MARKETWISE, INC.MKTW
MARKETWISE, INC. Income Taxes Disclosure
Income Taxes
We are subject to U.S. federal and state taxes with respect to our allocable share of any taxable income or loss of MarketWise, LLC, as well as any standalone income or loss we generate. MarketWise, LLC is treated as a partnership for U.S. income tax purposes and for most applicable state and local income tax purposes and generally does not pay income taxes in most jurisdictions. Instead, MarketWise, LLC’s taxable income or loss is passed through to its members, including us. The Company has no foreign components of income in the years ending December 31, 2025, 2024 and 2023.
The components of income tax expense consisted of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current income tax expense (benefit): | |||||||||||||||||
| Federal | $ | 1,342 | $ | 346 | $ | — | |||||||||||
| State | 262 | 35 | — | ||||||||||||||
| Deferred income tax expense (benefit): | |||||||||||||||||
| Federal | 595 | 2,380 | 1,517 | ||||||||||||||
| State | 359 | 492 | 286 | ||||||||||||||
| Total income tax expense (benefit) | $ | 2,558 | $ | 3,253 | $ | 1,803 | |||||||||||
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 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| U.S. Federal Statutory Rate | $ | 13,986 | 21.00 | % | $ | 20,352 | 21.00 | % | $ | 11,781 | 21.00 | % | |||||||||||||||||||||||
State and Local Taxes, net of Federal Income Tax Effect (1) | $ | 571 | 0.86 | % | $ | 527 | 0.54 | % | $ | 286 | 0.51 | % | |||||||||||||||||||||||
| Foreign Tax Effects | $ | — | — | % | $ | — | — | % | $ | — | — | % | |||||||||||||||||||||||
| Effect of Changes in Tax Laws or Rates Enacted in the Current Period | $ | (5) | (0.01) | % | $ | (130) | (0.13) | % | $ | (42) | (0.08) | % | |||||||||||||||||||||||
| Effect of Cross-Border Tax Laws | $ | — | — | % | $ | — | — | % | $ | — | — | % | |||||||||||||||||||||||
| Tax Credits | $ | — | — | % | $ | — | — | % | $ | — | — | % | |||||||||||||||||||||||
| Change in Valuation Allowances | $ | 674 | 1.01 | % | $ | — | — | % | $ | — | — | % | |||||||||||||||||||||||
| Nontaxable or Nondeductible Items | |||||||||||||||||||||||||||||||||||
| Income attributable to non-controlling interests | $ | (12,661) | (19.01) | % | $ | (18,891) | (19.49) | % | $ | (11,261) | (20.07) | % | |||||||||||||||||||||||
| Income attributable to flow-thru partnerships | $ | 792 | 1.19 | % | $ | 291 | 0.30 | % | $ | (255) | (0.45) | % | |||||||||||||||||||||||
| Other | $ | 133 | 0.20 | % | $ | 194 | 0.20 | % | $ | (90) | (0.16) | % | |||||||||||||||||||||||
| Changes in Unrecognized Tax Benefits | $ | — | — | % | $ | — | — | % | $ | — | — | % | |||||||||||||||||||||||
| Other Adjustments | $ | (932) | (1.40) | % | $ | 910 | 0.95 | % | $ | 1,384 | 2.46 | % | |||||||||||||||||||||||
| Effective income tax rate | $ | 2,558 | 3.84 | % | $ | 3,253 | 3.37 | % | $ | 1,803 | 3.21 | % | |||||||||||||||||||||||
| (1) State taxes in California, Florida, Illinois and New York made up the majority (greater than 50%) of the tax effect in this category | |||||||||||||||||||||||||||||||||||
The Company’s effective tax rate was 3.84%, 3.37%, and 3.21% in 2025, 2024, and 2023 respectively, in comparison to the U.S. statutory rate of 21.00%. Our effective tax rates in 2025, 2024, and 2023 differ from the U.S. federal statutory rate primarily because we generally do not record income taxes for the noncontrolling portion of pre-tax income. Further, the year over year difference includes the effects of the change in income allocation to the noncontrolling interest, partially offsetting the increase in the state tax apportionment.
Details of the Company’s deferred tax assets and liabilities are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Reserves | $ | 204 | $ | 148 | |||||||
| Accrued expenses | 413 | 156 | |||||||||
| Deferred revenue | 5,408 | 6,227 | |||||||||
| Stock-based compensation | 539 | 452 | |||||||||
| Investment in MarketWise, LLC | 32,189 | 30,944 | |||||||||
| Net operating loss carryforwards | 1,090 | 1,498 | |||||||||
| Investment in flow-through partnerships | 1,808 | 1,466 | |||||||||
| Lease liabilities | 248 | 136 | |||||||||
| Tax Receivable Agreement | 3,759 | 2,652 | |||||||||
| Charitable contributions | 3 | 20 | |||||||||
| Intangible assets | 154 | 20 | |||||||||
| Research and development capitalization | 113 | 139 | |||||||||
| Total deferred tax assets | $ | 45,928 | $ | 43,858 | |||||||
| Deferred tax liabilities | |||||||||||
| Deferred expense | $ | (2,403) | $ | (2,716) | |||||||
| Right-of-use asset | (270) | (103) | |||||||||
| Fixed assets | (56) | (24) | |||||||||
| Total deferred tax liabilities | (2,729) | (2,843) | |||||||||
| Valuation allowance | (32,192) | (30,944) | |||||||||
| Net deferred tax assets | $ | 11,007 | $ | 10,071 | |||||||
We had a federal net operating loss carryforward (“NOL”) of $4,754 and $5,938, which can be carried forward indefinitely as of December 31, 2025 and 2024, respectively. We also had state net operating losses of $2,530 and $0 as of December 31, 2025 and 2024, respectively, with various carryforward periods. As of December 31, 2025 and 2024, it is more likely than not that future operations will generate sufficient taxable income to realize the NOL and therefore, no valuation allowance was recorded on the NOL.
As a result of the Transactions, we recorded a deferred tax asset resulting from the outside basis difference in our interest in MarketWise, LLC. The Company considers both positive and negative evidence when measuring the need for a valuation allowance. A valuation allowance is not required to the extent that, in management’s judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not (a likelihood of more than 50%) that the Company’s deferred tax assets will be realized.
In evaluating the need for a valuation allowance on the deferred tax asset, the Company considered positive evidence related to its historic earnings, forecasted income and reversal of temporary differences. Therefore, the Company recorded a valuation allowance of $32,192 and $30,944 for the periods ending December 31, 2025 and 2024 respectively, related to the deferred tax asset associated with the Investment in Partnership.
The deferred tax asset is remeasured at the end of the reporting period to reflect the change in relative ownership of MarketWise, LLC held by the Company. The impact of the remeasurement of the noncontrolling interest is reflected in the consolidated statements of stockholders’ deficit.
The Company did not record any penalties or interest related to uncertain tax positions, as management has concluded that no such positions exist, on the consolidated balance sheets as of December 31, 2025 and 2024. The Company does not expect any changes to uncertain tax positions within the next 12 months.
The Company is subject to examination for tax years beginning with the year ended December 31, 2021. The Company had been under IRS examination of MarketWise, LLC for tax year 2020, and received final written confirmation in 2024 that the audit was completed with no changes. The Company is currently under IRS examination of Stansberry China, LLC for tax year 2021, and currently is awaiting responses to the first round of IDR responses. The Company is not currently subject to income tax audits in any state jurisdictions for any tax year.
The One Big Beautiful Bill was enacted on July 4, 2025. The legislation did not have a material impact on the financial statements for the year ended December 31, 2025 and the Company will continue to evaluate the impact of the legislation through subsequent periods.
Tax Receivable Agreement
As part of the Transactions, we entered into Tax Receivable Agreements (“TRAs”) with certain shareholders. Pursuant to our election under Section 754 of the Code, as amended, and the regulations issued thereunder, we expect to receive a step up in the tax basis of our ownership in MarketWise, LLC as exchanges of the LLC Units (as defined herein) occur. These increases in tax basis may reduce the amount we may otherwise pay to various tax authorities in the future. The TRA liability will represent approximately 85% of the calculated tax savings based on basis adjustments and other carryforward attributes assumed that we anticipate to be able to utilize in future years. We will retain the remaining 15% of calculated tax savings. The payments contemplated by the TRA are not conditioned upon any continued ownership interest in MarketWise, LLC. The timing and amount of aggregate payments due pursuant to the TRA may vary based on several factors including the timing and amount of future taxable income, as well as future applicable tax rates. As such, significant inputs and assumptions are used to estimate the future expected payments under the TRA.
During the year ended December 31, 2025, Members of MarketWise, LLC exchanged an aggregate of 381,857 common units of MarketWise, LLC (“LLC Units”) together with an equal number of shares of Class B common stock for 381,857 newly-issued shares of Class A common stock. As a result, we have recorded a cumulative liability of $4,260 under the TRA as of December 31, 2025. No payments have been made under the TRA and no significant payments are expected in the next 12 months.
Income taxes paid
Details of the Company’s income taxes paid, net of refunds received, are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. federal | 360 | 340 | — | ||||||||||||||
| U.S. state | 134 | (9) | — | ||||||||||||||
| Total income tax expense (benefit) | $ | 494 | $ | 331 | $ | — | |||||||||||
Income taxes paid, net of refunds, that exceeded 5 percent of total taxes paid, net of refunds, in the following jurisdictions:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. state | |||||||||||||||||
| California | 39 | * | — | ||||||||||||||
| New Jersey | (26) | (17) | — | ||||||||||||||
*Jurisdiction below the threshold for the period presented | |||||||||||||||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 6, 2026 | Showing above |
| 2024 | Mar 6, 2025 | |
| 2023 | Mar 7, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 10, 2022 | |
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.