Shift4 Payments, Inc.FOUR

Shift4 Payments, Inc. Income Taxes Disclosure

10-KFiled Feb 27, 20269 min read
Income Taxes
The Company holds an economic interest in Shift4 Payments, LLC and consolidates its financial position and results. The remaining ownership of Shift4 Payments, LLC not held by the Company is considered a noncontrolling interest. Shift4 Payments, LLC is treated as a partnership for income tax reporting and its members, including the Company, are liable for federal, state, and local income taxes based on their share of the LLC’s taxable income. In addition, Shift4 Payments, LLC wholly owns various U.S. and foreign subsidiaries which are taxed as corporations for tax reporting. Taxable income or loss from these subsidiaries is not passed through to Shift4 Payments, LLC. Instead, such taxable income or loss is taxed at the corporate level subject to the prevailing corporate tax rates.
The following table sets forth the Company’s income (loss) before income taxes for its domestic and foreign operations for the years ended December 31, 2025, 2024, and 2023:
December 31,
202520242023
Domestic$109 $(61)$110 
Foreign86 60 10 
Income (loss) before income taxes$195 $(1)$120 
Components of income tax benefit (provision) consist of the following:
Year Ended December 31,
202520242023
Current
Federal$(2)$(11)$(1)
State(6)(4)— 
Foreign(33)(11)(4)
Total current income tax benefit (provision)(41)(26)(5)
Deferred
Federal(24)252 5 
State1 66 2 
Foreign16 4 1 
Total deferred income tax benefit (provision)(7)322 8 
Total income tax benefit (provision)$(48)$296 $3 
A reconciliation of the U.S. statutory income tax rate to the Company’s effective income tax rate is as follows:
Year Ended December 31, 2025
AmountPercent
US federal statutory tax rate$41 21.0%
State and local income taxes, net of federal income tax effect (a)4 2.1%
Foreign tax effects
Switzerland
Statutory rate difference between Switzerland and the United States and local income taxes(6)(3.1%)
Other2 1.0%
Malta
Statutory rate difference between Malta and the United States(2)(1.0%)
United Kingdom
Effects of cross-border tax laws5 2.6%
Other(1)(0.5%)
Germany
Nontaxable or nondeductible items(4)(2.1%)
Other1 0.5%
Other5 2.6%
Tax credits
Research and development tax credits(1)(0.5%)
Changes in valuation allowances(13)(6.7%)
Nontaxable or nondeductible items
Limitation on executive compensation6 3.1%
Share-based payment awards(3)(1.5%)
Other(2)(1.0%)
Other adjustments
Income taxed to owners of NCI(6)(3.1%)
Investment in partnership24 12.3%
Legal entity restructuring(7)(3.6%)
Other5 2.6%
Total tax expense / effective tax rate$48 24.7%
(a)    State taxes in the following jurisdictions made up the majority (greater than 50 percent) of the tax effect in this category: California, Florida, New York, and Pennsylvania.
As previously disclosed for the years ended December 31, 2024 and 2023, the following is a reconciliation of the U.S. statutory income tax rate to the Company's effective income tax rate:
Year Ended December 31,
20242023
Federal statutory rate21.0%21.0%
Noncontrolling interests/effect of pass-through entities (LLC income (loss))850.0%(6.5%)
State income taxes, net of federal benefit(250.0%)25.9%
Permanent items106.3%2.1%
Impacts of recording Tax Receivable Agreement262.5%—%
Change in fair value of contingent consideration—%0.9%
Foreign rate differential450.0%0.4%
Change in valuation allowance18,100.0%(47.4%)
Equity-based compensation6.3 %0.2 %
Research and development tax credits93.7%—%
U.S. taxation of worldwide subsidiaries, net of foreign tax credits(1,137.5%)—%
Other4.0%0.6%
Effective income tax rate18,506.3%(2.8%)
The following table presents supplemental information related to income taxes paid (net of refunds received):
Year Ended December 31, 2025
US federal$13 
US state and local:
Other8 
Foreign:
Japan13 
Italy7 
Other22 
Total cash taxes paid, net of refunds received$63 
Details of the Company’s deferred tax assets and liabilities are as follows:
December 31,
20252024
Deferred tax assets:
Investment in Shift4 Payments, LLC$453 $465 
Net operating loss and tax credits carryforward176 84 
Equity-based compensation10 8 
Right-of-use liabilities5 6 
Accrued expenses19 2 
Interest expense carryforwards103 — 
Other14 19 
Subtotal780 584 
Valuation allowance(330)(137)
Total deferred tax assets450 447 
Deferred tax liabilities:
Fixed assets(2)(1)
Intangible assets(519)(101)
Right-of-use assets(4)(5)
Other liabilities(5)(4)
Total deferred tax liabilities(530)(111)
Net deferred tax asset (liability)$(80)$336 
The Company has a deferred tax asset for the difference between the financial reporting and the tax basis of its investment in Shift4 Payments, LLC. The deferred tax asset above considers the iterative impact of the Tax Receivable Agreement (“TRA”) liability.
During 2024, management assessed the realizability of deferred tax assets and concluded that it is more likely than not that its deferred tax assets will be realized and that a full valuation allowance is no longer required. The assessment included the fact that as of December 31, 2024, the Company is no longer in a three-year cumulative loss position and is projecting sufficient income in future periods to realize its deferred tax assets. The Company continues to maintain a valuation allowance on the portion of deferred tax assets that require capital gains income because there are no current projections of capital gains income at this time.
Accordingly, a tax benefit of $289 million was recognized during the year ended December 31, 2024 relating to the release of the valuation allowance associated with the Company’s deferred tax assets and recording additional deferred tax assets related to the TRA liability.
As of December 31, 2025, the Company has $276 million federal and $328 million state net operating loss carryforwards, which are expected to expire on various dates as follows. The federal net operating loss carryforwards of $214 million generated in tax years after 2017 have an unlimited carryforward period, while the remaining $63 million generated in earlier tax years have a twenty year carryforward and will expire if unused between 2036 and 2037. The Company’s state net operating loss carryforwards are available to reduce future taxable income, which expire at various times through 2042.
Uncertain Tax Positions
The effects of uncertain tax positions are recognized in the consolidated financial statements if these positions meet a “more-likely-than-not” threshold. For those uncertain tax positions that are recognized in the consolidated financial statements, liabilities are established to reflect the portion of those positions it cannot conclude “more-likely-than-not” to be realized upon ultimate settlement. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits within “Income tax benefit (expense)” in the Company’s Consolidated Statements of Operations. Accrued interest and penalties, if any, are included within “Deferred tax liability” in the Company’s Consolidated Balance Sheets. As of December 31, 2025 and 2024, $12 million and $10 million, respectively, of uncertain tax positions were recognized within “Other noncurrent liabilities” in the Company’s Consolidated Balance Sheets, which were primarily recognized in conjunction with acquisitions.
Below is a tabular reconciliation of the total amounts of unrecognized tax benefits:
Year Ended December 31,
202520242023
Beginning balance$10 $5 $8 
Increase related to current year tax positions3 — 1 
Increase related to prior year tax positions1 
Increase attributable to positions acquired through business combinations— 6 1 
Decrease attributable to measurement period adjustments— — (5)
Decrease attributable to statute of limitation expirations(2)(1)— 
Ending balance$12 $10 $5 
Total amount of interest and penalties recognized in the
Consolidated Statements of Operations		$1 $1 $1 
Total amount of interest and penalties recognized in the
Consolidated Balance Sheets		$2 $2 $2 
All of the unrecognized tax benefits reflected in the above table would affect the effective tax rate, if recognized.
The Company files income tax returns as required by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company may be subject to examination by federal and certain state and local tax authorities. As of December 31, 2025, the Company’s federal and state and local income tax years 2023 through 2025 remain open and are subject to examination. We are currently under examination by Canadian tax authorities for the 2015 to 2018 tax years and Israeli tax authorities for 2019 to 2021 tax years.
The Company's open tax years by major taxing jurisdictions are as follows:
JurisdictionOpen Tax Years
United States2022 - 2025
Australia2021 - 2025
France2022 - 2025
Germany2021 - 2025
Israel2019 - 2025
Italy2019 - 2025
Japan2022 - 2025
Malta2020 - 2025
Switzerland2020 - 2025
Tax Receivable Agreement
The Company expects to obtain an increase in its share of the tax basis in the net assets of Shift4 Payments, LLC as LLC interests are redeemed from or exchanged by the Continuing Equity Owners, at the option of the Company, determined solely by the Company’s independent directors. The Company intends to treat any redemptions and exchanges of LLC interests as direct purchases of LLC Interests for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that it would otherwise pay in the future to various tax authorities. In connection with the Company’s initial public offering in June 2020 and certain organizational transactions that the Company effected in connection with it, the Company entered into the TRA with the Continuing Equity Owners.
The TRA provided for certain payments by Shift4 Payments, Inc. to the Continuing Equity Owners. In connection with the Simplification Transactions, the Company is relieved of future TRA payments, as Rook assigned all of its rights and benefits under the TRA to the Company. The Company is still obligated for payments to Searchlight under the TRA of 85% of the amount of any tax benefits the Company realizes as a result of (i) increases in the Company’s share of the tax basis in the net assets of Shift4 Payments, LLC resulting from prior redemptions or exchanges of LLC Interests, (ii) tax basis increases attributable to payments made under the TRA, and (iii) deductions attributable to imputed interest pursuant to the TRA. The Company expects to benefit from the remaining 15% of any of cash savings that it realizes.
As of December 31, 2025 and 2024, the Company recognized a TRA liability of $369 million and $366 million, respectively, after concluding it was probable that, based on estimates of future taxable income, the Company will realize tax benefits associated with the TRA. A payment of $1 million and $2 million was made to the Continuing Equity Owners pursuant to the TRA during the year ended December 31, 2025 and 2024, respectively. The estimation of liability under the TRA is by its nature imprecise and subject to significant assumptions regarding the amount, character, and timing of the taxable income of Shift4 Payments, Inc. in the future. Changes in tax laws or rates could also materially impact the estimated liability.
On February 7, 2026, the Company entered into a Transaction Agreement to effect, among other things, the Up-C Collapse via a taxable exchange and the assignment and waiver of Rook’s rights under the TRA to the Company. The impact of this transaction on the TRA liability will be accounted for in the first quarter of 2026.
Developments in Tax Law
In December 2021, the Organisation for Economic Co-operation and Development (“OECD”) issued model rules for a new global minimum tax framework (“Pillar Two”), and various governments around the world have passed, or are in the process of passing, legislation on this. Certain Pillar Two rules started taking effect in 2024, depending on whether a particular jurisdiction had integrated the legislation into local law. The Company is continuing to monitor these impacts on its operating footprint and estimated an increase in income tax expense associated with jurisdictions that have implemented an Income Inclusion Rule (“IRR”) or a Qualifying Domestic Minimum Top-up Tax (“QDMTT”) for the twelve months ended December 31, 2025.
Furthermore, on January 5, 2026, the OECD released a comprehensive package for a “side-by-side arrangement” (“SbS”) with respect to Pillar Two. This package, effective for fiscal years beginning on or after January 1, 2026, implements a SbS Safe Harbor. The SbS Safe Harbor deems top-up tax as zero for IIR and Undertaxed Profits Rule (“UTPR”) purposes for eligible U.S.-parented groups, provided the ultimate parent entity's jurisdiction (currently only the United States) maintains a Qualified SbS Regime with an eligible domestic and worldwide tax system that credits Qualified Domestic Minimum Top-up Taxes (QDMTTs) equivalently to other covered taxes. We will continue to monitor U.S. and international legislative developments, including further announcements on the side-by-side arrangement, to assess any potential impacts on our operations.
On July 4, 2025, the One Big Beautiful Bill (“OBBB”) Act was signed into law, which includes several changes to corporate taxation in the United States. The Company has applied the impacts of the tax law change into our financial statements and noted no material changes to overall tax expense in 2025.

Historical Timeline

Fiscal YearFiled
2025Feb 27, 2026Showing above
2024Feb 19, 2025
2023Feb 29, 2024
2022Mar 1, 2023
2021Mar 1, 2022
2020Mar 8, 2021

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.

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