InterDigital, Inc.IDCC
InterDigital, Inc. Income Taxes Disclosure
TAXES
Our domestic/foreign pre-tax income consists of the following components for 2025, 2024, and 2023 (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Pre-Tax Income by Jurisdiction | |||||||||||||||||
| Domestic | $ | 451,214 | $ | 333,983 | $ | 242,780 | |||||||||||
| Foreign | 18,218 | 95,433 | (8,170) | ||||||||||||||
| Total | $ | 469,432 | $ | 429,416 | $ | 234,610 | |||||||||||
Our income tax provision consists of the following components for 2025, 2024, and 2023 (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | (17,743) | $ | 36,977 | $ | 45,816 | |||||||||||
| State | 161 | 687 | (229) | ||||||||||||||
| Foreign source withholding tax | 93,852 | 32,578 | 12,444 | ||||||||||||||
| 76,270 | 70,242 | 58,031 | |||||||||||||||
| Deferred | |||||||||||||||||
| Federal | (104,057) | (38,193) | (41,922) | ||||||||||||||
| State | (133) | (144) | 615 | ||||||||||||||
| Foreign | — | 9,760 | (9,759) | ||||||||||||||
| Foreign source withholding tax | 90,708 | 29,137 | 16,592 | ||||||||||||||
| (13,482) | 560 | (34,474) | |||||||||||||||
| Total | $ | 62,788 | $ | 70,802 | $ | 23,557 | |||||||||||
The deferred tax assets and liabilities were comprised of the following components at December 31, 2025 and 2024 (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net operating losses | $ | 91,486 | $ | 95,751 | |||||||
| Capitalized research and development | 40,438 | 29,432 | |||||||||
| Deferred revenue, net | 36,813 | 46,073 | |||||||||
| Amortization and depreciation | 23,097 | 22,707 | |||||||||
Tax credit carryforward | 10,737 | — | |||||||||
| Debt amortization | 5,863 | 9,334 | |||||||||
| Other | 24,505 | 22,797 | |||||||||
Deferred tax asset | 232,939 | 226,094 | |||||||||
| Less: valuation allowance | (89,190) | (95,465) | |||||||||
| Net deferred tax asset | 143,749 | 130,629 | |||||||||
Other | (2,200) | (2,475) | |||||||||
Deferred tax liability | (2,200) | (2,475) | |||||||||
Net deferred tax asset | $ | 141,549 | $ | 128,154 | |||||||
The following is a reconciliation of effective tax rates at the federal statutory tax rate recorded by the Company for the years ended December 31, 2025, 2024, and 2023:
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| U.S. federal statutory tax rate | $ | 98,553 | 21.0 | % | $ | 90,148 | 21.0 | % | $ | 49,268 | 21.0 | % | ||||||||||||||
State and local income taxes, net of federal income tax effect (a) | (6) | — | % | 399 | 0.1 | % | 434 | 0.2 | % | |||||||||||||||||
| Foreign Tax Effects | ||||||||||||||||||||||||||
| France | ||||||||||||||||||||||||||
| Changes in valuation allowances | (1,157) | (0.3) | % | (2,764) | (0.6) | % | (5,222) | (2.2) | % | |||||||||||||||||
| Other | (947) | (0.2) | % | 2,140 | 0.5 | % | (2,404) | (1.0) | % | |||||||||||||||||
| Korea | ||||||||||||||||||||||||||
| Foreign withholding taxes | 63,811 | 13.6 | % | 10,456 | 2.4 | % | 4,591 | 2.0 | % | |||||||||||||||||
| China | ||||||||||||||||||||||||||
| Foreign withholding taxes | 25,624 | 5.4 | % | 17,061 | 4.0 | % | 9,965 | 4.2 | % | |||||||||||||||||
Other | 136 | — | % | 23 | — | % | (6) | — | % | |||||||||||||||||
| Other foreign jurisdictions | 799 | 0.2 | % | 1,246 | 0.3 | % | 2,187 | 0.9 | % | |||||||||||||||||
| Effect of Cross-Border Tax Laws | ||||||||||||||||||||||||||
| Global Intangible Low-Taxed Income | 777 | 0.2 | % | 5,095 | 1.2 | % | 812 | 0.3 | % | |||||||||||||||||
| Foreign-Derived Intangible Income | (30,308) | (6.5) | % | (23,042) | (5.4) | % | (16,734) | (7.1) | % | |||||||||||||||||
| Foreign tax credit on withholding taxes | (90,708) | (19.3) | % | (29,137) | (6.8) | % | (16,593) | (7.1) | % | |||||||||||||||||
Other | 1,754 | 0.4 | % | — | — | % | — | — | % | |||||||||||||||||
| Tax Credits | ||||||||||||||||||||||||||
| Research and development tax credit | (2,354) | (0.5) | % | (1,673) | (0.4) | % | (1,313) | (0.6) | % | |||||||||||||||||
| Change in valuation allowance | — | — | % | (8) | — | % | — | — | % | |||||||||||||||||
| Nontaxable or Nondeductible Items | ||||||||||||||||||||||||||
| Share-based compensation | (15,036) | (3.2) | % | (4,448) | (1.0) | % | (2,973) | (1.3) | % | |||||||||||||||||
| Non-deductible officers' compensation | 10,755 | 2.3 | % | 6,612 | 1.5 | % | 3,260 | 1.4 | % | |||||||||||||||||
| Other | 1,292 | 0.3 | % | 576 | 0.1 | % | 1,591 | 0.7 | % | |||||||||||||||||
| Changes in unrecognized tax benefits | 436 | 0.1 | % | 419 | 0.1 | % | (889) | (0.4) | % | |||||||||||||||||
| Other | (633) | (0.1) | % | (2,301) | (0.5) | % | (2,417) | (1.0) | % | |||||||||||||||||
Total tax provision | $ | 62,788 | 13.4 | % | $ | 70,802 | 16.5 | % | $ | 23,557 | 10.0 | % | ||||||||||||||
(a)State taxes in Massachusetts & Delaware made up the majority (greater than 50%) of the tax effect in this category
Income Tax Reform
The One Big Beautiful Bill Act (the “OBBBA”) was signed into law on July 4th, 2025. The OBBBA contains significant tax law changes with various effective dates affecting business taxpayers. Among the tax law changes that will impact the Company relate to the timing and amount of certain tax deductions including FDII, depreciation expense, R&D expenditures and interest expense. The tax law changes did not have an impact on the tax provision in 2025.
Valuation Allowances and Net Operating Losses
We establish a valuation allowance for any portion of our deferred tax assets for which management believes it is more likely than not that we will be unable to utilize the assets to offset future taxes. Given the binary nature of our business, at this time we believe it is more likely than not that the majority of our state net operating losses and net operating losses in certain subsidiaries in France, as well as our non-wholly owned subsidiaries in the United States and United Kingdom will not be utilized; therefore we have maintained a near full valuation allowance against our state, French and United Kingdom net operating losses as of December 31, 2025. We also maintain a valuation allowance against certain temporary differences other than the net operating losses in these jurisdictions.
At December 31, 2025, we had no U.S net operating loss carryforwards and non-U.S. net operating loss carryforwards amounting to $89.7 million which can be indefinitely carried forward under French statutes. In addition, we had U.S. state net operating loss carryforwards of $1.3 billion, of which $27.7 million can be indefinitely carried forward, while the remaining $1.3 billion will expire in varying amounts from 2026 to 2045. We had $10.1 million of foreign tax credit carried forward that will expire in 2035 and $0.7 million of R&D credit carried forward that will expire in 2045.
The Company recognizes deferred tax balances related to the undistributed earnings of subsidiaries when it expects that it will recover those undistributed earnings in a taxable manner, such as through receipt of dividends or sale of the investments. On December 31, 2025, the Company does not have distributable earnings in foreign subsidiaries that would be subject to deferred taxes.
Uncertain Income Tax Positions
As of December 31, 2025, 2024 and 2023, we had $13.5 million, $13.8 million and $14.4 million, respectively, of unrecognized tax benefits that, if recognized, would impact the Company's effective tax rate. The total amount of unrecognized tax benefits could change within the next twelve months for a number of reasons including audit settlements, tax examination activities and the recognition and measurement considerations under this guidance.
During 2025, 2024 and 2023, we reduced the reserve previously established for the amended returns by $0.7 million for the benefit available in the current year had it not been included on the amended returns. In addition, during 2023 we reduced the previously recorded reserve for withholding tax by $1.1 million due to favorable guidance from the taxing authorities in the United States.
The following is a roll forward of our total gross unrecognized tax benefits, which if reversed would impact the effective tax rate, for the fiscal years 2025 through 2023 (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance as of January 1 | $ | 13,848 | $ | 14,385 | $ | 16,052 | |||||||||||
| Tax positions related to current year: | |||||||||||||||||
| Additions | 366 | 165 | 91 | ||||||||||||||
| Tax positions related to prior years: | |||||||||||||||||
| Additions | — | — | — | ||||||||||||||
| Reductions | (695) | (702) | (1,758) | ||||||||||||||
| Balance as of December 31 | $ | 13,519 | $ | 13,848 | $ | 14,385 | |||||||||||
Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense.
The Company and its subsidiaries are subject to United States federal income tax, foreign income and withholding taxes and income taxes from multiple state jurisdictions. Our federal income tax returns for 2006 to the present, with the exception of 2011 and 2012, are currently open and will not close until the respective statutes of limitations have expired. The 2014, 2015 and 2018-2020 Federal income tax returns are currently under audit by the IRS. The statutes of limitations generally expire three years following the filing of the return or in some cases three years following the utilization or expiration of net operating loss carry forwards. The statute of limitations applicable to our open federal returns will expire at the end of 2027. The Company is subject to French corporate income tax on certain subsidiaries. The statute of limitations applicable to our open French returns will expire in 2026. Excluding the Korea Competent Authority Proceeding and the Finland Competent Authority Proceeding described in the section below, specific tax treaty procedures remain open for certain jurisdictions for 2014 to the present. Many of our subsidiaries have filed state income tax returns on a separate company basis. To the extent these subsidiaries have unexpired net operating losses, their related state income tax returns remain open. These returns have been open for varying periods, some exceeding ten years. The total amount of state net operating losses is $1.3 billion.
Foreign Taxes
We pay foreign source withholding taxes on patent license royalties when applicable. We apply foreign source withholding tax payments against our United States federal income tax obligations to the extent we have foreign source income to support these credits. In 2025, 2024 and 2023, we paid $91.5 million, $23.3 million and $12.0 million in foreign source withholding taxes, respectively, and applied these payments as credits against our United States federal tax obligation.
Between 2014 and 2025, we paid approximately $205.2 million in foreign taxes to foreign governments that have tax treaties with the U.S., for which we have claimed foreign tax credits against our U.S. tax obligations, and for which the tax treaty procedures are still open. It is possible that as a result of tax treaty procedures, the U.S. government may reach an agreement with the related foreign governments that will result in a partial refund of foreign taxes paid with a related reduction in our foreign tax credits. Due to foreign currency fluctuations, any such agreement could result in foreign currency gain or loss.
On November 8, 2019, the Company received notification that its request for competent authority pertaining to Article 25 (Mutual Agreement Procedure) of the United States-Republic of Finland Income Tax Convention had been reviewed by the IRS and an agreement has been reached (the “Finland Competent Authority Proceeding”). As a result of this agreement, the Company does not anticipate any tax consequences.
In France, where we have substantial operations, we benefit from research tax credits applicable to French technology companies, including the Crédit Impôt Recherche ("CIR"). While we have historically benefited from the CIR, the French government has recently challenged our eligibility for portions of the CIR that they previously accepted. The Company received notification from the French Tax Authorities that the CIR credit on patent costs has been rejected for tax years 2019 and 2020. The Company has filed petitions in the Lower Court of Paris to litigate this matter. Between 2019 and 2025, the Company has recorded benefits totaling approximately $29 million for CIR credit on patent related costs.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 5, 2026 | Showing above |
| 2024 | Feb 6, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 15, 2023 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 18, 2016 | |
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.