COSTAR GROUP, INC.CSGP
COSTAR GROUP, INC. Income Taxes Disclosure
INCOME TAXES
The components of the provision for income taxes attributable to operations consist of the following (in millions):
Year Ended December 31, | |||||||||||||||||
2025 | 2024 | 2023 | |||||||||||||||
Current: | |||||||||||||||||
Federal | $ | (14) | $ | 91 | $ | 126 | |||||||||||
State | 1 | 28 | 37 | ||||||||||||||
Foreign | 1 | 2 | 1 | ||||||||||||||
Total current | (12) | 121 | 164 | ||||||||||||||
Deferred: | |||||||||||||||||
Federal | 44 | (42) | (32) | ||||||||||||||
State | 5 | (8) | (3) | ||||||||||||||
Foreign | (14) | — | (2) | ||||||||||||||
Total deferred | 35 | (50) | (37) | ||||||||||||||
Total provision for income taxes | $ | 23 | $ | 71 | $ | 127 | |||||||||||
The components of deferred tax assets and liabilities consist of the following (in millions):
December 31, | |||||||||||
2025 | 2024 | ||||||||||
Deferred tax assets: | |||||||||||
Allowance for credit losses | $ | 7 | $ | 5 | |||||||
Accrued compensation | 15 | 13 | |||||||||
Stock compensation | 28 | 15 | |||||||||
Net operating losses | 169 | 50 | |||||||||
Accrued reserve and other | 43 | 20 | |||||||||
Lease liabilities | 38 | 26 | |||||||||
Capitalized research and development costs | 109 | 140 | |||||||||
Research and development credits | 36 | 5 | |||||||||
Total deferred tax assets, prior to valuation allowance | 445 | 274 | |||||||||
Valuation allowance | (49) | (33) | |||||||||
Total deferred tax assets, net of valuation allowance | 396 | 241 | |||||||||
Deferred tax liabilities: | |||||||||||
Deferred commission costs, net | (46) | (43) | |||||||||
Lease right-of-use assets | (19) | (16) | |||||||||
Prepaid expenses | (5) | (5) | |||||||||
Property and equipment, net | (3) | (10) | |||||||||
Intangible assets, net | (514) | (144) | |||||||||
Total deferred tax liabilities | (587) | (218) | |||||||||
Net deferred tax assets (liabilities) | $ | (191) | $ | 23 | |||||||
For both the years ended December 31, 2025 and 2024, the Company has not recognized deferred tax liabilities for temporary differences related to investments in foreign subsidiaries that were deemed permanently reinvested. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because such liability, if any, depends on certain circumstances existing if and when remittance occurs. A deferred tax liability will be recognized if and when the Company no longer plans to permanently reinvest these undistributed earnings.
As of both December 31, 2025 and 2024, a valuation allowance has been established for certain deferred tax assets due to the uncertainty of realization. The valuation allowance as of both December 31, 2025 and 2024 includes an allowance for acquired net operating losses and foreign deferred tax assets.
The Company established the valuation allowance because it is more likely than not that a portion of the deferred tax asset for certain items will not be realized based on the weight of available evidence. A valuation allowance was established for the foreign deferred tax assets due to the cumulative loss in recent years in those jurisdictions. The Company has not had sufficient taxable income historically to utilize the foreign deferred tax assets, and it is uncertain whether the Company will generate sufficient taxable income in the future to utilize the deferred tax assets. The Company established a valuation allowance for capital losses held by Domain. Capital losses can only offset capital gains in Australia. The Company has established a valuation allowance for certain acquired net operating losses where Section 382 limitations will impact the ability of the Company to utilize the net operating losses before they expire.
The Company’s change in valuation allowance was an increase of approximately $16 million for the year ended December 31, 2025 and an increase of approximately $24 million for the year ended December 31, 2024. The increase for the year ended December 31, 2025 was due to capital losses acquired in the Domain Acquisition and increases in foreign net operating losses. The increase for the year ended December 31, 2024 was primarily due to increases in foreign net operating loss deferred tax assets for which a full valuation allowance has been established.
The Company had U.S. income before income taxes of approximately $122 million, $294 million, and $527 million for the years ended December 31, 2025, 2024, and 2023, respectively. The Company had foreign losses before income taxes of approximately $92 million, $84 million, and $25 million for the years ended December 31, 2025, 2024, and 2023, respectively.
The table below provides the updated requirements of ASU 2023-09 for 2025. See Note 2 for additional details on the adoption of ASU 2023-09.
The effective income tax rate for the year ended December 31, 2025 differs from the statutory federal income tax rate as follows (in millions, except percentages):
Year Ended December 31, 2025 | |||||||||||
Amount | Percentage | ||||||||||
Expected federal income tax provision at statutory rate | $ | 6 | 21 | % | |||||||
State income taxes, net of federal benefit(1) | 6 | 20 | |||||||||
Foreign Tax Effects | |||||||||||
United Kingdom | |||||||||||
Statutory tax rate difference between United Kingdom and United States | (2) | (7) | |||||||||
Changes in valuation allowances | 13 | 43 | |||||||||
Research credits | (1) | (3) | |||||||||
Australia | |||||||||||
Statutory tax rate difference between Australia and United States | (4) | (13) | |||||||||
Foreign exchange loss | 3 | 10 | |||||||||
Other | (2) | (7) | |||||||||
Tax Credit | |||||||||||
Research credits | (21) | (70) | |||||||||
Nontaxable or Nondeductible Items | |||||||||||
Nondeductible Compensation | 18 | 60 | |||||||||
Transaction Costs | 9 | 29 | |||||||||
Stock Based Compensation | (3) | (10) | |||||||||
Other | (1) | (4) | |||||||||
Changes in Unrecognized Tax Benefits | 2 | 7 | |||||||||
Income tax expense, net | $ | 23 | 77 | % | |||||||
(1) State taxes in CA, DC, IL, NJ, NY, NYC, TX and VA made up the majority (greater than 50 percent) of the tax effect in this category.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the Company’s provision for income taxes resulted in effective tax rates that varied from the statutory federal income tax rate as follows (in millions):
Year Ended December 31, | |||||||||||
2024 | 2023 | ||||||||||
Expected federal income tax provision at statutory rate | $ | 44 | $ | 105 | |||||||
State income taxes, net of federal benefit | 18 | 27 | |||||||||
Increase (decrease) in valuation allowance | 22 | 2 | |||||||||
Foreign tax rate differential | (3) | (1) | |||||||||
Research credits | (29) | (20) | |||||||||
Excess tax benefit | (2) | (6) | |||||||||
Tax reserves | 7 | 4 | |||||||||
Nondeductible compensation | 9 | 9 | |||||||||
Other adjustments | 5 | 7 | |||||||||
Income tax expense, net | $ | 71 | $ | 127 | |||||||
The disaggregation of the income taxes paid (net of refunds) consist of the following (in millions):
Year Ended December 31, | |||||
2025 | |||||
Federal | $ | 40 | |||
State | 15 | ||||
Foreign | 18 | ||||
Total income taxes paid | $ | 73 | |||
Income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid (net of refunds) in the following jurisdictions (in millions):
Year Ended December 31, | |||||
2025 | |||||
Federal | |||||
US | $ | 40 | |||
State | |||||
Other States | $ | 15 | |||
Foreign | |||||
Australia | $ | 15 | |||
The Company has net operating loss carryforwards for international income tax purposes of approximately $173 million that do not expire. The Company has federal net operating loss carryforwards of approximately $503 million that begin to expire in 2028 and federal income tax credit carryforwards with a tax value of approximately $19 million primarily relating to federal research and development credits that begin to expire in 2032, state net operating loss carryforwards with a tax value of approximately $21 million that begin to expire in 2032 and state income tax credit carryforwards with a tax value of approximately $19 million primarily relating to state research and development credits and the D.C. qualified high technology company tax credit that began to expire in 2026. The Company realized a cash benefit relating to the use of its tax loss carryforwards of approximately $1 million, $3 million, and $6 million in December 31, 2025, 2024, and 2023, respectively.
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in millions):
Unrecognized tax benefit as of December 31, 2022 | $ | 16 | |||
Increase for current year tax positions | 4 | ||||
Increase for prior year tax positions | 2 | ||||
Expiration of the statute of limitation for assessment of taxes | (2) | ||||
Unrecognized tax benefit as of December 31, 2023 | 20 | ||||
Increase for current year tax positions | 6 | ||||
Increase for prior year tax positions | 5 | ||||
Expiration of the statute of limitation for assessment of taxes | (4) | ||||
Unrecognized tax benefit as of December 31, 2024 | 27 | ||||
Increase for current year tax positions | 5 | ||||
Increase for prior year tax positions | 2 | ||||
Expiration of the statute of limitation for assessment of taxes | (4) | ||||
Unrecognized tax benefit as of December 31, 2025 | $ | 30 | |||
Approximately $30 million and $27 million of the unrecognized tax benefits as of December 31, 2025 and 2024, respectively, would favorably affect the annual effective tax rate if recognized in future periods. The increase for current year tax positions of $5 million and increase for prior year tax positions of $2 million for the year ended December 31, 2025 were primarily attributable to research credits. The decrease for expiration of the statute of limitation of $4 million for the year ended December 31, 2025 was attributable to research credits. The Company recognized $1 million, $1 million, and $1 million for interest and penalties in its consolidated statements of operations for the years ended December 31, 2025, 2024, and 2023, respectively. The Company had liabilities of $3 million, $2 million, and $1 million for interest and penalties in its consolidated balance sheets as of December 31, 2025, 2024, and 2023, respectively. The Company does not anticipate the amount of the unrecognized tax benefits will change significantly over the next 12 months.
The Company is subject to taxation in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company’s federal income tax returns for tax years 2022 through 2024 remain open to examination. Most of the Company’s state income tax returns for tax years 2022 through 2024 remain open to examination. For states that have a four-year statute of limitations, the state income tax returns for tax years 2021 through 2024 remain open to examination. The Company’s U.K. income tax return for tax year 2024 remains open to examination. The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 26, 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.