Circle Internet Group, Inc.CRCL
Circle Internet Group, Inc. Income Taxes Disclosure
13. Income taxes
The Company’s net income (loss) from continuing operations before provision for income taxes for the years ended December 31, 2025, 2024 and 2023 consists of the following (in thousands):
Table 13.1. Net Income (loss) before Income Taxes | ||||||||||||||||||||
| Year ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Domestic | $ | (165,134) | $ | 241,476 | $ | 364,179 | ||||||||||||||
| Foreign | 62,241 | (19,902) | (45,230) | |||||||||||||||||
Total income (loss) before provision for income taxes | $ | (102,893) | $ | 221,574 | $ | 318,949 | ||||||||||||||
The components of the provision for income taxes from continuing operations consist of the following (in thousands):
Table 13.2. Components of Income Taxes | ||||||||||||||||||||
| Year ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current | ||||||||||||||||||||
| Federal | $ | (32,805) | $ | 57,623 | $ | 66,186 | ||||||||||||||
| State | (698) | 10,226 | 13,225 | |||||||||||||||||
| Foreign | 2,400 | 542 | 882 | |||||||||||||||||
| Total Current | (31,103) | 68,391 | 80,293 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | 2,298 | 7,625 | (31,383) | |||||||||||||||||
| State | (1,691) | (652) | (834) | |||||||||||||||||
| Foreign | (2,879) | (10,781) | (676) | |||||||||||||||||
| Total Deferred | (2,272) | (3,808) | (32,893) | |||||||||||||||||
| Total | $ | (33,375) | $ | 64,583 | $ | 47,400 | ||||||||||||||
The Company’s income tax expense from continuing operations differs from the taxes computed by applying the federal income tax rate of 21% to the income (loss) before income taxes. A reconciliation of these differences is as follows (in thousands):
Table 13.3. Effective Tax Rate Reconciliation | |||||||||||||||||||||||||||||
| Year ended December 31, | |||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||
Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||
| Federal income taxes at 21% | $ | (21,608) | 21.0 | % | $ | 46,530 | 21.0 | % | $ | 66,979 | 21.0 | % | |||||||||||||||||
State and local taxes, net of federal income tax effect (1) | 3,704 | (3.6) | % | 7,550 | 3.4 | % | 9,712 | 3.0 | % | ||||||||||||||||||||
Foreign tax effects | |||||||||||||||||||||||||||||
| Ireland | |||||||||||||||||||||||||||||
Other non-deductible Irish expenses | 1,741 | (1.7) | % | 3,617 | 1.6 | % | — | — | % | ||||||||||||||||||||
Changes in valuation allowances | 1,871 | (1.8) | % | (2,596) | (1.2) | % | 3,978 | 1.2 | % | ||||||||||||||||||||
| Other | (9,957) | 9.7 | % | 223 | 0.1 | % | (1,866) | (0.6) | % | ||||||||||||||||||||
| United Kingdom | |||||||||||||||||||||||||||||
| Changes in valuation allowances | (63) | 0.1 | % | (7,464) | (3.4) | % | 2,353 | 0.7 | % | ||||||||||||||||||||
| Other | (1,215) | 1.2 | % | (511) | (0.2) | % | (1,842) | (0.6) | % | ||||||||||||||||||||
| Taiwan | |||||||||||||||||||||||||||||
Stock-based compensation | 121 | (0.1) | % | 3,929 | 1.8 | % | 6,398 | 2.0 | % | ||||||||||||||||||||
| Other | (415) | 0.4 | % | (1,261) | (0.6) | % | 367 | 0.1 | % | ||||||||||||||||||||
| Other foreign jurisdictions | (5,738) | 5.6 | % | (1,873) | (0.8) | % | 197 | 0.1 | % | ||||||||||||||||||||
Non-taxable or non-deductible items: | |||||||||||||||||||||||||||||
Stock-based compensation | (136,641) | 132.8 | % | 1,380 | 0.6 | % | 9,446 | 3.0 | % | ||||||||||||||||||||
Non-deductible compensation | 30,571 | (29.7) | % | — | — | % | — | — | % | ||||||||||||||||||||
Research and development expense disallowance | 8,751 | (8.5) | % | — | — | % | — | — | % | ||||||||||||||||||||
Change in fair value of convertible note | 17,552 | (17.1) | % | — | — | % | — | — | % | ||||||||||||||||||||
| Other | 3,473 | (3.4) | % | 600 | 0.3 | % | 716 | 0.2 | % | ||||||||||||||||||||
Effect of cross-border tax laws | |||||||||||||||||||||||||||||
| Foreign branch deferred accounting | 818 | (0.8) | % | 10,175 | 4.6 | % | — | — | % | ||||||||||||||||||||
| Other | 672 | (0.7) | % | 2,030 | 0.9 | % | — | — | % | ||||||||||||||||||||
Tax credits | |||||||||||||||||||||||||||||
Research and development credits | (60,644) | 58.9 | % | (7,536) | (3.4) | % | (756) | (0.2) | % | ||||||||||||||||||||
Changes in unrecognized tax benefits | 16,750 | (16.3) | % | 2,230 | 1.0 | % | (1,860) | (0.6) | % | ||||||||||||||||||||
Changes in valuation allowances | 112,919 | (109.7) | % | 9,903 | 4.5 | % | (51,622) | (16.2) | % | ||||||||||||||||||||
Other adjustments | 3,963 | (3.9) | % | (2,343) | (1.1) | % | 5,200 | 1.6 | % | ||||||||||||||||||||
Effective tax rate | $ | (33,375) | 32.4 | % | $ | 64,583 | 29.1 | % | $ | 47,400 | 14.9 | % | |||||||||||||||||
(1)State taxes in New York and New York City made up the majority (greater than 50 percent) of the tax effect in this category.
Significant components of the Company’s net deferred tax assets and liabilities consist of the following (in thousands):
Table 13.4. Significant Components of Deferred Tax Assets and Liabilities | ||||||||||||||
| December 31, 2025 | December 31, 2024 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
Stock-based compensation | $ | 59,785 | $ | 25,723 | ||||||||||
| Capitalized research expenses | 8,417 | 18,250 | ||||||||||||
| Net operating loss carryforwards | 117,342 | 12,988 | ||||||||||||
| Accruals and reserves | 9,474 | 11,431 | ||||||||||||
| Capital loss carryforward | 7,826 | 5,760 | ||||||||||||
| Lease liabilities | 3,353 | 3,741 | ||||||||||||
Charitable contribution carryforward | 4,802 | — | ||||||||||||
| Tax credit carryforwards | 11,662 | 1,418 | ||||||||||||
| Unrealized loss on investments | — | 1,368 | ||||||||||||
| Other, net | 2,078 | 395 | ||||||||||||
| Total deferred tax assets | 224,739 | 81,074 | ||||||||||||
| Valuation allowance | (158,114) | (31,029) | ||||||||||||
| Total deferred tax assets, net of valuation allowance | 66,625 | 50,045 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Intangible assets | (52,387) | (53,925) | ||||||||||||
| Foreign branch income | (10,583) | (10,175) | ||||||||||||
| Right-of-use assets | (3,231) | (3,689) | ||||||||||||
| Credit risk adjustment | — | (1,049) | ||||||||||||
| Fixed assets | (2,309) | (290) | ||||||||||||
| Unrealized foreign currency exchange gain (loss) | — | (253) | ||||||||||||
Unrealized (gain) loss on digital assets and other investments | (14,270) | — | ||||||||||||
| Other | (1,437) | — | ||||||||||||
| Total deferred tax liabilities | (84,217) | (69,381) | ||||||||||||
| Deferred tax liabilities, net | $ | (17,592) | $ | (19,336) | ||||||||||
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.
Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax-planning strategies in making this assessment. The Company released a portion of its foreign valuation allowance in 2024, primarily due to the Company’s foreign country book and taxable profits. The Company continues to maintain a full valuation allowance, except to the extent of utilizable deferred tax liabilities, in the U.S. and certain foreign jurisdictions.
The Company has U.S. federal net operating losses carryforward of $478.8 million, of which $3.4 million are subject to limitations under the Separate Return Limitation Year restrictions, and may be carried forward indefinitely. In addition, the Company has U.S. Federal and State capital loss carryforwards of $9.5 million which begin to expire in 2027.
The Company has U.S. state net operating loss carryforwards of $135.6 million, including approximately $45.0 million attributable to New York State and $45.0 million attributable to New York City. The state net operating loss carryforwards generally have 20-year carryforward periods and begin to expire in 2038, with the majority expiring beginning in 2046.
The Company also has foreign net operating losses carryforwards and capital loss carryforwards of approximately $38.9 million and $18.5 million, respectively. These attributes may be subject to various annual and carryforward limitations under the tax laws of the different jurisdictions in which the Company operates.
Significant judgment is required in evaluating the Company’s uncertain tax positions and determining the provision for income taxes. The Company follows the provisions of FASB ASC 740, Income Taxes, which provides detailed guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions recognized in the financial statement. Tax positions must meet a “more-likely-than-not” recognition threshold at the effective date to be recognized upon the adoption of ASC 740 and in subsequent periods. As of December 31, 2025 and 2024, the Company maintained uncertain tax position reserves of $20.7 million and $4.8 million, respectively, for its current and prior year federal and state R&D credits given the inherent judgment that is involved in the credit calculation. Of these amounts, $15.6 million would reduce the effective tax rate, if recognized. The interest or penalties related to these uncertain tax positions are immaterial and are recorded as a component of income tax expense.
The following tables present activity related to unrecognized tax benefits as of the dates indicated (in thousands):
Table 13.5. Summary of Uncertain Tax Positions Activities | |||||||||||||||||
| December 31, 2025 | December 31, 2024 | ||||||||||||||||
| Beginning balance | $ | 4,823 | $ | 2,158 | |||||||||||||
| Increase related to tax positions taken during current year | 15,242 | 1,511 | |||||||||||||||
| Decrease related to tax positions taken during prior year | 618 | 1,154 | |||||||||||||||
| Ending balance | $ | 20,683 | $ | 4,823 | |||||||||||||
Management believes that it has sufficient accrued liabilities as of December 31, 2025 for uncertain tax position exposures and related interest expense.
The Company is subject to U.S. income taxes in federal and various state jurisdictions. The years open for audit for federal and state are 2021 through 2025. As of December 31, 2025, the Company was under examination in Missouri for tax year 2021 through 2023. The Missouri income tax examination was concluded in January 2026 with no material adjustments. There are no other open income tax examinations as of December 31, 2025. The Company is also subject to income taxes in Bermuda, Canada, France, Ireland, the United Kingdom, Singapore, Taiwan, Japan, the United Arab Emirates and Hong Kong. The earliest year open for audit for the Company’s foreign jurisdictions is 2018.
Global Intangible Low-Taxed Income (“GILTI”)
The Tax Cuts and Jobs Act enacted in December 2017 introduced comprehensive tax reform, including a new tax on GILTI provisions under Section 951A of the Internal Revenue Code. These provisions require the Company to include in its U.S. taxable income the GILTI of its controlled foreign corporations.
The Company has made an accounting policy election to treat GILTI as a period cost. Under this policy, the Company recognizes the tax expense related to GILTI in the year in which the tax is incurred. As a result, the Company does not record deferred tax assets or liabilities for temporary differences that are expected to reverse as GILTI in future years.
For the years ended December 31, 2025, 2024 and 2023, the Company’s GILTI tax expense made up an immaterial component of its total income tax provision.
Global Minimum Tax (Pillar Two) Legislation
Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions in which the Company operates and is effective prospectively for the Company beginning on January 1, 2025. The assessment of the potential exposure to Pillar Two income taxes is based on the most recent tax filings, country-by-country reporting and financial statements for the constituent entities in the Company. Based on this assessment, it is expected that the transitional safe harbor rules will apply in countries that the Company currently operates. The Company does not expect that Pillar Two will have a material impact for the Company for the year ending December 31, 2025.
One Big Beautiful Bill Act (“OBBBA”)
In July 2025, President Trump signed into law the OBBBA. The OBBBA includes significant changes to U.S. tax law, including making permanent certain provisions originally enacted under the Tax Cuts and Jobs Act, such as 100% bonus depreciation, the immediate expensing of domestic research and development costs, and limitations on the deductibility of business interest expense. The enactment of the OBBBA resulted in an income tax benefit recognized during the third quarter of 2025, primarily related to the immediate expensing of domestic research and development costs; however, for the year ended December 31, 2025, the enactment did not have a material impact on the Company’s full-year income tax provision.
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.