Core Scientific, Inc./txCORZ
Core Scientific, Inc./tx Income Taxes Disclosure
13. 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 $0.9 million and $0.7 million of income tax expense, and $17.1 million of income tax benefit for the years ended December 31, 2024, 2023 and 2022, respectively.
The income tax expense and effective income tax rate for the years ended December 31, 2024, 2023 and 2022 were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
Current tax: | |||||||||||||||||
| Federal | $ | — | $ | — | $ | 74 | |||||||||||
| State | 859 | 683 | 1,356 | ||||||||||||||
| Total current tax | 859 | 683 | 1,430 | ||||||||||||||
| Deferred tax: | |||||||||||||||||
| Federal | — | — | (18,532) | ||||||||||||||
| State | — | — | 11 | ||||||||||||||
| Total deferred tax | — | — | (18,521) | ||||||||||||||
Total income tax expense (benefit) | $ | 859 | $ | 683 | $ | (17,091) | |||||||||||
The reconciliation between the U.S. statutory tax rate and the Company’s effective tax is presented as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
U.S. federal statutory income tax benefit applied to loss before income taxes | $ | (275,971) | $ | (51,619) | $ | (454,316) | |||||||||||
State income taxes, net of federal benefit | 6,673 | 12,325 | (31,667) | ||||||||||||||
| Stock compensation | 14,319 | 16,578 | 4,789 | ||||||||||||||
| Non-deductible interest | 2,875 | 11,659 | 11,366 | ||||||||||||||
| Fair value adjustment - convertible notes | 287,523 | — | (10,942) | ||||||||||||||
Reorganization costs | 1,508 | 40,572 | — | ||||||||||||||
| Non-deductible expenses | — | — | 288 | ||||||||||||||
Valuation allowance | (36,230) | (29,195) | 241,892 | ||||||||||||||
| Goodwill impairment | — | — | 221,499 | ||||||||||||||
Other permanent items | 162 | 363 | — | ||||||||||||||
Total income tax expense (benefit) | $ | 859 | $ | 683 | $ | (17,091) | |||||||||||
The Company’s deferred tax assets and liabilities are detailed as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
Deferred tax assets: | |||||||||||||||||
| Net operating loss carryforward | $ | 70,530 | $ | 73,272 | $ | 79,729 | |||||||||||
| Capital loss carryforward | 48,007 | 50,313 | 52,765 | ||||||||||||||
| Deferred interest carryforward | 23,858 | 18,438 | 11,289 | ||||||||||||||
| Research tax credit carryforward | 1,005 | 483 | 404 | ||||||||||||||
| Reserves and accruals | 4,773 | 2,440 | 4,248 | ||||||||||||||
| Stock-based compensation | 6,705 | 17,614 | 16,917 | ||||||||||||||
Derivatives | 228 | — | — | ||||||||||||||
Property, plant and equipment, net | 21,857 | 53,334 | 75,349 | ||||||||||||||
| Digital asset impairment loss | — | 6 | — | ||||||||||||||
| Debt extinguishment loss | — | 2,446 | 2,561 | ||||||||||||||
| Intangibles (other than goodwill) | 2,266 | 2,660 | 2,301 | ||||||||||||||
| Leases | 23,455 | 2,099 | 7,062 | ||||||||||||||
| Capitalized research and development expenses | 4,872 | 4,226 | 801 | ||||||||||||||
| Other | 470 | 6 | 169 | ||||||||||||||
Gross deferred tax assets | 208,026 | 227,337 | 253,595 | ||||||||||||||
Valuation allowance | (183,123) | (219,515) | (248,710) | ||||||||||||||
Deferred tax assets, net of valuation allowance | 24,903 | 7,822 | 4,885 | ||||||||||||||
Deferred tax liabilities: | |||||||||||||||||
Deferred settlement | — | (6,031) | — | ||||||||||||||
Operating lease ROU assets | (24,903) | (1,791) | (4,885) | ||||||||||||||
Deferred tax liabilities, net | (24,903) | (7,822) | (4,885) | ||||||||||||||
Total net deferred tax assets (liabilities) | $ | — | $ | — | $ | — | |||||||||||
The changes in the Company’s valuation allowance were as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
Beginning Balance | $ | 219,515 | $ | 248,710 | $ | 6,781 | |||||||||||
| Change related to current net operating losses and impairments | 16,612 | (561) | 241,892 | ||||||||||||||
| Change related to deferred tax adjustments | (29,217) | (37,485) | 37 | ||||||||||||||
| Change related to prior period adjustments | 6,409 | 8,851 | — | ||||||||||||||
Change related to restructuring | (30,196) | — | — | ||||||||||||||
Ending Balance | $ | 183,123 | $ | 219,515 | $ | 248,710 | |||||||||||
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 $183.1 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, 2024, the Company has federal and state net operating loss carryforwards in the amount of $312.4 million and $128.1 million, respectively. As of December 31, 2023, the Company had federal and state net operating loss carryforwards in the amount of $330.2 million and $106.6 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, 2024, the Company had U.S. federal and state capital loss carryforwards of $220.7 million and $42.4 million, respectively. The capital loss carryforwards begin to expire in 2028.
In addition, the Company's net operating loss 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.
At December 31, 2024 and 2023, the Company had an unrecognized tax benefit of $0.6 million and $0.3 million, respectively. 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 Company files income tax returns in the U.S. federal and various state jurisdictions. The Company’s 2020 through 2024 tax years are subject to U.S. federal and state examination.
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.