Crocs, Inc.CROX
Crocs, Inc. Income Taxes Disclosure
INCOME TAXES
Pillar Two Global Minimum Tax
The Organization for Economic Co-operation and Development (“OECD”) has released Pillar Two model rules introducing a 15% global minimum tax rate applied on a country-by-country basis for large multinational corporations. Various jurisdictions we operate in have enacted the legislation. There remains uncertainty as to the final Pillar Two rules as the OECD continues to release guidance and modifications to the rules. In January 2026, the OECD released additional guidance regarding a side-by-side agreement to exclude U.S. parented companies from the scope of some Pillar Two taxes, specifically the Income Inclusion Rule and Undertaxed Profits Rule. We will continue to monitor new guidance and laws as they are released and implemented. The Pillar Two rules did not have a significant impact on our 2025 consolidated financial statements.
H.R.1 Tax Act Bill
On July 4, 2025, H.R.1. was signed into law, amending and extending several provisions of the 2017 Tax Cuts and Jobs Act. Key changes relevant to the Company include the reinstatement of 100% bonus depreciation, the deductibility of domestic R&D expenses, and modifications to international provisions. The legislation has multiple effective dates with certain provisions effective in 2025 and other relevant provisions effective in 2026. The Company applied the provisions of the new tax law in 2025 and it did not have a significant impact on our 2025 consolidated financial statements.
In 2025, in one relevant jurisdiction, we settled a portion of the uncertain tax positions associated with the 2023 intellectual property (“IP”) transactions that resulted in the release of uncertain tax positions of $34.1 million. The other relevant uncertain tax positions associated with the 2023 IP transactions remain unchanged. The impairments of the indefinite-lived HEYDUDE trademark and HEYDUDE Brand reporting unit goodwill also impact the net deferred tax assets since the GAAP carrying value
decreased. As of December 31, 2025, the related deferred tax asset, net of applicable valuation allowance and uncertain tax positions, was $114.2 million.
In 2024, we completed an intra-entity transaction related to certain IP rights primarily to align with current and future international operations. The transaction resulted in a step-up in tax basis of IP rights and a correlated increase in foreign deferred tax assets based on the fair value of the IP rights. Foreign deferred tax assets increased by $268.8 million and this benefit was offset by an increase in uncertain tax positions of $145.6 million. As such, a net change in deferred tax asset of $123.2 million was recognized along with a corresponding foreign income tax benefit in 2024. In 2024, we received new information and remeasured the reserve for uncertain tax positions related to the 2020 and 2021 IP rights transactions which resulted in the release of uncertain tax positions of $141.2 million along with a corresponding foreign income tax benefit. As of December 31, 2025, the related deferred tax asset, net of applicable valuation allowance and uncertain tax positions, was $289.8 million.
During 2020, 2021, 2023 and 2024, we completed intra-entity transactions related to certain IP rights primarily to align with current and future international operations. The transactions were executed using transfer pricing guidelines issued by the relevant taxing authorities. Significant estimates and assumptions were required to compute the valuation of this transaction. These estimates and assumptions include, but are not limited to, estimated future revenue growth and discount rates, which by their nature are inherently uncertain, and, therefore, may ultimately differ materially from our actual results.
We have recorded certain tax reserves to address potential differences involving our income tax positions. These potential tax liabilities result from the varying application of statutes, rules, regulations, and interpretations by different taxing jurisdictions. While our tax position is not uncertain, because of the significant estimates used in the value of certain IP rights, our tax reserves contain assumptions based on past experiences and judgments about the interpretation of statutes, rules and regulations by taxing jurisdictions. It is possible that the costs of the ultimate tax liability or benefit from these matters may be materially more or less than the amount that we estimated.
In order to support and sustain the amortizable tax basis for these transactions (and associated deferred tax asset, net of uncertain tax position), we must demonstrate economic ownership, including the appropriate authority and expertise to manage the IP owned and serviced in the Netherlands and Singapore. The determination of economic substance is a judgment that has to be evaluated by management on a continual basis requiring understanding and expertise of local laws of each associated tax jurisdiction. The Netherlands and Singapore subsidiaries serve as the primary corporate headquarters outside of the U.S. and already perform significant functions in support of the economic ownership of the IP. In 2025, we undertook activities to align business operations that support the economic substance of the IP.
The following table sets forth income before taxes and the expense for income taxes:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Income before taxes: | |||||||||||||||||
| U.S. | $ | (6,474) | $ | 217,429 | $ | 309,098 | |||||||||||
| Foreign | 79,452 | 693,156 | 567,174 | ||||||||||||||
| Total income before taxes | $ | 72,978 | $ | 910,585 | $ | 876,272 | |||||||||||
| Income tax expense (benefit): | |||||||||||||||||
| Current income taxes: | |||||||||||||||||
| U.S. federal | $ | 51,449 | $ | 98,137 | $ | 85,075 | |||||||||||
| U.S. state | 11,436 | 18,005 | 21,884 | ||||||||||||||
| Foreign | 44,198 | 98,826 | 387,066 | ||||||||||||||
| Total current income taxes | 107,083 | 214,968 | 494,025 | ||||||||||||||
| Deferred income taxes: | |||||||||||||||||
| U.S. federal | (25,866) | (8,393) | (12,873) | ||||||||||||||
| U.S. state | (10,805) | (797) | (1,662) | ||||||||||||||
| Foreign | 83,764 | (245,264) | (395,784) | ||||||||||||||
| Total deferred income taxes | 47,093 | (254,454) | (410,319) | ||||||||||||||
Total income tax expense (benefit) | $ | 154,176 | $ | (39,486) | $ | 83,706 | |||||||||||
The following table sets forth income reconciliations of the statutory federal income tax rate to actual rates based on income or loss before income taxes, reflecting the adoption of new accounting guidance. A subsequent table below provides the corresponding information for the prior year before the adoption of new accounting guidance and is provided for comparative purposes only.
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| (in thousands) | |||||||||||
| Income tax expense and rate attributable to: | |||||||||||
| Federal income tax rate | $ | 15,326 | 21.0 | % | |||||||
State income tax rate, net of federal benefit (1) | (386) | (0.5) | % | ||||||||
| Foreign tax effects | |||||||||||
| Netherlands | |||||||||||
| Statutory tax rate difference between Netherlands and United States | 17,094 | 23.3 | % | ||||||||
HEYDUDE trademark and HEYDUDE goodwill impairment | 7,598 | 10.4 | % | ||||||||
| Foreign tax credits | (17,323) | (23.7) | % | ||||||||
| Non-deductible/non-taxable items | 58,571 | 80.3 | % | ||||||||
| Other | 854 | 1.2 | % | ||||||||
| China | |||||||||||
| Withholding taxes | 11,828 | 16.2 | % | ||||||||
| Other | (2,721) | (3.7) | % | ||||||||
| Malta | (47,361) | (65.0) | % | ||||||||
| Other foreign Jurisdictions | |||||||||||
| Change in valuation allowance | 79,375 | 108.8 | % | ||||||||
HEYDUDE trademark and HEYDUDE goodwill impairment | 23,700 | 32.5 | % | ||||||||
| Withholding taxes | 20,622 | 28.3 | % | ||||||||
| Other | 3,338 | 4.6 | % | ||||||||
| Effects of Cross-Border Tax Laws: | |||||||||||
| Global Intangible Low-Taxed Income | 10,277 | 14.1 | % | ||||||||
| Other | (239) | (0.3) | % | ||||||||
| Tax Credits | (3,602) | (4.9) | |||||||||
| Change in valuation allowance | (16,202) | (22.2) | % | ||||||||
| Non-deductible/non-taxable items | 3,737 | 5.1 | % | ||||||||
HEYDUDE trademark and HEYDUDE goodwill impairment | 33,171 | 45.5 | % | ||||||||
| Uncertain tax positions | (44,483) | (61.0) | % | ||||||||
| Other | 1,002 | 1.3 | % | ||||||||
| Effective income tax expense and rate | $ | 154,176 | 211.3 | % | |||||||
(1) State taxes in California, Colorado, Florida, Indiana, Massachusetts, Ohio, and Tennessee made up the majority (greater than 50 percent) of the tax effect in this category.
| Year Ended December 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||
| Income tax expense and rate attributable to: | |||||||||||||||||||||||
| Federal income tax rate | $ | 191,223 | 21.0 | % | $ | 184,017 | 21.0 | % | |||||||||||||||
State income tax rate, net of federal benefit | 13,301 | 1.5 | % | 16,854 | 1.9 | % | |||||||||||||||||
| Foreign income tax rate differential | (34,166) | (3.8) | % | 31,495 | 3.6 | % | |||||||||||||||||
Global Intangible Low-Taxed Income, net | 61,440 | 6.6 | % | 44,003 | 5.0 | % | |||||||||||||||||
Non-deductible/non-taxable items | (12,028) | (1.3) | % | (1,129) | (0.1) | % | |||||||||||||||||
| Change in valuation allowance | 58,861 | 6.5 | % | 156,312 | 17.8 | % | |||||||||||||||||
| U.S. tax on foreign earnings | 12,684 | 1.4 | % | 1,752 | 0.2 | % | |||||||||||||||||
| Foreign tax credits | (98,551) | (10.8) | % | (55,648) | (6.4) | % | |||||||||||||||||
| Research and development credits | (9,903) | (1.1) | % | (6,754) | (0.8) | % | |||||||||||||||||
| Uncertain tax positions | 50,193 | 5.5 | % | 330,819 | 37.8 | % | |||||||||||||||||
| Share-based compensation | (1,157) | (0.1) | % | (2,097) | (0.2) | % | |||||||||||||||||
Intra-entity IP transactions | (271,700) | (29.8) | % | (611,403) | (69.8) | % | |||||||||||||||||
| Other | 317 | 0.1 | % | (4,515) | (0.4) | % | |||||||||||||||||
| Effective income tax expense and rate | $ | (39,486) | (4.3) | % | $ | 83,706 | 9.6 | % | |||||||||||||||
The following tables set forth cash paid for income taxes, net of refunds, reflecting the adoption of ASU 2023-09. A subsequent table below provides the corresponding information for the prior years before the adoption of ASU 2023-09 and is provided for comparative purposes only.
Year Ended December 31, | |||||
| 2025 | |||||
| (in thousands) | |||||
| Cash paid for income taxes, net of refunds: | |||||
| Federal | $ | 81,458 | |||
| State | 13,186 | ||||
| Foreign | |||||
| China | 15,584 | ||||
| Netherlands | 40,605 | ||||
| Other foreign | 34,233 | ||||
| Total | $ | 185,066 | |||
Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in thousands) | |||||||||||
Cash paid for income taxes, net of refunds (1) | $ | 122,678 | $ | 176,564 | |||||||
(1) During the year ended December 31, 2025, we revised our presentation for cash paid for income taxes. Previously, cash paid for income taxes was presented excluding income tax refunds received. Under the revised presentation, cash paid for income taxes is presented net of refunds. We believe the revised presentation provides more meaningful and transparent information regarding our operating cash flows. Amounts for the years ended December 31, 2024, and 2023, have been recast to conform to current period presentation.
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table sets forth deferred income tax assets and liabilities as of the date shown:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Non-current deferred tax assets: | |||||||||||
| Share-based compensation expense | $ | 4,727 | $ | 4,081 | |||||||
| Accruals, reserves, and other expenses | 12,302 | 22,974 | |||||||||
| Net operating loss | 311,741 | 65,776 | |||||||||
| Intangible assets | 832,144 | 918,000 | |||||||||
| Foreign tax credit | 65,268 | 49,027 | |||||||||
| Operating lease liabilities | 77,131 | 75,396 | |||||||||
Unrealized loss on foreign currency | — | 59,111 | |||||||||
Other | 55,797 | 48,866 | |||||||||
| Valuation allowance | (300,379) | (241,568) | |||||||||
| Total non-current deferred tax assets | $ | 1,058,731 | $ | 1,001,663 | |||||||
| Non-current deferred tax liabilities: | |||||||||||
Unrealized gain on foreign currency | (1,254) | — | |||||||||
| Property and equipment | (17,744) | (25,896) | |||||||||
| Right-of-use assets | (65,551) | (63,782) | |||||||||
| Intangible assets | (38,561) | (42,409) | |||||||||
| Other | (1,449) | (1,313) | |||||||||
| Total non-current deferred tax liabilities | $ | (124,559) | $ | (133,400) | |||||||
In 2024, the intra-entity transaction related to IP rights resulted in an increase in the intangible assets deferred tax asset of $268.8 million, and this benefit was offset by an increase in uncertain tax positions of $145.6 million. In 2024, we received new information and remeasured the reserve for uncertain tax positions related to the 2020 and 2021 IP rights transactions which resulted in the release of uncertain tax positions of $141.2 million along with a corresponding foreign income tax benefit.
During 2025, valuation allowances recorded against deferred tax assets increased by $58.8 million. During 2024, valuation allowances increased by $58.0 million.
Our valuation allowances are primarily the result of uncertainties regarding the future realization of tax attributes recorded in various jurisdictions. The measurement of deferred tax assets is reduced by a valuation allowance if, based upon available evidence, it is more likely than not the deferred tax assets will not be realized. We have evaluated the realizability of our deferred tax assets in each jurisdiction by assessing the adequacy of expected taxable income, including the reversal of existing temporary differences, historical and projected operating results, and the availability of prudent and feasible tax planning strategies. In assessing our valuation allowance, we considered all available evidence, including the magnitude of recent and current operating results, the duration of statutory carryforward periods, our historical experience utilizing tax attributes prior to their expiration dates, the historical volatility of operating results of these jurisdictions, and our assessment regarding the sustainability of their profitability. The weight we give to any particular item is, in part, dependent upon the degree to which it can be objectively verified.
In certain other jurisdictions, we recorded additional attributes, primarily driven by operational losses recognized based on local tax accounting requirements. These carryforwards were generated in jurisdictions where results indicate it is not more likely than not the deferred tax assets would be realized. We maintain a valuation allowance against the majority of these balances.
We have included in the table above deferred tax assets related to U.S. federal tax carryforwards of foreign tax credits and various state tax credits which expire starting in 2031 of $23.6 million and $17.9 million at December 31, 2025, and 2024, respectively. We have included in the table above deferred tax assets related to U.S. state tax net operating loss carryforwards, some of which expire at various dates beginning in 2030 and others of which do not expire, of $6.5 million and $0.3 million at December 31, 2025, and 2024, respectively. We have recorded deferred tax assets related to foreign tax carryforwards,
including foreign tax credits and net operating losses, which expire starting in 2026 and those which do not expire of $346.9 million and $98.3 million as of December 31, 2025, and 2024, respectively.
The transition tax in the U.S. Tax Cuts and Jobs Act (“Tax Act”) imposed a tax on undistributed and previously untaxed foreign earnings at various tax rates. This tax largely eliminated the differences between the financial reporting and income tax basis of foreign undistributed earnings. Furthermore, as of December 31, 2025, foreign withholding taxes have not been provided on unremitted earnings of subsidiaries operating outside of the U.S. as these amounts are considered to be indefinitely reinvested. We consider all foreign earnings permanently reinvested unless there is an option to repatriate with low to minimal tax cost.
The following table sets forth a reconciliation of the beginning and ending amount of unrecognized tax benefits:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Unrecognized tax benefit as of January 1 | $ | 582,228 | $ | 556,482 | $ | 219,363 | |||||||||||
| Additions in tax positions taken in prior period | 1,522 | 9,855 | 3,690 | ||||||||||||||
| Reductions in tax positions taken in prior period | (14,624) | (147,561) | (7) | ||||||||||||||
| Additions in tax positions taken in current period | 72,177 | 184,184 | 325,058 | ||||||||||||||
| Settlements | (34,840) | — | — | ||||||||||||||
| Lapse of statute of limitations | (9,585) | (366) | (148) | ||||||||||||||
| Cumulative foreign currency translation adjustment | 40,095 | (20,366) | 8,526 | ||||||||||||||
| Unrecognized tax benefit as of December 31 | $ | 636,973 | $ | 582,228 | $ | 556,482 | |||||||||||
We recorded a net expense of $10.2 million related to increases in 2025 unrecognized tax benefits. The impact of uncertain tax benefits on the rate reconciliation includes net increases and decreases in position changes and accrued interest expense. We disclosed current year unrecognized tax benefits and the related tax positions on a net basis in the categories in the rate reconciliation in which the tax positions are presented.
Any settlements or statute of limitations expirations could result in a significant decrease in our uncertain tax positions. Our assessments are based on estimates and assumptions using the best available information to management. However, our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and any variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible change related to our uncertain tax positions, and such changes could be significant.
Interest and penalties related to income tax liabilities are included in ‘Income tax expense (benefit)’ in the consolidated statements of operations. For the years ended December 31, 2025, 2024, and 2023, income tax-related penalties and interest were insignificant. During the year ended December 31, 2025, we released $4.8 million of interest from settlements, lapse of statutes, and change in certainty. The cumulative accrued balance of penalties and interest was $12.2 million, $13.3 million, and $8.8 million, as of December 31, 2025, 2024, and 2023, respectively.
Unrecognized tax benefits of $642.2 million, $591.7 million, and $562.0 million as of December 31, 2025, 2024, and 2023, respectively, if recognized, would reduce the annual effective tax rate offset by deferred tax assets recorded for uncertain tax positions.
We have tax years open to examination in the major jurisdictions where we conduct business for the 2012-2025 tax years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 16, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 29, 2016 | |
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.