DoubleVerify Holdings, Inc. Income Taxes Disclosure

10. Income Tax

Components of Income and Income Tax Expense

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The components of income before income tax provision were as follows:

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Income tax provision was as follows:

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Effective Income Tax Rate

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As of January 1, 2025, the Company adopted new FASB guidance related to income tax disclosures on a prospective basis.  The following table reconciles the U.S. federal statutory income tax rate to the effective income tax rate for 2025 pursuant to the new guidance:

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*State taxes in California, New York City, and New York state made up a majority of the tax effect in this category.

The table below presents the Company’s effective tax rate reconciliations for 2024 and 2023 consistent with historical period disclosures:

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The Company’s effective tax rates for the years ended December 31, 2025, 2024, and 2023 were generally higher than the U.S. federal statutory income tax rate primarily as a result of the impact of state tax effects and other permanent book-tax differences, including non-deductible executive compensation and stock-based compensation.

Income Taxes Paid

The FASB guidance mentioned above also requires Companies to enhance disclosures regarding cash tax payments made during the year.  For the year ended December 31, 2025, the Company paid income taxes, net of any refunds, by jurisdiction as follows:

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Income tax payments for the years ended December 31, 2024 and 2023, as historically disclosed in the Consolidated Statements of Cash Flows, were $41.9 million and $60.9 million, respectively.

Deferred Income Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting purposes. The following table details the components of deferred tax assets and liabilities as of December 31, 2025 and 2024:

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The Company has generally not recorded a deferred tax liability for foreign withholding or other relevant taxes on the undistributed earnings from the Company’s international subsidiaries, as such earnings are considered to be indefinitely reinvested, with the exception of certain earnings connected to one of the Company’s international subsidiaries.

Under the Tax Cuts and Jobs Act of 2017, research and development costs were no longer immediately tax deductible and were required to be capitalized and amortized for U.S. tax purposes effective January 1, 2022. The mandatory capitalization requirement temporarily increases our deferred tax assets and cash tax liabilities.  On July 4, 2025, the One Big Beautiful Bill Act modified these rules to allow the acceleration of tax deductions of certain research and development costs historically capitalized. The Company intends to deduct current US research and development costs on an as-incurred basis and deduct any remaining legacy US research and development amortizable costs within the 2025 and 2026 tax years.  

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act which, among other changes, imposes a 15% corporate alternative minimum tax (“CAMT”) and a 1% excise tax on stock repurchases. The CAMT is effective for tax years beginning after December 31, 2022, but the CAMT has not had an effect upon the Company through December 31, 2024. The excise tax on stock repurchases applies to stock repurchases occurring after December 31, 2022.

Tax Valuation Allowance

As of each reporting date, management considers new evidence, both positive and negative, that could impact management’s view with regard to the future realization of deferred tax assets. Based on this analysis, the Company has concluded that it is more likely than not that the Company will realize all of its deferred taxes assets, with limited exception. A valuation allowance is recorded on a small amount of tax loss carryforwards that are subject to specific usage limitations.

Net Operating Loss and Credit Carryforwards

As of December 31, 2025, the Company had a Federal net operating loss carryforward of approximately $4.8 million and a state net operating loss carryforward of approximately $5.9 million. In addition, the Company had loss carryforwards for various foreign countries where the Company has business operations of approximately $5.6 million. Federal net operating loss carryforwards can be used to offset taxable income in the future and begin to expire in 2029. Utilization of Federal net operating loss carryforwards may be subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The Company’s net operating loss carryforwards are subject to the annual limitation under Section 382 of the Internal Revenue Code.

Uncertain Tax Positions

The Company and its subsidiaries file income tax returns with the Internal Revenue Service (“IRS”) in various state and international jurisdictions. The Company’s income tax returns are open to examination by federal and state authorities for the tax years ended December 31, 2022 and later. The Company is currently under examination by the IRS for the tax year ended December 31, 2023.

For uncertain tax positions, the Company uses a more-likely-than-not recognition threshold based on the technical merits of the tax position taken. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefits determined on a cumulative probability basis, which are more-likely-than-not to be realized upon ultimate settlement in the financial statements. The Company has unrecognized tax benefits, which are tax benefits related to uncertain tax positions which have been or will be reflected in income tax filings that have not been recognized in the financial statements due to potential adjustments by taxing authorities in the applicable jurisdictions.

The Company's unrecognized tax benefits, which include interest and penalties, were $5.0 million and $2.7 million as of December 31, 2025 and 2024, respectively. The amount of unrecognized tax benefits that, if recognized, would affect the Company's effective tax rate are $4.8 million and $2.2 million as of December 31, 2025 and 2024, respectively, and include the federal tax benefit of state deductions.

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Changes in the Company’s unrecognized tax benefits were as follows:

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