DEXCOM INCDXCM
DEXCOM INC Income Taxes Disclosure
7. Income Taxes | ||||||||||||||
Income (loss) before income taxes subject to taxes in the following jurisdictions is as follows:
| Twelve Months Ended December 31, | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| United States | $ | 961.4 | $ | 659.8 | $ | 732.4 | |||||||||||
| Outside of the United States | 127.0 | 49.2 | (22.0) | ||||||||||||||
| Total | $ | 1,088.4 | $ | 709.0 | $ | 710.4 | |||||||||||
Significant components of the provision for income taxes are as follows:
| Twelve Months Ended December 31, | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 37.1 | $ | 157.4 | $ | 149.1 | |||||||||||
| State | 7.1 | 16.5 | 18.1 | ||||||||||||||
| Foreign | 25.7 | 2.7 | 56.7 | ||||||||||||||
| Total current income taxes | 69.9 | 176.6 | 223.9 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 169.7 | (55.2) | (93.7) | ||||||||||||||
| State | 16.0 | (2.0) | 14.6 | ||||||||||||||
| Foreign | (3.5) | 13.4 | 24.1 | ||||||||||||||
| Total deferred income taxes | 182.2 | (43.8) | (55.0) | ||||||||||||||
| Total | $ | 252.1 | $ | 132.8 | $ | 168.9 | |||||||||||
Income taxes paid are as follows:
| Twelve Months Ended December 31, | |||||
| (In millions) | 2025 | ||||
Federal | $ | 68.0 | |||
State | 10.6 | ||||
Foreign | 15.8 | ||||
Total | $ | 94.4 | |||
Significant loss and tax credit carryforwards and years of expiration are as follows:
| December 31, | Year of Expiration | ||||||||||||||||
| (In millions) | 2025 | 2024 | |||||||||||||||
| Net operating loss: | |||||||||||||||||
| Federal | $ | 3.8 | $ | 12.1 | 2028 | ||||||||||||
| California | 162.0 | 162.0 | 2037 | ||||||||||||||
| Other states | 5.1 | 5.8 | 2028 | ||||||||||||||
| Tax credits: | |||||||||||||||||
| Federal | |||||||||||||||||
| Foreign tax credits | 1.2 | 0.1 | 2032 | ||||||||||||||
| California R&D credits | 134.6 | 124.9 | Indefinite | ||||||||||||||
| California AMT Credits | $ | 0.5 | $ | 0.5 | Indefinite | ||||||||||||
Utilization of net operating losses and credit carryforwards is subject to an annual limitation due to ownership change limitations provided by Section 382 and 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. An ownership change limitation occurred in February 2009 resulting in an immaterial amount of U.S. research and development tax credits that will expire unused, and therefore, are not reflected in the credit carryforwards above or in the related deferred tax assets in the table below.
Significant components of our deferred tax assets and liabilities as of December 31, 2025 and 2024 are shown below. Significant judgment is required to evaluate the need for a valuation allowance against deferred tax assets. We review all available positive and negative evidence, including projections of pre-tax book income, earnings history, reliability of forecasting, and reversal of temporary differences. A valuation allowance is established when it is more likely than not that some or all of the deferred tax assets will not be realized. Realization of deferred tax assets is dependent upon future earnings in applicable tax jurisdictions.
| December 31, | |||||||||||
| (In millions) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 12.6 | $ | 14.4 | |||||||
| Capitalized research and development expenses | 103.6 | 265.0 | |||||||||
| Tax credits | 85.6 | 79.2 | |||||||||
| Share-based compensation | 20.6 | 22.5 | |||||||||
| Fixed and intangible assets | 187.3 | 263.6 | |||||||||
| Accrued liabilities and reserves | 86.8 | 87.4 | |||||||||
| Convertible debt | 11.3 | 16.0 | |||||||||
| Total gross deferred tax assets | 507.8 | 748.1 | |||||||||
| Less: valuation allowance | (160.7) | (221.9) | |||||||||
| Total net deferred tax assets | 347.1 | 526.2 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Fixed assets and acquired intangibles assets | (45.8) | (59.3) | |||||||||
Net unrealized gain on equity investments | (18.4) | — | |||||||||
| Other | — | (0.3) | |||||||||
| Total deferred tax liabilities | (64.2) | (59.6) | |||||||||
| Net deferred tax assets (liabilities) | $ | 282.9 | $ | 466.6 | |||||||
We maintain a valuation allowance of $160.7 million against our California research and development tax credits, foreign tax credits, and certain foreign intangible assets. During the year ended December 31, 2025, the valuation allowance decreased by $61.2 million primarily in connection with the intra-entity transfer of certain intellectual property and the generation of California research and development tax credits.
The reconciliation between our effective tax rate on income from continuing operations and the statutory rate, after the adoption of ASU 2023-09 on a prospective basis, is as follows:
| Twelve Months Ended December 31, | |||||||||||
| (In millions) | 2025 | ||||||||||
| U.S. Federal Statutory Rate | $ | 228.6 | 21.0 | % | |||||||
| Increase (Decrease) Resulting From: | |||||||||||
| State and Local Income Tax, Net of Federal Income Tax Effect | 16.4 | 1.5 | % | ||||||||
| Foreign Tax Effects | |||||||||||
Ireland | |||||||||||
Change in Rate | 63.6 | 5.8 | % | ||||||||
Change in Valuation Allowance | (74.5) | (6.8) | % | ||||||||
| Other | 5.8 | 0.5 | % | ||||||||
Malaysia | |||||||||||
Foreign rate differential | (14.8) | (1.4) | % | ||||||||
Other | 8.9 | 0.8 | % | ||||||||
Other foreign jurisdictions | 6.7 | 0.6 | % | ||||||||
Effect of Cross-Border Taxes | 3.0 | 0.3 | % | ||||||||
| Tax Credits | |||||||||||
Research and development credits | (13.6) | (1.2) | % | ||||||||
| Changes in Valuation Allowance | 0.4 | — | % | ||||||||
| Nontaxable or Nondeductible Items | |||||||||||
| Stock and officers compensation | 16.1 | 1.5 | % | ||||||||
| Other | 2.5 | 0.2 | % | ||||||||
| Changes in Unrecognized Tax Benefits | 4.4 | 0.4 | % | ||||||||
| Other | (1.4) | (0.1) | % | ||||||||
| Total | $ | 252.1 | 23.2 | % | |||||||
State taxes in Colorado and Florida made up the majority (greater than 50%) of the tax effect in the state and local income tax category.
The reconciliation between our effective tax rate on income from continuing operations and the statutory rate for prior years not impacted by the adoption of ASU 2023-09 is as follows:
| Twelve Months Ended December 31, | ||||||||||||||
| (In millions) | 2024 | 2023 | ||||||||||||
| U.S. federal statutory tax rate | $ | 148.9 | $ | 149.2 | ||||||||||
| State income tax, net of federal benefit | 10.2 | 7.8 | ||||||||||||
| Permanent items | 10.5 | (2.7) | ||||||||||||
| Research and development credits | (24.6) | (28.3) | ||||||||||||
| Foreign tax credit | (1.2) | — | ||||||||||||
| Foreign rate differential | 1.6 | 15.8 | ||||||||||||
| Stock and officers compensation | 3.8 | 5.6 | ||||||||||||
| Collaboration agreement milestone share-based payment | (32.2) | (72.1) | ||||||||||||
| Change in statutory tax rates | 51.5 | 19.4 | ||||||||||||
| Intellectual property transfer | — | 63.9 | ||||||||||||
| Other | 6.7 | 0.3 | ||||||||||||
| Change in valuation allowance | (42.4) | 10.0 | ||||||||||||
| Income taxes at effective rates | $ | 132.8 | $ | 168.9 | ||||||||||
The following table summarizes the activity related to our gross unrecognized tax benefits:
| (In millions) | |||||
Balance at January 1, 2023 | $ | 52.0 | |||
Increases related to prior year tax positions | 0.8 | ||||
Increases related to current year tax positions | 6.6 | ||||
| Balance at December 31, 2023 | 59.4 | ||||
Increases related to prior year tax positions | 0.1 | ||||
Increases related to current year tax positions | 6.7 | ||||
| Balance at December 31, 2024 | 66.2 | ||||
Increases related to prior year tax positions | 0.2 | ||||
Increases related to current year tax positions | 5.7 | ||||
Decreases related to prior year tax positions | (3.0) | ||||
| Balance at December 31, 2025 | $ | 69.1 | |||
Of the total unrecognized tax benefits at December 31, 2025, 2024, and 2023, $40.8 million, $40.7 million and $37.0 million, respectively, would affect our annual effective tax rate if recognized. The indirect effect of the unrecognized tax benefits that, if recognized, would affect our annual effective tax rate is not material for all years presented. Also, the amount of unrecognized tax benefits that, if recognized, would result in adjustments to other tax accounts, is not material for all years presented. Interest and penalties are classified as a component of income tax expense and are not material for all years presented.
Due to our global business activities, we file income tax returns and are subject to routine compliance audits in numerous jurisdictions, including those material jurisdictions listed in the following table. The U.S. net operating losses generated since 2007 and utilized in recent years are open for examination. The years remaining subject to audit, by major jurisdiction, are as follows:
| Jurisdiction | Fiscal Year | ||||
| United States (Federal and state) | 2007 - 2025 | ||||
| United Kingdom | 2022 - 2025 | ||||
| Malaysia | 2020 - 2025 | ||||
| Ireland | 2023 - 2025 | ||||
We currently operate under a Special Corporate Income Tax Preferential rate in the Philippines, which is in effect through 2031. The prior tax holiday ended in 2023. The impact of both the tax holiday and preferential rate is immaterial for all years presented. We have been granted a tax incentive by the Malaysian Investment Development Authority (MIDA) in Malaysia, which provides for a 0% tax holiday of up to 15 years based on our ability to meet certain conditions. The tax incentive had no effect on foreign taxes during 2023. In July 2025, the Malaysia Investment Development Authority, or MIDA, certified our achievement of the milestones and conditions related to our Malaysia income tax holiday. We have recorded a tax benefit related to the retroactive application of the tax holiday back to January 1, 2024.
We assert that any foreign earnings will be indefinitely reinvested, and accordingly, we have not recorded a liability for taxes associated with these undistributed earnings. If we determine that all or a portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes.
On July 4, 2025, the One Big Beautiful Bill Act, or OBBBA, was signed into law in the U.S., and includes a broad range of tax reform provisions which did not have a significant impact to the effective tax rate. The primary impact of this legislation is a reduction in our U.S. income tax liability and deferred tax asset related to the ability to currently deduct U.S.-based research expenses against U.S. income.
The Organization for Economic Co-operation and Development’s, or OECD, Pillar Two Initiative introduced a 15% global minimum tax for certain multinational groups exceeding minimum annual global revenue thresholds. As of December 31, 2025, the global minimum tax rules enacted in countries in which we operate, including the transitional safe harbor provisions, does not have a material impact on our consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 8, 2024 | |
| 2022 | Feb 9, 2023 | |
| 2021 | Feb 14, 2022 | |
| 2020 | Feb 11, 2021 | |
| 2019 | Feb 13, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 23, 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.