MAGNITE, INC.MGNI
MAGNITE, INC. Income Taxes Disclosure
Income Taxes
The following are the domestic and foreign components of the Company’s income (loss) before income taxes for the years ended December 31, 2025, 2024, and 2023:
| Year Ended | |||||||||||||||||
| December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Domestic | $ | 62,422 | $ | 19,481 | $ | (165,311) | |||||||||||
| International | 8,205 | 7,003 | 7,764 | ||||||||||||||
Income (loss) before income taxes | $ | 70,627 | $ | 26,484 | $ | (157,547) | |||||||||||
The following are the components of the provision (benefit) for income taxes for the years ended December 31, 2025, 2024, and 2023:
| Year Ended | |||||||||||||||||
| December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (170) | $ | 89 | $ | 218 | |||||||||||
| State | 2,545 | 1,803 | 1,994 | ||||||||||||||
| Foreign | 1,953 | 1,743 | 1,707 | ||||||||||||||
| Total current provision | 4,328 | 3,635 | 3,919 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (49,348) | 47 | 763 | ||||||||||||||
| State | (27,453) | (235) | (5,317) | ||||||||||||||
| Foreign | (1,513) | 251 | 2,272 | ||||||||||||||
Total deferred provision (benefit) | (78,314) | 63 | (2,282) | ||||||||||||||
| Total provision (benefit) for income taxes | $ | (73,986) | $ | 3,698 | $ | 1,637 | |||||||||||
The Company recorded an income tax benefit of $74.0 million for the year ended December 31, 2025 compared to an income tax expense of $3.7 million and $1.6 million for the years ended December 31, 2024 and 2023, respectively. The income tax benefit for the year ended December 31, 2025 was primarily the result of the release of the majority of the domestic and certain foreign valuation allowances on the Company's deferred tax assets and the state and foreign income tax liabilities.
The release was supported by sustained profitability and the Company’s cumulative three-year pre-tax income position, inclusive of the impact of permanent book-to-tax differences, as of December 31, 2025, together with forecasts of future taxable income and the expected reversal of taxable temporary differences sufficient to support realization of deferred tax assets.
The income tax expense for the year ended December 31, 2024 was primarily the result of the domestic valuation allowance on the Company's deferred tax assets and the federal, state, and foreign income tax liabilities. The income tax expense for the year ended December 31, 2023 was primarily the result of the domestic valuation allowance on the Company's deferred tax assets and the federal, state, and foreign income tax liabilities.
The Company continues to maintain a valuation allowance against certain state and foreign deferred tax assets where it is not more likely than not that such assets will be realized.
Set forth below provides the updated requirements of ASU 2023-09 for 2025 (see Note 2). The table below is a reconciliation of the components that caused the Company’s provision (benefit) for income taxes to differ from amounts computed by applying the U.S. federal statutory rate of 21% for the year ended December 31, 2025 (in thousands except for percentages):
Year Ended December 31, 2025 | |||||||||||
Amount | Percent | ||||||||||
U.S. federal statutory income tax rate | $ | 14,832 | 21.0 | % | |||||||
Domestic state and local income taxes, net of federal effect(1) | (19,677) | (27.9) | % | ||||||||
Foreign tax effects: | |||||||||||
United Kingdom: | |||||||||||
Changes in valuation allowance | (492) | (0.7) | % | ||||||||
Stock option windfall benefit | (837) | (1.2) | % | ||||||||
Other | 683 | 1.0 | % | ||||||||
Other foreign jurisdictions | (589) | (0.8) | % | ||||||||
Tax credits: | |||||||||||
Research and development credits | (1,889) | (2.7) | % | ||||||||
Nontaxable and nondeductible items: | |||||||||||
Sec 162(m) officers' compensation | 9,052 | 12.8 | % | ||||||||
Stock-based compensation expense | (8,867) | (12.6) | % | ||||||||
Other | 581 | 0.8 | % | ||||||||
Changes in valuation allowances(2) | (67,036) | (94.9) | % | ||||||||
| Worldwide changes in prior years unrecognized tax expenses | 130 | 0.2 | % | ||||||||
Other | 123 | 0.2 | % | ||||||||
Total tax provision (benefit) and effective income tax rate | $ | (73,986) | (104.8) | % | |||||||
(1) We consistently report the effects of the state valuation allowance on the state income tax expense line-item within our effective tax rate. In 2025, we released $22.0 million of our valuation allowance on our U.S. state deferred tax assets. State taxes in California, New York, and Virginia made up the majority (greater than 50%) of the tax effect in this category. See the income taxes paid table below as required under ASU 2023-09. | |||||||||||
(2) In 2025, we released our entire valuation allowance of $67.0 million on our U.S. federal deferred tax assets. This is included on the change in valuation allowance line item. | |||||||||||
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the table below is a reconciliation of the components that caused the Company’s provision (benefit) for income taxes to differ from amounts computed by applying the U.S. federal statutory rate of 21%:
| Year Ended | |||||||||||
| December 31, 2024 | December 31, 2023 | ||||||||||
| U.S. federal statutory income tax rate | 21.0 | % | 21.0 | % | |||||||
| State income taxes, net of federal benefit | 4.6 | % | 1.7 | % | |||||||
| Foreign income (loss) at other than U.S. rates | 1.8 | % | (0.3) | % | |||||||
| Stock-based compensation expense | 9.0 | % | (2.4) | % | |||||||
| Meals and entertainment | 1.9 | % | (0.3) | % | |||||||
| Other permanent items | 0.9 | % | (0.2) | % | |||||||
| Change in valuation allowance | (42.5) | % | (17.8) | % | |||||||
| Sec 162(m) officers' compensation | 19.1 | % | (3.3) | % | |||||||
| Provision to return adjustments | 4.9 | % | 0.2 | % | |||||||
| Research and development tax credits | (6.9) | % | 0.4 | % | |||||||
| Foreign withholding taxes | 0.2 | % | — | % | |||||||
| Effective income tax rate | 14.0 | % | (1.0) | % | |||||||
Set forth below are the tax effects of temporary differences that give rise to a significant portion of the deferred tax assets and deferred tax liabilities as of December 31, 2025 and 2024:
| December 31, 2025 | December 31, 2024 | ||||||||||
| (in thousands) | |||||||||||
| Deferred Tax Assets: | |||||||||||
Allowance for doubtful accounts | $ | 1,853 | $ | 1,597 | |||||||
| Accrued liabilities | 1,180 | 2,102 | |||||||||
| Lease liabilities | 8,735 | 8,704 | |||||||||
| Stock-based compensation | 2,830 | 3,053 | |||||||||
Intangible assets | — | 1,276 | |||||||||
| Net operating loss carryovers | 70,295 | 77,581 | |||||||||
| Tax credit carryovers | 12,430 | 11,098 | |||||||||
Capitalized facilitative costs | 11,014 | 5,975 | |||||||||
| Other | 2,455 | 816 | |||||||||
| Total deferred tax assets | 110,792 | 112,202 | |||||||||
| Less valuation allowance | (4,257) | (94,373) | |||||||||
| Deferred tax assets, net of valuation allowance | 106,535 | 17,829 | |||||||||
| Deferred Tax Liabilities: | |||||||||||
| Fixed assets | (17,550) | (7,510) | |||||||||
| Intangible assets | (2,919) | — | |||||||||
Right-of-use lease assets | (7,685) | (7,647) | |||||||||
Debt issuance and original issue discount | (2,066) | (3,082) | |||||||||
| Total deferred tax liabilities | (30,220) | (18,239) | |||||||||
Net deferred tax assets (liabilities) | $ | 76,315 | $ | (410) | |||||||
As of December 31, 2025, the net deferred tax asset of $76.3 million consists of deferred tax assets of $76.7 million and deferred tax liabilities of $0.3 million. As of December 31, 2024, the net deferred tax liabilities of $0.4 million consists of deferred tax liabilities of $0.7 million and deferred tax assets of $0.3 million. The valuation allowance was decreased by $90.1 million and $12.6 million for the years ended December 31, 2025 and 2024, respectively, and increased by $30.2 million for the year ended December 31, 2023. The net deferred tax assets balance is presented in other assets, non-current within the Company's consolidated balance sheets and the net deferred tax liabilities balance is presented in other liabilities, non-current within the Company's consolidated balance sheets.
The Company evaluates the realizability of deferred tax assets on a jurisdictional basis at each reporting date and records a valuation allowance when it is more likely than not that some portion or all of a deferred tax asset will not be realized. In assessing realizability, the Company considers all available positive and negative evidence, including cumulative results of operations, historical and projected taxable income, reversal of taxable temporary differences, and the carryforward periods of existing tax attributes.
During the year ended December 31, 2025, the Company concluded that it is more likely than not that substantially all of its U.S. federal and certain state deferred tax assets will be realized. This conclusion was primarily driven by (i) sustained profitability and a cumulative three-year pre-tax income position as of December 31, 2025, (ii) forecasts of future taxable income, and (iii) the expected reversal of taxable temporary differences sufficient to support realization of deferred tax assets.
As a result, the Company released its U.S. federal, the majority of its state, and certain foreign valuation allowances during 2025. A valuation allowance continues to be recorded against certain New York state and city net operating losses subject to Section 382 limitations and certain foreign net operating losses where realization is not considered more likely than not.
At December 31, 2025, the Company had U.S. federal net operating loss carryforwards, or NOLs, of approximately $252.6 million. Approximately $103.5 million were generated in tax years beginning before January 1, 2018 and may offset 100% of taxable income, but begin to expire in 2037. The remaining federal net operating losses were generated in tax years beginning after December 31, 2017, have an indefinite carryforward period, and may offset up to 80% of taxable income in a given year.
At December 31, 2025, the Company had state NOLs of approximately $205.3 million, which will begin to expire in 2028. At December 31, 2025, the Company had foreign NOLs of approximately $17.6 million, which will begin to expire in 2026. At December 31, 2025, the Company had acquired federal research and development tax credit carryforwards of approximately $8.1 million which will begin to expire in 2036, and state research and development tax credits of approximately $10.1 million, the majority of which carry forward indefinitely.
Based on current projections of future taxable income, the Company expects to fully utilize its federal net operating losses, federal research and development credits, and the majority of the state net operating losses prior to expiration. Certain New York state and city net operating losses are subject to Section 382 limitations and are not expected to be fully realized. Based on current foreign business operations in certain foreign jurisdictions, the Company continues to maintain valuation allowances for losses that are not likely to be realized.
At December 31, 2025, unremitted earnings of the subsidiaries outside of the United States were approximately $40.7 million. The Company’s intention is to indefinitely reinvest these earnings outside the United States. Upon distribution of those earnings in the form of a dividend or otherwise, the Company would be subject to withholding taxes payable to various foreign countries and, potentially, various state taxes. The amounts of such tax liabilities that might be payable upon actual repatriation of foreign earnings, after consideration of corresponding foreign tax credits, are not material.
The following table summarizes the activity related to the unrecognized tax benefits (in thousands):
| Amount | ||||||||
Balance as of December 31, 2023 | $ | 4,443 | ||||||
| Increases related to current year tax positions | 490 | |||||||
| Decreases related to prior year tax positions | (457) | |||||||
| Increases related to prior year tax positions | 18 | |||||||
Balance as of December 31, 2024 | 4,494 | |||||||
| Increases related to current year tax positions | 529 | |||||||
| Decreases related to prior year tax positions | (288) | |||||||
Balance as of December 31, 2025 | $ | 4,735 | ||||||
Interest and penalties related to the Company’s unrecognized tax benefits accrued at December 31, 2025, 2024, and 2023 were not material.
Set forth below provides the new requirements of ASU 2023-09 for 2025 (see Note 2). The following table summarizes the income taxes paid, net of refunds, for the year ended December 31, 2025:
| Year Ended | ||||||||
| December 31, 2025 | ||||||||
| (in thousands) | ||||||||
U.S. federal | $ | 200 | ||||||
U.S. state and local: | ||||||||
New York State | 216 | |||||||
Virginia | 211 | |||||||
Michigan | 200 | |||||||
Other | 1,449 | |||||||
Foreign: | ||||||||
Australia | 676 | |||||||
India | 424 | |||||||
Other | 384 | |||||||
Total income taxes paid | $ | 3,760 | ||||||
Due to the net operating loss carryforwards, the Company's United States federal and a majority of its state returns are open to examination by the Internal Revenue Service and state jurisdictions for all years since inception. For the India, Netherlands, Sweden, and the United Kingdom, all tax years remain open for examination by the local country tax authorities, for France only 2023 and forward are open for examination, for Australia and Singapore only 2022 and forward are open for examination, for Brazil, Canada, Germany, Malaysia, and New Zealand only 2021 and forward are open for examination, for Italy only 2020 and forward are open for examination, and for Japan 2019 and forward remain open for examination.
The Company does not expect its uncertain income tax positions to have a material impact on its consolidated financial statements within the next twelve months.
On July 4, 2025, the President of the United States signed H.R. 1, commonly referred to as the "One Big Beautiful Bill Act" ("OBBBA") 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. OBBBA also includes certain changes to the U.S. 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. These changes are generally effective for tax years beginning after December 31, 2025. OBBBA changes effective for 2025 were reflected in the income tax provision for the year ended December 31, 2025. Based on current projections, the continuing impact will be a deferral of the payment of current income taxes over multiple years; however, the Company expects the net impact to its effective tax rate for 2026 to be immaterial. The Company will monitor as additional guidance becomes available.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2017 | Mar 15, 2018 | |
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.