Nerdy Inc.NRDY
Nerdy Inc. Income Taxes Disclosure
INCOME TAXES
Nerdy Inc. holds an economic interest in Nerdy LLC (see Notes 1 and 4), which is treated as a partnership for U.S. federal income tax purposes. As a partnership, Nerdy LLC is itself generally not subject to U.S. federal income tax under current U.S. tax laws as its net taxable income (loss) and any related tax credits are passed through to its members and included in their tax returns, even though such net taxable income (loss) or tax credits may not have actually been distributed. Nerdy Inc. is subject to U.S. federal income taxes, in addition to state and local income taxes, with respect to its distributive share of the net taxable income (loss) and any related tax credits of Nerdy LLC.
The following table presents expense for income taxes for the periods presented.
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State and local | 159 | 115 | 109 | ||||||||||||||
| 159 | 115 | 109 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | — | — | — | ||||||||||||||
| State and local | — | — | — | ||||||||||||||
| — | — | — | |||||||||||||||
| Income tax expense | $ | 159 | $ | 115 | $ | 109 | |||||||||||
| Loss before income taxes | $ | (60,789) | $ | (67,027) | $ | (67,560) | |||||||||||
| Effective income tax rate | (0.26) | % | (0.17) | % | (0.16) | % | |||||||||||
Income tax expense recorded during the years ended December 31, 2025, 2024, and 2023 represents amounts owed to state authorities.
The following table presents a reconciliation of income tax expense and the effective income tax rate for the period presented, reported under ASC Topic 740 after the adoption of ASU 2023-09.
| Year Ended December 31, 2025 | |||||||||||
Amount | % | ||||||||||
U.S. Federal Statutory Tax Rate (21%) | $ | (12,766) | 21.00 | % | |||||||
State income taxes, net of federal tax effect (a) | 159 | (0.26) | % | ||||||||
| Changes in valuation allowances | 8,217 | (13.52) | % | ||||||||
Other, net | |||||||||||
| Income tax benefit attributable to the NCI | 4,416 | (7.26) | % | ||||||||
Other | 133 | (0.22) | % | ||||||||
Income tax expense and effective income tax rate | $ | 159 | (0.26) | % | |||||||
(a)State taxes in Texas make up the majority of the tax effect in this category.
The following table presents a reconciliation of income tax expense with amounts computed at the federal statutory tax rate for the periods presented, reported under ASC Topic 740 prior to the adoption of ASU 2023-09.
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Computed tax (21%) | $ | (14,076) | $ | (14,188) | |||||||
| Partnership outside basis adjustments | 47 | 2,266 | |||||||||
| Income tax benefit attributable to NCI | 6,180 | 6,979 | |||||||||
Income tax credit | (630) | (1,121) | |||||||||
| Change in valuation allowance charged to expense | 11,019 | 11,907 | |||||||||
| State income tax benefit, net of effect on federal tax | (2,699) | (2,888) | |||||||||
Other, net | 274 | (2,846) | |||||||||
| Income tax expense | $ | 115 | $ | 109 | |||||||
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. Non-current deferred tax assets (liabilities) were as follows:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||||||||||||||
| Assets | Liabilities | Net | Assets | Liabilities | Net | ||||||||||||||||||||||||||||||
| Investment in Nerdy LLC (a) | $ | 76,280 | $ | — | $ | 76,280 | $ | 77,424 | $ | — | $ | 77,424 | |||||||||||||||||||||||
| Net operating loss and credit carryforwards | 60,612 | — | 60,612 | 46,094 | — | 46,094 | |||||||||||||||||||||||||||||
| Other items | 214 | — | 214 | 191 | — | 191 | |||||||||||||||||||||||||||||
| Total gross deferred income taxes | 137,106 | — | 137,106 | 123,709 | — | 123,709 | |||||||||||||||||||||||||||||
| Valuation allowance | (137,106) | — | (137,106) | (123,709) | — | (123,709) | |||||||||||||||||||||||||||||
| Total deferred taxes | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | |||||||||||||||||||||||
(a)The Company’s deferred tax asset for investment in partnership relates to excess tax outside basis over financial reporting outside basis in Nerdy LLC, which is treated as a partnership for U.S. federal income tax purposes.
At December 31, 2025 and 2024, the Company continued to maintain a full valuation allowance against the deferred tax assets at Nerdy Inc. The full valuation allowance will remain until there is sufficient evidence to support the reversal of all or some portion of these allowances.
The following table summarizes changes to the Company’s valuation allowance for the periods presented.
| As Of and For The Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance, beginning of year | $ | (123,709) | $ | (107,263) | $ | (86,774) | |||||||||||
| Provision charged to expense | (11,155) | (11,019) | (11,907) | ||||||||||||||
| Provision charged to additional paid-in capital | (2,242) | (5,427) | (8,582) | ||||||||||||||
| Balance, end of year | $ | (137,106) | $ | (123,709) | $ | (107,263) | |||||||||||
As of December 31, 2025, the Company had U.S. federal net operating loss (“NOL”) and credit carryforwards totaling $49,436, which have expiration dates ranging from 2035 to extending indefinitely without expiration, as well as state NOL carryforwards totaling $11,175, which have expiration dates ranging from 2029 to extending indefinitely without expiration.
The Company recognizes the financial statement effects of uncertain income tax positions when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. To the extent the Company’s assessment of such tax positions changes, the change in estimate will be recorded in the period in which the determination is made. At both December 31, 2025 and 2024, the Company had not recorded any uncertain tax positions, nor any accrued interest or penalties on the Consolidated Balance Sheets. During the years ended December 31, 2025, 2024, and 2023, the Company did not record any interest and penalties in “Income tax expense” in the Consolidated Statements of Operations.
Nerdy Inc.’s U.S. federal, state, and local jurisdiction income tax returns for the tax years ended December 31, 2024, 2023 and 2022 are generally open and subject to examination by the tax authorities in each respective jurisdiction.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted, resulting in impacts to the Company’s deferred tax positions. However, these impacts were not material to its financial statements because the Company maintains a full valuation allowance against its deferred tax assets.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 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.