Enphase Energy, Inc.ENPH
Enphase Energy, Inc. Income Taxes Disclosure
INCOME TAXES
The domestic and foreign components of income before income taxes consisted of the following:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| United States | $ | 145,956 | $ | 80,903 | $ | 465,463 | |||||||||||
| Foreign | 58,858 | 39,256 | 47,676 | ||||||||||||||
| Income before income taxes | $ | 204,814 | $ | 120,159 | $ | 513,139 | |||||||||||
The income tax provision for the years presented was as follows:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 7,233 | $ | 61,256 | $ | 96,151 | |||||||||||
| State | 986 | 6,319 | 13,937 | ||||||||||||||
| Foreign | 10,957 | 11,137 | 11,303 | ||||||||||||||
| 19,176 | 78,712 | 121,391 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 4,575 | (58,588) | (50,211) | ||||||||||||||
| State | 6,628 | (4,535) | 1,287 | ||||||||||||||
| Foreign | 2,302 | 1,912 | 1,736 | ||||||||||||||
| 13,505 | (61,211) | (47,188) | |||||||||||||||
| Income tax provision | $ | 32,681 | $ | 17,501 | $ | 74,203 | |||||||||||
The Company adopted ASU 2023‑09 prospectively for the year ended December 31, 2025, and a reconciliation of the income tax provision and the amount computed by applying the statutory federal income tax rate of 21% to income before income taxes was as follows:
| Year Ended December 31, | ||||||||||||||
| 2025 | ||||||||||||||
| Amount | Percent | |||||||||||||
| (In thousands) | ||||||||||||||
| U.S. Federal Statutory Tax Rate | $ | 43,011 | 21.0 | % | ||||||||||
State and Local Income Taxes, Net of Federal Income Tax Effect (1) | 6,775 | 3.3 | % | |||||||||||
| Foreign Tax Effect | ||||||||||||||
| India | ||||||||||||||
| Statutory tax rate difference between India and U.S. | 1,932 | 0.9 | % | |||||||||||
| Unremitted foreign earnings | 1,570 | 0.8 | % | |||||||||||
| Other | 1,114 | 0.5 | % | |||||||||||
| Other Countries | ||||||||||||||
| Statutory tax rate difference between Other Countries and U.S. | 827 | 0.4 | % | |||||||||||
| Other | (902) | (0.4) | % | |||||||||||
| Effect of Cross-Border Tax Laws | ||||||||||||||
| GILTI and other foreign inclusion | 535 | 0.3 | % | |||||||||||
| Foreign-derived intangible income deduction | 1,103 | 0.5 | % | |||||||||||
| Foreign Branch Tax | 5,400 | 2.6 | % | |||||||||||
| Other | 1,033 | 0.5 | % | |||||||||||
| Tax Credits | ||||||||||||||
| Foreign Tax Credits | (9,804) | (4.8) | % | |||||||||||
| Other Tax Credits | (59) | — | % | |||||||||||
| Nontaxable or Nondeductible items | ||||||||||||||
| Non-taxable income related to Section 45X tax credits | (50,132) | (24.5) | % | |||||||||||
| Stock-based compensation | 18,509 | 9.0 | % | |||||||||||
| Section 162(m) | 4,849 | 2.4 | % | |||||||||||
| Other | 2,247 | 1.1 | % | |||||||||||
| Changes in Unrecognized Tax Benefits | 4,679 | 2.3 | % | |||||||||||
| Other Adjustments | (6) | — | % | |||||||||||
| Provision for (benefit from) income taxes | $ | 32,681 | 15.9 | % | ||||||||||
(1) During the year ended December 31, 2025, state taxes in California comprised greater than 90% of the tax effect in this category.
A reconciliation of the income tax provision, prior to the adoption of ASU 2023-09, to the amount computed by applying the statutory federal income tax rate of 21% to income before income taxes for the years presented was as follows:
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (In thousands) | |||||||||||
| Income tax provision at statutory federal rate | $ | 25,233 | $ | 107,760 | |||||||
| State taxes, net of federal benefit | 7,406 | 18,107 | |||||||||
| Change in valuation allowance | 1,973 | — | |||||||||
| Foreign tax rate and tax law differential | 6,502 | 5,965 | |||||||||
| Tax credits | (7,598) | (29,229) | |||||||||
| Non-taxable income related to Section 45X tax credits | (33,083) | (11,229) | |||||||||
| Stock-based compensation | 13,408 | (13,969) | |||||||||
| Other permanent items | 335 | (964) | |||||||||
| Other nondeductible/nontaxable items | (219) | (73) | |||||||||
| Uncertain tax positions | 2,746 | 8,432 | |||||||||
| Foreign-derived intangible income deduction | (5,188) | (15,391) | |||||||||
| GILTI and other foreign inclusions | 9,101 | — | |||||||||
| Section 162(m) | 4,618 | 5,445 | |||||||||
| Unremitted foreign earnings | 1,654 | 1,829 | |||||||||
| Prior year changes in estimates | (9,387) | (2,480) | |||||||||
| Income tax provision | $ | 17,501 | $ | 74,203 | |||||||
A summary of significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 was as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Allowances and reserves | $ | 61,810 | $ | 56,819 | |||||||
| Accrued liabilities | 15,306 | 30,230 | |||||||||
| Net operating loss and tax credit carryforwards | 16,423 | 17,945 | |||||||||
| Stock-based compensation | 31,853 | 17,504 | |||||||||
| Deferred revenue | 62,898 | 66,353 | |||||||||
| Fixed assets and intangibles | 2,032 | 1,670 | |||||||||
| Convertible notes and related hedges | 14,717 | 27,053 | |||||||||
| Capitalized research and development expense | 105,020 | 104,002 | |||||||||
| Capitalized inventory | 23,178 | 13,865 | |||||||||
| Other | 6,714 | 10,121 | |||||||||
| Gross deferred tax assets | 339,951 | 345,562 | |||||||||
| Less valuation allowance | (1,772) | (1,973) | |||||||||
| Total deferred tax assets | 338,179 | 343,589 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Unremitted foreign earnings | (8,390) | (6,800) | |||||||||
| State impact of Section 45X tax credits | (5,914) | (1,625) | |||||||||
| Deferred cost of goods sold | (24,828) | (26,397) | |||||||||
| Other | (1,203) | (208) | |||||||||
| Total deferred tax liabilities | (40,335) | (35,030) | |||||||||
| Net deferred tax asset | $ | 297,844 | $ | 308,559 | |||||||
As of December 31, 2025 and 2024, the Company recorded a valuation allowance of $1.8 million and $2.0 million, respectively, against certain of its net operating losses on one of its foreign operations, as it is more likely than not that such amounts will not be fully realized.
The Company's accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company's deferred tax assets. Assessing the realizability of deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. The Company's management forecasts taxable income by considering all available positive and negative evidence including its history of operating income or losses and its financial plans and estimates which are used to manage the business. These assumptions require significant judgment about future taxable income. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are reduced
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In thousands) | |||||||||||
| Valuation allowance, beginning of period | $ | 1,973 | $ | — | |||||||
| Additions | — | 1,973 | |||||||||
| Reversals | (201) | — | |||||||||
| Valuation allowance, end of period | $ | 1,772 | $ | 1,973 | |||||||
The Company has approximately $8.8 million of federal tax credit and $8.3 million of state tax credit carryforwards. The federal credits begin to expire in 2031 and the state credits can be carried forward indefinitely. As of December 31, 2025, the Company has foreign net operating losses of $5.5 million from the acquisition of GreenCom, which can be carried over indefinitely.
Utilization of some of the federal credit carryforwards and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986, as amended (the “Code”), and similar state provisions. The Company believes that no such change has occurred through December 31, 2025.
Accounting for uncertain tax positions prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company is required to recognize in the financial statements the impact of a tax position, if that position is more-likely than-not of being sustained on audit, based on the technical merits of the position. The Company recorded a net benefit for unrecognized tax benefits in 2025 of $4.2 million.
The Company has a tax position for which it is reasonably possible that the total amount of gross unrecognized tax benefits will decrease within the next year. The unrecognized tax benefits may increase or change during the next year for items that arise in the ordinary course of business.
As of December 31, 2025, the total amount of gross unrecognized tax benefits was $23.5 million, of which $21.8 million, if recognized, would impact the Company’s effective tax rate.
A tabular reconciliation of the total amounts of unrecognized tax benefits for the years presented was as follows (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Unrecognized tax benefits—at beginning of year | $ | 27,660 | $ | 27,218 | $ | 21,768 | |||||||||||
| Increases (decreases) in balances related to tax positions taken in prior years | 2,195 | (702) | (417) | ||||||||||||||
| Increases in balances related to tax positions taken in current year | 954 | 1,490 | 5,985 | ||||||||||||||
| Decreases related to settlements with taxing authorities | (6,820) | — | — | ||||||||||||||
| Lapses in statutes of limitations | (484) | (346) | (118) | ||||||||||||||
| Unrecognized tax benefits—at end of year | $ | 23,505 | $ | 27,660 | $ | 27,218 | |||||||||||
The Company includes interest and penalties related to unrecognized tax benefits within the income tax provision. In the years ended December 31, 2025, 2024 and 2023, the total amount of gross interest and penalties accrued was $6.6 million, $6.1 million and $2.9 million, respectively. Both the unrecognized tax benefits and the associated interest and penalties that are not expected to result in payment or receipt of cash within one year are classified as other non-current liabilities in the consolidated balance sheets. In connection with tax matters, the Company’s interest and penalty expense recognized in 2025, 2024 and 2023 in the consolidated statements of operations was $0.4 million, $2.3 million and $3.8 million, respectively.
The Company’s tax returns continue to remain effectively subject to examination by U.S. federal authorities for the years 2006 and onwards and by California state authorities for the years 2006 and onwards due to use and carryovers of net operating losses and tax credits.
For the years ended December 31, 2025,and 2024, benefits recognized from the AMPTC of $238.7 million, and $157.5 million, respectively, were recorded as a prepaid income tax of $227.5 million and $94.9 million (included in Prepaid Expenses and Other Assets), reduction of income tax payable of $11.2 million and $62.7 million on the consolidated balance sheet for the year ended December 31, 2025 and 2024, respectively, and as a reduction to cost of revenues of $238.7 million and $157.5 million on the consolidated statements of operations for the year ended December 31, 2025 and 2024, respectively. Amounts recognized in the consolidated financial statements are based on management’s judgement and interpretation of the most current guidance.
In July 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted into law, extending key provisions of 2017 Tax Act while scaling back clean energy tax incentives of the IRA. The OBBBA brought back accelerated depreciation for property acquired and placed in service after January 19, 2025, and restored expensing of domestic research expenditures for years beginning after December 31, 2024. Additionally, the bill also amended international tax provisions on global intangible low-tax income, foreign derived intangible income, and base erosion and anti-abuse tax.
Among the significant changes to the clean energy provisions are those related to the repeal of the Section 25D residential solar incentive tax credit starting after December 31, 2025, and the Section 48E tax credit after December 31, 2027, if construction is not started within 12 months of the enactment. The OBBBA expanded the new non-Foreign Entity of Concern requirements to the Section 45X tax credit, denying tax credits for projects owned or controlled by certain foreign entities or that use components from or make payments to these foreign entities.
On October 1, 2025, the Governor of California signed Senate Bill 302 (“SB 302”) into law. SB 302 provides a gross income exclusion for taxpayers that either elect to receive direct payments from the Internal Revenue Service or receive payment from transfer of certain federal clean energy tax credits beginning tax years on or after January 1, 2026, and before January 1, 2031. The Company is currently evaluating the impacts of SB 302 on its condensed consolidated financial statements.
The Company made net tax payments during the year ended December 31, 2025 as follows:
| United States | $ | — | ||||||
| India | 12,942 | |||||||
| Netherlands | 2,690 | |||||||
| New Jersey | 1,090 | |||||||
| Other - Foreign | 2,119 | |||||||
| Other - States | 1,609 | |||||||
| Total | $ | 20,450 | ||||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 10, 2025 | |
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.