Galaxy Digital Inc.GLXY
Galaxy Digital Inc. Income Taxes Disclosure
INCOME TAXES
GDI is an LP unit holder and sole GP of GDH LP, which is the operating partnership that conducts all of the Company's business and is treated as a partnership for U.S. federal tax purposes. As the Company has a controlling financial interest in GDH LP, the Company consolidates GDH LP’s financial results. As a partnership, GDH LP is not subject to most applicable U.S. federal, state, and local income taxes. GDH LP is subject to entity level New York City unincorporated business tax (“UBT”) on income allocated or apportioned to New York City while GDH LP’s foreign corporate subsidiaries are generally subject to taxes in the foreign jurisdictions where they are located. Any taxable income or loss generated by GDH LP is passed through to and reported by its partners, including the Company, based on their respective allocable share. GDI is taxed as a corporation and pays applicable corporate federal, state, and local taxes on income allocated to it from GDH LP, as well as any stand-alone income or loss generated by GDI. As the Company consolidates GDH LP but does not own all of the economic interest in GDH LP, the Company presents a noncontrolling interest related to the economic ownership of GDH LP held by its Class B common stockholders. The Company will not be taxed on the earnings attributed to the non-controlling interests.
The components of income (loss) before income taxes were attributable to the following regions (in thousands):
(in thousands) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | |||||||||||||||||
Domestic | $ | (359,322) | $ | (181,051) | $ | (98,293) | ||||||||||||||
Foreign | 88,643 | 510,834 | 342,721 | |||||||||||||||||
Total income (loss) before income taxes | $ | (270,679) | $ | 329,783 | $ | 244,428 | ||||||||||||||
Provision for (benefit from) income taxes consisted of the following (in thousands):
(in thousands) | Year ended December 31, 2025 | Year ended December 31, 2024 | Year ended December 31, 2023 | |||||||||||||||||
Current | ||||||||||||||||||||
Federal | $ | (43,862) | $ | — | $ | — | ||||||||||||||
State | (2,488) | (6,270) | 1,920 | |||||||||||||||||
Foreign | 3,107 | (2,283) | 7,457 | |||||||||||||||||
Total Current | (43,243) | (8,553) | 9,377 | |||||||||||||||||
Deferred | ||||||||||||||||||||
Federal | 19,713 | (1,333) | (251) | |||||||||||||||||
State | 1,932 | 6,222 | 3,381 | |||||||||||||||||
Foreign | (7,732) | (13,275) | 3,407 | |||||||||||||||||
Total Deferred | 13,913 | (8,386) | 6,537 | |||||||||||||||||
Total provision for (benefit from) income taxes | $ | (29,330) | $ | (16,939) | $ | 15,914 | ||||||||||||||
The effective income tax rate for the year ended December 31, 2025 differs from the statutory federal income tax rate as follows (in thousands, except percentages):
(in thousands) | Year ended December 31, 2025 | |||||||||||||
$ | (56,843) | 21.00 | % | |||||||||||
State and local income taxes, net of federal benefit (1) | (6,573) | 2.43 | % | |||||||||||
Foreign tax effects | (4,625) | 1.71 | % | |||||||||||
Non-taxable or non-deductible items: | ||||||||||||||
Share based compensation | (13,589) | 5.02 | % | |||||||||||
Other nondeductible items | (529) | 0.20 | % | |||||||||||
Other adjustments | ||||||||||||||
Other adjustments | (8,676) | 3.21 | % | |||||||||||
Noncontrolling interest | 35,580 | (13.14) | % | |||||||||||
Impact of reorganization | 25,925 | (9.58) | % | |||||||||||
Total tax provision and effective tax rate | $ | (29,330) | 10.84 | % | ||||||||||
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(1) State and Local taxes in New York, including New York City, make up a majority (greater than 50%) of the tax effect in this category.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09 and the Reorganization Transactions, the effective income tax rate differs from the Cayman statutory income tax rate of 0.0% as follows:
(in thousands) | Year Ended December 31, 2024 | Year Ended December 31, 2023 | ||||||||||||||||||||||||
Earnings before income taxes | $ | 329,783 | $ | 244,428 | ||||||||||||||||||||||
Cayman statutory tax rate | — | — | ||||||||||||||||||||||||
Increase (decrease) in the income tax rate resulting from: | ||||||||||||||||||||||||||
Foreign rate differential on entity level partnership tax | (1,381) | (0.42) | % | 5,050 | 2.07 | % | ||||||||||||||||||||
Foreign subsidiaries taxed at different rates | (15,558) | (4.72) | % | 10,864 | 4.44 | % | ||||||||||||||||||||
Total income tax expense and effective income tax rate | $ | (16,939) | (5.14) | % | $ | 15,914 | 6.51 | % | ||||||||||||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities consisted of the following (in thousands):
(in thousands) | Year ended December 31, 2025 | Year ended December 31, 2024 | ||||||||||||
Deferred Tax Assets | ||||||||||||||
Net operating loss carryforward | $ | 208,121 | $ | 68,432 | ||||||||||
Other | 1,600 | 6,244 | ||||||||||||
Total Deferred Tax Assets | 209,721 | 74,676 | ||||||||||||
Deferred Tax Liabilities | — | |||||||||||||
Investment basis differences/Net unrealized gains and losses | (29,857) | (52,557) | ||||||||||||
Other | — | (2,096) | ||||||||||||
Total Deferred Tax Liabilities | (29,857) | (54,653) | ||||||||||||
Net Deferred Tax Assets | $ | 179,864 | $ | 20,023 | ||||||||||
A valuation allowance is recorded when, based on the weight of all available evidence, management determines it is more likely than not that some portion or all of the deferred tax assets will not be realized. This analysis is complex and, amongst other factors, requires that management assess the likelihood that the Company and/or its subsidiaries will generate taxable earnings in future periods, in order to utilize its deferred tax assets. As of December 31, 2025 and 2024 the Company did not record a valuation allowance as it is more likely than not that all deferred tax assets will be fully realized.
Galaxy files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, Galaxy is subject to examination by federal and certain state, local and foreign tax authorities. The Company recognizes the effects of a tax position in the financial statements only if, as of the reporting date, it is “more likely than not” to be sustained based on its technical merits and their applicability to the facts and circumstances of the tax position. Neither the Company, nor any of its foreign corporate subsidiaries, are subject to income tax examination in any jurisdiction in which they operate for any years prior to 2020. As of December 31, 2025, the Company does not believe that there will be a significant change to the uncertain tax positions during the next 12 months. The Company recognized an income tax benefit of $6.9 million for previously accrued interest during the period ended December 31, 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.