||
| Change in valuation allowance | (26.2) | (23.7) | ||||||||||||
| Stock-based compensation | (0.6) | (3.6) | ||||||||||||
| Non-deductible executive compensation | (1.0) | (0.6) | ||||||||||||
| Non-deductible expenses | (0.4) | (0.4) | ||||||||||||
| Worthless stock deduction | 0.2 | 3.2 | ||||||||||||
| Other | 1.5 | (1.0) | ||||||||||||
| Benefit from income taxes | 0.3 | % | 0.1 | % | ||||||||||
The components of net deferred taxes arising from temporary differences were as follows (in millions):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Nondeductible accruals | $ | 19.8 | $ | 27.8 | |||||||
| Stock-based compensation | 58.5 | 46.7 | |||||||||
| Lease liabilities | 128.1 | 136.6 | |||||||||
| Net operating loss carryforward | 520.8 | 476.8 | |||||||||
| Allowance for credit losses | 9.3 | 10.1 | |||||||||
| Accrued compensation | 12.9 | 16.9 | |||||||||
| Capitalized research & development costs | 52.7 | 91.7 | |||||||||
| Intangible assets | 24.3 | 18.5 | |||||||||
| Other | 2.9 | 4.7 | |||||||||
| Total deferred tax assets | $ | 829.3 | $ | 829.8 | |||||||
| Deferred tax liabilities: | |||||||||||
| Operating lease right-of-use assets | $ | (101.7) | $ | (104.9) | |||||||
| Property and equipment | (12.5) | (17.4) | |||||||||
| Total deferred tax liabilities | (114.2) | (122.3) | |||||||||
| Less: valuation allowance | (712.7) | (703.8) | |||||||||
| Net deferred tax assets | $ | 2.4 | $ | 3.7 | |||||||
The Company is subject to income taxes in the United States, India and the United Kingdom. Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes and (b) operating losses and tax credit carryforwards.
As of December 31, 2025 and 2024, the Company’s deferred tax assets were primarily the result of U.S. federal and state net operating losses, operating lease obligations, capitalized research and development costs, stock-based compensation and other compensation and expense related accruals. A full valuation allowance was maintained against its U.S. gross deferred tax asset balances as of December 31, 2025 and 2024. As of each reporting date, the Company considers new evidence, both positive and negative, that could impact the Company’s view with regard to future realization of deferred tax assets. As of December 31, 2025 and 2024, the Company continued to maintain that the realization of its deferred tax
assets has not achieved a more-likely-than-not threshold primarily due to the evidence that the Company continued to maintain three-year cumulative pre-tax book losses. As of December 31, 2025, the valuation allowance was approximately $712.7 million, an increase of $8.9 million from December 31, 2024, which includes the impact of acquisition activity.
As of December 31, 2025 and 2024, the Company had approximately $1.8 billion and $1.7 billion of gross federal net operating losses, respectively. Of those amounts, $152.0 million will begin to expire in 2032 and $1.7 billion have an unlimited carryforward with utilization limited to 80% of taxable income. Such amounts may be subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, as a result of various ownership change rules.
As of December 31, 2025 and 2024, the Company had approximately $2.2 billion and $2.0 billion of gross state net operating losses, respectively, that will begin to expire in 2026.
The Company had no material uncertain tax positions as of December 31, 2025, 2024 and 2023. The Company does not anticipate a material increase or decrease in uncertain tax positions in the next twelve months after the reporting period. It is the Company’s policy to record interest and penalties related to uncertain tax positions as a component of the provision for income taxes. No material amounts of interest or penalties were recognized in the consolidated financial statements for the years ended December 31, 2025, 2024 and 2023.
The number of years with open tax audits varies depending upon the tax jurisdiction. The Company is generally no longer subject to U.S. federal examination by the Internal Revenue Service (“IRS”) for years before 2015. The IRS and state taxing authorities can subject the Company to audit dating back to 2012 when the Company begins to utilize its net operating loss carryforwards.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Feb 28, 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.