Life360, Inc.LIF
Life360, Inc. Income Taxes Disclosure
14. Income Taxes
During the year ended December 31, 2025, the Company incurred $30.6 million of pre-tax net operating income in the U.S. and $2.0 million of pre-tax net operating income internationally.
The Provision for (benefit from) income taxes is composed of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Current | |||||||||||||||||
| State and local | $ | 181 | $ | (71) | $ | 616 | |||||||||||
Total current | 181 | (71) | 616 | ||||||||||||||
Deferred | |||||||||||||||||
| Federal | (104,351) | — | — | ||||||||||||||
| State and local | (14,003) | — | — | ||||||||||||||
Total deferred | (118,354) | — | — | ||||||||||||||
Provision for (benefit from) income taxes | $ | (118,173) | $ | (71) | $ | 616 | |||||||||||
The reconciliation of the Company’s effective tax to the U.S. statutory federal income tax is as follows:
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
(in thousands) | Percent | (in thousands) | Percent | (in thousands) | Percent | |||||||||||||||||||||
Statutory federal income tax | $ | 6,858 | 21 | % | $ | (972) | 21 | % | $ | (5,640) | 21 | % | ||||||||||||||
State and local income taxes, net of federal income tax effect (1) | (10,264) | (31) | % | 114 | (2) | % | 338 | (1) | % | |||||||||||||||||
Tax credits | ||||||||||||||||||||||||||
Research & development tax credits | (2,915) | (9) | % | (4,805) | 104 | % | (2,296) | 9 | % | |||||||||||||||||
Change in valuation allowance | (87,509) | (269) | % | 11,936 | (259) | % | 4,475 | (18) | % | |||||||||||||||||
Nondeductible items | ||||||||||||||||||||||||||
Stock issuance cost | — | % | 1,178 | (25) | % | — | % | |||||||||||||||||||
Stock-based compensation | (30,207) | (92) | % | (12,641) | 273 | % | (267) | 1 | % | |||||||||||||||||
Other permanent differences | 1,069 | 3 | % | 157 | (3) | % | 239 | (1) | % | |||||||||||||||||
Officer compensation - 162(m) | 7,794 | 24 | % | 4,701 | (102) | % | 2,666 | (10) | % | |||||||||||||||||
Fair value adjustment | — | % | 154 | (3) | % | 181 | (1) | % | ||||||||||||||||||
Meals & entertainment | 80 | — | % | 53 | (1) | % | 72 | — | % | |||||||||||||||||
| Worldwide changes in unrecognized tax benefits | (3,079) | (9) | % | 54 | (1) | % | 909 | (3) | % | |||||||||||||||||
Foreign tax effects | ||||||||||||||||||||||||||
Canadian rate differential | 128 | — | % | 71 | (2) | % | 18 | — | % | |||||||||||||||||
Canadian SRED credit(2) | (406) | (1) | % | 1,065 | (23) | % | (704) | 3 | % | |||||||||||||||||
Canadian valuation allowance | 278 | 1 | % | (1,136) | 25 | % | 625 | (2) | % | |||||||||||||||||
Effective income tax | $ | (118,173) | (362) | % | $ | (71) | 2 | % | $ | 616 | (2) | % | ||||||||||||||
(1) The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include Illinois, California, New York, Georgia, Pennsylvania, and Tennessee.
(2) Canadian SRED credit refers to the Canadian Scientific Research and Experimental Development tax incentive program.
The significant components of net deferred income tax assets were as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Deferred tax assets | |||||||||||
| Reserves and allowances | $ | 3,400 | $ | 2,977 | |||||||
| Lease liability | 85 | 175 | |||||||||
| Net operating loss carryforward | 80,404 | 52,776 | |||||||||
| Stock-based compensation | 3,907 | 3,307 | |||||||||
| Capitalized research and development | 28,441 | 42,610 | |||||||||
| Credits carryforward | 22,033 | 16,937 | |||||||||
| June 2025 Convertible Notes | 7,157 | — | |||||||||
| Total deferred tax assets | 145,427 | 118,782 | |||||||||
Deferred tax liabilities | |||||||||||
| Operating lease ROU asset | (80) | (165) | |||||||||
| Depreciable assets | (274) | (125) | |||||||||
| Acquired intangibles | (7,764) | (9,178) | |||||||||
| Data Revenue Partner Warrant | (2,347) | (2,302) | |||||||||
| Total deferred tax liabilities | (10,465) | (11,770) | |||||||||
| Less: Valuation allowance and other reserves | (8,544) | (107,012) | |||||||||
| Deferred tax assets, net | $ | 126,418 | $ | — | |||||||
The valuation allowance decreased by $98.5 million during 2025 due to the release of the valuation allowance on the Company’s U.S. and state deferred tax assets. As a result of the release, the Company recognized $126.4 million of previously unrecognized net deferred tax assets on the consolidated balance sheet. Additionally, the Company recorded $118.4 million in Provision for (benefit from) income taxes on the consolidated statement of operations and comprehensive income (loss), and $8.0 million as an increase to Additional paid-in capital related to the purchase of the June 2025 Capped Calls on the consolidated statement of stockholders’ equity.
The remaining valuation allowance of $8.5 million primarily relates to California state tax credits and Canadian SRED credits as of December 31, 2025. Since the Company mainly conducts research and development activities in California, but earns a substantial portion of its U.S. income in other states, the Company could not assert, at the required more likely than not level of certainty, that it would generate future taxable California income sufficient to realize the benefit of those deferred tax assets. Similarly, the Company has historically generated more Canadian tax credits than it utilizes each year. Accordingly, the Company maintained a valuation allowance specific to California state tax credits and Canadian SRED credits.
At December 31, 2025 the Company had approximately $339.9 million and $135.4 million of federal and state net operating loss carryforwards, respectively, available to offset future taxable income. Such carryforwards expire in varying amounts beginning in 2027. The federal net operating loss carryforwards of $254.7 million arising after December 31, 2017 do not expire.
The Company also had federal and state research and development credit carryforwards of $18.5 million and $10.4 million, respectively. The federal tax credits expire in varying amounts beginning in 2034. The state tax credits do not expire. Additionally, the Company has approximately $0.5 million of tax credits in Canada, which are expected to expire in varying amounts beginning 2033.
The Tax Reform Act of 1986 limits the use of net operating loss carryforwards in certain situations where changes occur in the stock ownership of a Company. The annual limitation may result in the expiration of net operating losses and credits before utilization. The Company performed a Section 382 analysis through December 31, 2025. The Company does not expect any previous ownership changes (as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended) to result in a limitation that will materially reduce the total amount of net operating loss carryforwards and credits that can be utilized. Subsequent ownership changes may affect the limitation in future years.
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and Canada. In the normal course of business, the Company is subject to examination by taxing authorities throughout the nation. The Company is not currently under audit by the Internal Revenue Service or other similar state and local authorities. All tax years remain open to examination by major taxing jurisdictions to which the Company is subject.
As of December 31, 2025 and 2024, the Company had $7.4 million and $12.0 million, respectively, of gross unrecognized tax benefits related to federal and state research credits. As of December 31, 2025, $5.0 million of these unrecognized tax benefits, if recognized, would affect the Company’s effective tax rate.
The aggregate changes in the balance of gross unrecognized tax benefits were as follows (in thousands):
Balance as of December 31, 2023 | $ | 12,059 | |||
Additions based on tax positions related to 2024 | 2,050 | ||||
| Reductions for tax positions of prior years | (2,077) | ||||
Balance as of December 31, 2024 | 12,032 | ||||
Additions based on tax positions related to 2025 | 1,816 | ||||
| Reductions for tax positions of prior years | (6,477) | ||||
Balance as of December 31, 2025 | $ | 7,371 | |||
The amounts of cash paid (refunds received) during the period for income taxes, net were as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Federal | $ | — | $ | 481 | $ | — | |||||||||||
State and local | (893) | 1,900 | 697 | ||||||||||||||
| Cash paid (refunds received) during the period for income taxes, net | $ | (893) | $ | 2,381 | $ | 697 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 23, 2023 | |
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.