EverCommerce Inc.EVCM
EverCommerce Inc. Income Taxes Disclosure
Note 16. Income Taxes
The components of our net income (loss) before income tax expense are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
United States | $ | 9,888 | $ | (32,143) | $ | (49,483) | |||||||||||
International | 11,271 | 22,785 | 155 | ||||||||||||||
Net income (loss) before income tax expense | $ | 21,159 | $ | (9,358) | $ | (49,328) | |||||||||||
As of December 31, 2025, a portion of our undistributed earnings from non-U.S. subsidiaries are intended to be indefinitely reinvested in non-U.S. operations, and therefore no U.S. deferred taxes have been recorded. As of December 31, 2025, there was no material unrecognized deferred tax liability related to countries where we are indefinitely reinvested. The remaining undistributed earnings from non-U.S. subsidiaries are not permanently reinvested, however, due to a combination of anticipated tax treatment and losses, no material deferred tax liability exists.
The components of the provision for income tax expense (benefit) consists of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 47 | $ | 311 | $ | — | |||||||||||
| State | 804 | 1,280 | 1,494 | ||||||||||||||
| Foreign | 2,633 | 1,335 | 1,647 | ||||||||||||||
| Total current | 3,484 | 2,926 | 3,141 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (4,418) | (9,237) | (5,700) | ||||||||||||||
| State | (4) | (2,221) | (2,402) | ||||||||||||||
| Foreign | 962 | 289 | (256) | ||||||||||||||
| Change in valuation allowance - United States | 5,982 | 14,183 | 10,082 | ||||||||||||||
Change in valuation allowance - State (1) | (713) | — | — | ||||||||||||||
| Change in valuation allowance - Foreign | (2,338) | (101) | (3,488) | ||||||||||||||
| Total deferred | (529) | 2,913 | (1,764) | ||||||||||||||
Total income tax expense | $ | 2,955 | $ | 5,839 | $ | 1,377 | |||||||||||
(1) 2025 presentation of change in state valuation allowance is provided separately due to the prospective adoption of ASU 2023-09. | |||||||||||||||||
The Company’s deferred tax assets and liabilities, included in other non-current liabilities on the consolidated balance sheets, related to temporary differences and operating loss carryforwards were as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Net operating losses | $ | 27,027 | $ | 29,277 | |||||||
| 163(j) interest limitation | 31,786 | 33,187 | |||||||||
| Reserves and accrued expenses | 6,081 | 6,571 | |||||||||
| Property and equipment depreciation | — | 463 | |||||||||
Capitalized software | — | 2,726 | |||||||||
| Stock-based compensation | 2,525 | 2,802 | |||||||||
Intangibles | 9,889 | 8,012 | |||||||||
| Lease liability | 3,385 | 4,240 | |||||||||
Capital loss carryforward | 22,248 | 10,795 | |||||||||
| Other | 4,363 | 2,974 | |||||||||
| Total deferred tax assets | 107,304 | 101,047 | |||||||||
| Less: valuation allowance | (64,585) | (64,870) | |||||||||
| Net deferred tax assets | 42,719 | 36,177 | |||||||||
| Deferred tax liabilities: | |||||||||||
Goodwill | (40,033) | (36,041) | |||||||||
| Property and equipment depreciation | (31) | — | |||||||||
Capitalized software | (3,895) | — | |||||||||
| Capitalized expenses | (4,210) | (4,951) | |||||||||
| Operating lease right-of-use assets | (2,035) | (2,736) | |||||||||
| Other | (674) | (1,039) | |||||||||
| Total deferred tax liabilities | (50,878) | (44,767) | |||||||||
| Net deferred tax liabilities | $ | (8,159) | $ | (8,590) | |||||||
The Company had net operating loss, capital loss, and tax credit carryforwards as of the financial statement date as follows:
| Amount | Expiration Years | ||||||||||
| (in thousands) | |||||||||||
Net operating losses, federal (Post December 31, 2017) | $ | 19,063 | Indefinite | ||||||||
Net operating losses, federal (Pre January 1, 2018) | $ | 167 | 2036 | ||||||||
| Net operating losses, state | $ | 6,988 | Various | ||||||||
| Net operating losses, foreign | $ | 809 | 2038 - Indefinite | ||||||||
Capital loss, federal | $ | 22,248 | 2029 | ||||||||
| Tax credits, federal | $ | 2,357 | Various | ||||||||
Tax credits, state | $ | 108 | Various | ||||||||
| Tax credits, foreign | $ | 362 | Various | ||||||||
Management has not considered future projections of income in this analysis due to the Company’s history of losses. The Company has determined that it is more likely than not that a portion of the deferred tax assets will not be realized and has recorded a valuation allowance of $64.6 million and $64.9 million as of December 31, 2025 and 2024, respectively, against the deferred tax assets. If the Company’s assumptions change and we determine that we will be able to realize these deferred tax assets, the tax benefits related to
any reversal of the valuation allowance on deferred tax assets as of December 31, 2025, will be accounted for as follows: $64.2 million will be recognized as a reduction of income tax expense and $0.4 million will be recorded as an increase in equity.
A reconciliation of our valuation allowance on deferred tax assets is as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Balance at beginning of period | $ | 64,870 | $ | 51,904 | |||||||
| Additions to valuation allowance | 2,931 | 12,992 | |||||||||
Reductions recorded from sale of business | (3,254) | (541) | |||||||||
| Additions recorded as a decrease in equity | 396 | 771 | |||||||||
| Reductions recorded as an increase in equity | (358) | (256) | |||||||||
| Balance at end of period | $ | 64,585 | $ | 64,870 | |||||||
The Company files income tax returns in the U.S. federal jurisdiction, Colorado, various other state jurisdictions, Canada, Jordan, the United Kingdom, Australia and New Zealand. The years open for audit vary depending on the tax jurisdiction. In the U.S., the Company's federal tax returns for the years before 2022 (year ended December 31, 2022) are no longer subject to audit. The net operating losses utilized during the open periods from select years prior to 2022 are subject to examination. The foreign jurisdictions statutes vary but are generally four years from assessment of the return.
While management believes we have adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from our accrued positions as a result of uncertain and complex application of tax regulations. Additionally, the recognition and measurement of certain tax benefits includes estimates and judgment by management and inherently includes subjectivity. Accordingly, additional provision on federal, state and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Balance at beginning of period | $ | 550 | $ | 531 | |||||||
| Gross additions based on tax positions related to the current year | 617 | 57 | |||||||||
Gross reductions based on tax positions related to prior years | — | (38) | |||||||||
| Balance at end of period | $ | 1,167 | $ | 550 | |||||||
As of December 31, 2025 and 2024, unrecognized tax benefits of $1.2 million and $0.6 million, respectively, were recorded in other long-term liabilities, which would impact the annual effective tax rate if recognized. The Company recognizes interest and penalties, if any, related to unrecognized tax positions in the provision for income taxes in the accompanying consolidated statements of operations and comprehensive income (loss).
The Company, through its former foreign subsidiary Alnashmi Digital Marketing, LLC, provided exported technology services that were exempt from income tax through December 31, 2025 under Article (9/A/4) of Regulation No. 106 of the 2016 Regulations. Alnashmi Digital Marketing, LLC was sold as part of the Company’s marketing technology solutions disposition in 2025 and its operating results, including the related tax effects of the tax holiday, are reported within discontinued operations in the accompanying consolidated statements of operations and comprehensive income (loss). The approximate dollar value of tax expense related to the tax holiday was nil and $0.1 million as of December 31, 2025 and 2024, respectively.
During the year ended December 31, 2024, we sold Fitness Solutions as discussed in Note 3. Acquisition and Dispositions, which resulted in an income tax benefit.
During the year ended December 31, 2025, we sold marketing technology solutions as discussed in Note 3. Acquisition and Dispositions, which resulted in an income tax benefit.
The tables below represent a reconciliation of the statutory federal income tax expense (benefit) to income tax expense. The Company has adopted the guidance in ASU 2023-09 on a prospective basis (see Note 2. Summary of Significant Accounting Policies). The
following table reflects the rate reconciliation for the current year under the new guidance. Rate reconciliations for the years ending December 31, 2024 and 2023 are presented below the current year table under the prior guidance.
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| (in thousands, except percentages) | |||||||||||
Provision for income taxes U.S. statutory rate | $ | 4,443 | 21.00% | ||||||||
| Change in income tax resulting from: | |||||||||||
State and local income tax, net of federal income tax effect (1) | (238) | (1.12) | |||||||||
Foreign tax effects | |||||||||||
New Zealand | |||||||||||
Change in valuation allowance | (2,377) | (11.23) | |||||||||
Other | 119 | 0.56 | |||||||||
Canada | |||||||||||
Rate differential | 445 | 2.10 | |||||||||
Other | 65 | 0.31 | |||||||||
Australia | |||||||||||
Rate differential | 273 | 1.29 | |||||||||
Other | 4 | 0.02 | |||||||||
Other | 342 | 1.62 | |||||||||
Effect of cross-border tax laws | |||||||||||
Foreign branch income | 374 | 1.77 | |||||||||
Other | 82 | 0.39 | |||||||||
Nontaxable or nondeductible items | |||||||||||
Nondeductible compensation | 2,704 | 12.78 | |||||||||
Sale of marketing technology solutions | (7,976) | (37.70) | |||||||||
| Other | 809 | 3.82 | |||||||||
Tax credits | |||||||||||
Federal research and development tax credit | (2,573) | (12.16) | |||||||||
Foreign tax credit | (240) | (1.13) | |||||||||
| Change in valuation allowance | 5,982 | 28.27 | |||||||||
Changes in unrecognized tax benefits | 617 | 2.92 | |||||||||
| Other | 100 | 0.47 | |||||||||
Income tax expense | $ | 2,955 | 13.98 | % | |||||||
(1) The tax effect in this category primarily reflects state and local taxes in Florida and Texas. | |||||||||||
| Year Ended December 31, | |||||||||||||||||||||||
| 2024 | 2023 | ||||||||||||||||||||||
| (in thousands, except percentages) | |||||||||||||||||||||||
| Benefit at U.S. statutory rate | $ | (1,965) | 21.00% | $ | (10,359) | 21.00% | |||||||||||||||||
| Change in income tax resulting from: | |||||||||||||||||||||||
| State income benefit, net of federal benefit | (1,715) | 18.33 | (999) | 2.03 | |||||||||||||||||||
| Stock-based compensation | 416 | (4.45) | 2,513 | (5.09) | |||||||||||||||||||
| Nondeductible compensation | 1,863 | (19.91) | 876 | (1.78) | |||||||||||||||||||
| Nondeductible transaction costs | — | — | 61 | (0.12) | |||||||||||||||||||
| Foreign rate differential | 1,484 | (15.86) | 55 | (0.11) | |||||||||||||||||||
| Change in valuation allowance | 14,082 | (150.48) | 6,595 | (13.37) | |||||||||||||||||||
| Intellectual property migration | — | — | — | — | |||||||||||||||||||
Change in deferred state income tax rate | 633 | (6.76) | 193 | (0.39) | |||||||||||||||||||
US taxation of foreign income | 13 | (0.14) | 1,512 | (3.07) | |||||||||||||||||||
Goodwill impairment | 724 | (7.74) | — | — | |||||||||||||||||||
Sale of Fitness Solutions | (9,424) | 100.71 | — | — | |||||||||||||||||||
Tax credits | (526) | 5.62 | — | — | |||||||||||||||||||
| Other | 254 | (2.72) | 930 | (1.89) | |||||||||||||||||||
Income tax expense | $ | 5,839 | (62.40) | % | $ | 1,377 | (2.79) | % | |||||||||||||||
Net cash paid for income taxes consisted of the following:
| Year Ended December 31, | |||||
| 2025 | |||||
| (in thousands) | |||||
| Federal | $ | 123 | |||
| State | |||||
Florida | 447 | ||||
Texas | 249 | ||||
Other | 410 | ||||
Total state | 1,106 | ||||
Foreign | |||||
Canada | 1,672 | ||||
Other | 191 | ||||
Total foreign | 1,863 | ||||
Total cash paid | $ | 3,092 | |||
On July 4, 2025, President Trump signed H.R. 1, the “One Big Beautiful Bill Act,” into law. The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses beginning in 2025, including the restoration of immediate expensing of domestic R&D expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. The Act also includes certain changes to the US taxation of foreign activity, including changes to foreign tax credits, global intangible low-taxed income, foreign-derived intangible income, and base erosion and anti-abuse tax, amongst other changes. The Company’s tax provision for the year ended December 31, 2025 includes the estimated impact of the Act. The Company will continue to evaluate the impact for future periods.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 14, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 15, 2022 | |
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.