Core Scientific, Inc./txCORZ
Core Scientific, Inc./tx Income Taxes Disclosure
12. INCOME TAXES
Current income tax expense represents the amount expected to be reported on the Company’s income tax returns, and deferred
tax expense or benefit represents the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates that
will be in effect when these differences reverse. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the
amount considered likely to be realized. The Company had $0.6 million, $0.9 million, and $0.7 million of income tax expense, for the
years ended December 31, 2025, 2024 and 2023, respectively.
Loss from continuing operations before income tax expense:
Year Ended December 31, | |
2025 | |
Domestic | $(288,033) |
Foreign | — |
Total | $(288,033) |
The income tax expense and effective income tax rate for the years ended December 31, 2025, 2024 and 2023 were as follows:
Year Ended December 31, | |||||
2025 | 2024 | 2023 | |||
Current tax: | |||||
Federal | $— | $— | $— | ||
State | 583 | 859 | 683 | ||
Total current tax | 583 | 859 | 683 | ||
Deferred tax: | |||||
Federal | — | — | — | ||
State | — | — | — | ||
Total deferred tax | — | — | — | ||
Total income tax expense | $583 | $859 | $683 | ||
Income taxes paid, net of refunds received (in thousands):
Year Ended December 31, | |
2025 | |
Federal | $— |
State | |
North Carolina | (559) |
Texas | 759 |
Other State | 5 |
Total State | 205 |
Foreign | — |
Total income taxes paid | $205 |
The reconciliation between the U.S. statutory tax rate and the Company’s effective tax is presented as follows for the periods
presented (in thousands):
Year Ended December 31, | |||
2024 | 2023 | ||
U.S. federal statutory income tax benefit applied to loss before income taxes | $(301,774) | $(51,619) | |
State income taxes, net of federal benefit | 5,746 | 12,325 | |
Stock compensation | 14,319 | 16,578 | |
Non-deductible interest | 2,875 | 11,659 | |
Fair value adjustment - convertible notes | 287,523 | — | |
Reorganization costs | 1,508 | 40,572 | |
Valuation allowance | (9,500) | (29,195) | |
Other permanent items | 162 | 363 | |
Total income tax expense (benefit) | $859 | $683 | |
The reconciliation between the U.S. statutory tax rate and the Company’s effective tax is presented as follows for the period
presented (in thousands, except percentages):
Year Ended December 31, 2025 | |||
US Federal statutory income tax rate | $(60,487) | 21.00% | |
State and local income taxes, net of federal effect1 | 536 | (0.19)% | |
Change in valuation allowance | 64,365 | (22.35)% | |
Nontaxable and nondeductible items | |||
Fair value adjustment - convertible notes | 6,942 | (2.41)% | |
Stock compensation | 8,785 | (3.05)% | |
Cancellation of debt income | (25,796) | 8.96% | |
Other non-deductible items | (3,428) | 1.19% | |
Tax credits | (1,339) | 0.46% | |
Deferred tax adjustments | 10,201 | (3.54)% | |
Worldwide changes in unrecognized tax benefits | 638 | (0.22)% | |
Other | 166 | (0.05)% | |
Total | $583 | (0.20)% | |
1 State and local income taxes in Texas comprise the majority of the state and local income taxes, net of federal effect category.
The Company’s deferred tax assets and liabilities are detailed as follows (in thousands):
Year Ended December 31, | |||||
2025 | 2024 | 2023 | |||
Deferred tax assets: | |||||
Net operating loss carryforward | $159,384 | $70,530 | $73,272 | ||
Capital loss carryforward | 48,055 | 48,007 | 50,313 | ||
Deferred interest carryforward | 26,454 | 23,858 | 18,438 | ||
Research tax credit carryforward | 1,705 | 1,005 | 483 | ||
Reserves and accruals | 48 | 4,773 | 2,440 | ||
Stock-based compensation | 7,421 | 6,705 | 17,614 | ||
Derivatives | 7,119 | 228 | — | ||
Property, plant and equipment, net | 27,285 | 48,586 | 53,334 | ||
Digital asset impairment loss | — | — | 6 | ||
Debt extinguishment loss | — | — | 2,446 | ||
Intangibles (other than goodwill) | 2,018 | 2,266 | 2,660 | ||
Leases | 22,255 | 23,455 | 2,099 | ||
Capitalized research and development expenses | 3,575 | 4,872 | 4,226 | ||
Other | 42 | 470 | 6 | ||
Gross deferred tax assets | 305,361 | 234,755 | 227,337 | ||
Valuation allowance | (275,497) | (209,852) | (219,515) | ||
Deferred tax assets, net of valuation allowance | 29,864 | 24,903 | 7,822 | ||
Deferred tax liabilities: | |||||
Deferred revenue | (5,839) | — | (6,031) | ||
Operating lease ROU assets | (24,025) | (24,903) | (1,791) | ||
Deferred tax liabilities, net | (29,864) | (24,903) | (7,822) | ||
Total net deferred tax assets (liabilities) | $— | $— | $— | ||
The changes in the Company’s valuation allowance were as follows (in thousands):
Year Ended December 31, | |||||
2025 | 2024 | 2023 | |||
Balance at beginning of period | $209,852 | $219,515 | $248,710 | ||
Change related to current net operating losses and impairments | 50,460 | 16,612 | (561) | ||
Change related to deferred tax adjustments | 20,080 | (2,488) | (37,485) | ||
(4,895) | 6,409 | 8,851 | |||
Change related to restructuring | — | (30,196) | — | ||
Balance at end of period | $275,497 | $209,852 | $219,515 | ||
Realization of deferred tax assets is dependent upon the generation of future taxable income, if any, the timing and amount of
which are uncertain. The assessment regarding whether a valuation allowance is required on deferred tax assets considers the
evaluation of both positive and negative evidence when concluding whether it is more likely than not that deferred tax assets are
realizable. After reviewing the positive and negative evidence available, the Company has recorded a valuation allowance of
$275.5 million. The valuation allowance primarily relates to deferred tax assets for fixed assets, deferred interest carryforwards, net
operating loss carryforwards and capital loss carryforwards.
As of December 31, 2025, the Company has federal and state net operating loss carryforwards in the amount of $727.8 million
and $184.2 million, respectively. As of December 31, 2024, the Company has federal and state net operating loss carryforwards in the
amount of $312.4 million and $128.1 million, respectively. The federal net operating loss can be carried forward indefinitely, however
the utilization of the federal net operating loss for a tax year is equal to the lesser of (1) the aggregate of the net operating loss
carryovers to such year, plus the net operating carrybacks to such tax year, or (2) 80% of taxable income determined without regard to
the deduction. The Company's state net operating loss carryforwards expiration periods range from 2035 to indefinite. As of December
31, 2025, the Company had U.S. federal and state capital loss carryforwards of $220.7 million and $47.8 million, respectively. The
capital loss carryforwards begin to expire in 2027.
In addition, the Company's net operating loss and research and development credits may be subject to utilization limitations due
to changes of control, as defined by tax law under Internal Revenue Code Sections 382. Similar provisions may subject the capital loss
carryforwards to utilization limitation.
The “One Big Beautiful Bill Act” (“OBBBA”) enacted on July 4, 2025, introduced notable changes to the U.S. Internal
Revenue Code, including immediate expensing of domestic Section 174 costs. Section 174 costs are expenditures, which represent
research and development costs that are incident to the development or improvement of a product, process, formula, invention,
computer software, or technique. As previously required under the Tax Cuts and Jobs Act, we capitalized research and development
expenditures in the years ended December 31, 2022 through December 31, 2024. With the enactment of OBBBA, we began deducting
domestic Section 174 costs in 2025. As of December 31, 2025, we have a deferred tax asset of $3.6 million related to capitalized
Section 174 expenditures.
The Company also has net research and development credit carryforwards of $2.7 million and $1.9 million as of December 31,
2025 and 2024, respectively, which are available to reduce future tax liabilities.
Accrued interest and penalties related to unrecognized tax benefits are recorded as income tax expense. The Company continues
to believe its positions are supportable; however, due to uncertainties in any tax audit outcome, the Company's estimates of the
ultimate settlement of uncertain tax positions may change and the actual tax benefits may differ from the estimates.
The summary of the Company’s unrecognized tax benefit activity is presented as follows for the periods presented (in
thousands);
Year Ended December 31, | |||
2025 | 2024 | ||
Balance at beginning of period | $587 | $278 | |
Gross increases to tax positions in current periods | 638 | 309 | |
Balance at end of period | $1,225 | $587 | |
The Company files income tax returns in the U.S. federal and various state jurisdictions. The Company’s 2021 through 2025 tax
years are subject to U.S. federal and state examination.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Mar 13, 2024 | |
| 2022 | Apr 4, 2023 | |
| 2021 | Mar 30, 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.