Enova International, Inc. Income Taxes Disclosure

10. Income Taxes

Included within both the current and deferred federal provision components for the year ended December 31, 2024 was a decrease in the unrecognized tax benefits reserve, which results in a current federal and state income tax benefit with an equal and offsetting deferred federal and state income tax expense, due to the temporary nature of the unrecognized tax benefits.

The Company had gross federal net operating loss carryforwards of $11.2 million as of December 31, 2025, mainly attributable to the Company’s 2020 acquisitions. The Company has recorded a valuation allowance related to the federal net operating loss carryforwards as they are not more likely than not to be utilized as the losses will be limited to the Section 382 ownership changes. The Company had a tax-effected valuation allowance of $0.7 million as of December 31, 2025 established against the net operating losses that will expire prior to their utilization.

The Company had gross state net operating loss carryforwards of $293.4 million, $277.4 million and $178.6 million as of December 31, 2025, 2024 and 2023, respectively, that, if unused, will expire between calendar years 2026 and 2046. The 2025 gross state net operating loss carryforwards include losses incurred in states that quantify net operating losses before the application of apportionment factors, and their inclusion inflates the total amount of state net operating loss carryforwards when compared to a population of states that quantify net operating losses after the application of apportionment factors. The Company had recorded a tax-effected valuation allowance of $9.9 million as of December 31, 2025, primarily related to Louisiana state net operating loss carryforward deferred tax assets as they are not more likely than not to be utilized based on the calculation of income tax in the state of Louisiana. The state excludes interest income from its tax base and the Company does not anticipate generating a sufficient amount of non-interest income to enable the utilization of net operating losses.

The Company had gross foreign net operating loss carryforwards from Brazilian operations of $73.6 million, $39.0 million and $29.5 million as of December 31, 2025, 2024 and 2023, respectively. These net operating loss carryforwards are subject to annual limitations and have an unlimited carryforward period. The Company has recorded a full valuation allowance related to the Brazilian net operating loss carryforwards, as they are not more likely than not to be utilized. We currently have insignificant accumulated earnings in foreign jurisdictions. We intend to indefinitely reinvest these earnings and expect future U.S. cash generation to be sufficient to meet future U.S. cash needs.

The Company had gross federal capital loss carryforwards of $19.0 million as of December 31, 2025, mainly attributable to the Company’s write-down of its investment in Linear in 2024. Capital losses can be carried back three years and carried forward five years. The Company has recorded a valuation allowance related to the capital loss that will not be utilized against capital gains within the three-year carryback window. The Company continued to maintain a tax-effected valuation allowance of $1.3 million as of December 31, 2025 against the capital loss carryforwards that are not more likely than not to be utilized prior to their expiration as the Company cannot project future capital gains.

Included in the balances of unrecognized tax benefits at December 31, 2025, 2024 and 2023 were potential benefits of $11.4 million, $7.2 million and $9.9 million, respectively, that, if recognized, would favorably affect the effective tax rate in the period of recognition. The balance of unrecognized tax benefits for temporary items as of December 31, 2025, 2024 and 2023 was $91.8 million, $75.6 million and $125.9 million, respectively. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense. The liability for unrecognized tax benefits as of December 31, 2025 and 2024 included $8.5 million and $4.9 million, respectively, for accrued interest and penalties related to unrecognized tax benefits. Within the tabular rollforward, the additions and reductions based on tax positions related to the current year, primarily relate to a temporary uncertainty that is expected to reverse in the immediately following tax period. The table includes the net increase or decrease associated with this position. The balance of unrecognized tax benefits includes amounts classified as an increase in income taxes payable or the reduction of a deferred tax asset. In 2024, the Company decreased the balance of the unrecognized tax benefits reserve due to management’s evaluation and remeasurement of its settlement position related to the timing of recognition of income and losses related to the Company's loan and finance receivable portfolio.

The Company believes it is reasonably possible that, within the next twelve months, unrecognized domestic tax benefits will change by a significant amount up to and including the full amount of the reserve. The Company’s principal uncertainties are related to the timing of recognition of income and losses related to its loan and finance receivable portfolio. Depending upon the outcome of any future agreements or settlements with relevant taxing authorities, the amount of the uncertainty, including amounts that would be recognized as a component of the effective tax rate, could change significantly. While the total amount of uncertainty to be resolved is not clear, it is reasonably possible that the uncertainties pertaining to the tax positions will be resolved in the next twelve months.

The Company’s U.S. tax returns are subject to examination by federal and state taxing authorities. The statute of limitations related to the Company’s consolidated Federal income tax returns is closed for all tax years up to and including 2021. The years open to examination by state, local and foreign government authorities vary by jurisdiction, but the statute of limitation is generally three years from the date the tax return is filed. For jurisdictions that have generated net operating losses, carryovers may be subject to the statute of limitations applicable for the year those carryovers are utilized. In these cases, the period for which the losses may be adjusted will extend to conform with the statute of limitations for the year in which the losses are utilized. In most circumstances, this is expected to increase the length of time that the applicable taxing authority may examine the carryovers by one year or longer, in limited cases.