Energy Vault Holdings, Inc.NRGV
Energy Vault Holdings, Inc. Income Taxes Disclosure
INCOME TAXES
The components of pre-tax loss are as follows for the years ended December 31, 2025 and 2024 (amounts in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| United States | $ | (82,925) | $ | (123,143) | |||||||
| Switzerland | (8,890) | (8,151) | |||||||||
| United Kingdom | (1,700) | (1,993) | |||||||||
| Australia | (2,363) | (2,448) | |||||||||
| China | (17) | (11) | |||||||||
| Total loss before tax | $ | (95,895) | $ | (135,746) | |||||||
The following table presents a reconciliation of the Company’s federal statutory income tax rate to the effective income tax rate (amounts in thousands):
| Year Ended December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| Amount | Percent | Amount | Percent | ||||||||||||||||||||
| US federal statutory income tax rate | $ | (20,138) | 21.0 | % | $ | (28,493) | 21.0 | % | |||||||||||||||
State and local income taxes, net of federal benefit (1) | 503 | (0.5) | % | 225 | (0.1) | % | |||||||||||||||||
| Non-deductible expenses: | |||||||||||||||||||||||
| Stock-based compensation | 5,549 | (5.8) | % | 6,691 | (4.9) | % | |||||||||||||||||
| Other | 1,781 | (1.9) | % | 122 | (0.1) | % | |||||||||||||||||
| Credits: | |||||||||||||||||||||||
| Research and development | (433) | 0.5 | % | (621) | 0.5 | % | |||||||||||||||||
| ITC | 7,148 | (7.5) | % | — | — | % | |||||||||||||||||
| Foreign rate differential | 3,341 | (3.5) | % | 2,647 | (2.0) | % | |||||||||||||||||
| Valuation allowance | 10,049 | (10.5) | % | 19,520 | (14.4) | % | |||||||||||||||||
| Other | (37) | — | % | (24) | — | % | |||||||||||||||||
| Effective income tax rate | $ | 7,763 | (8.2) | % | $ | 67 | — | % | |||||||||||||||
__________________
(1) State taxes in Texas and Virginia made up the majority (greater than 50%) of the tax effect of this category.
The components of the provision (benefit) for income taxes are as follows (amounts in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Current | |||||||||||
| Federal | $ | 611 | $ | (20) | |||||||
| State | 3 | 87 | |||||||||
| Foreign | — | — | |||||||||
| Total current tax provision | 614 | 67 | |||||||||
| Deferred | |||||||||||
| Federal | 7,149 | — | |||||||||
| State | — | — | |||||||||
| Foreign | — | — | |||||||||
| Total deferred tax provision | 7,149 | — | |||||||||
| Total provision for income taxes | $ | 7,763 | $ | 67 | |||||||
Net income taxes paid (refunded) by jurisdiction consisted of the following (amounts in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| U.S. | |||||||||||
| Federal | $ | (7) | $ | 52 | |||||||
| State | 50 | — | |||||||||
| Total U.S. | 43 | ||||||||||
| Foreign: | |||||||||||
| India | 600 | — | |||||||||
| Total | $ | 643 | $ | — | |||||||
The components of the deferred tax asset are as follows (amounts in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 39,631 | $ | 30,397 | |||||||
| Stock-based compensation | 1,868 | 1,763 | |||||||||
| Revenue | 3,500 | 672 | |||||||||
| Accrued expenses | 3,443 | 605 | |||||||||
| Capitalized research and development | 1,662 | 3,701 | |||||||||
| Investment and research tax credits | 51,016 | 2,778 | |||||||||
| Depreciation and amortization | 329 | — | |||||||||
| Operating lease liabilities | 310 | 156 | |||||||||
| Impairment of investment in equity securities | 2,940 | 2,556 | |||||||||
| Allowance for credit losses | 9,459 | 7,024 | |||||||||
| Interest expense | 1,315 | — | |||||||||
| Other | 2,150 | — | |||||||||
| Gross deferred tax assets | 117,623 | 49,652 | |||||||||
| Less: valuation allowance | (76,778) | (48,107) | |||||||||
| Net deferred tax assets | 40,845 | 1,545 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and amortization | — | (1,287) | |||||||||
| Right of use assets | (337) | (174) | |||||||||
| Other | — | (84) | |||||||||
| Gross deferred tax liabilities | (337) | (1,545) | |||||||||
| Net deferred tax assets (liabilities) | $ | 40,508 | $ | — | |||||||
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Based upon the analysis of federal and state deferred tax balances, future tax projections and availability of taxable income in the carryback period, the Company recorded a valuation allowance against the federal, state, and international deferred tax assets of $76.8 million.
As of December 31, 2025, the Company had federal net operating losses of $155.6 million, state net operating losses of $58.9 million, and foreign net operating losses of $13.6 million. The federal net operating loss carryforwards do not expire, but are subject to a limitation on their use equal to 80% of the taxable income in the year of use. The state net operating loss carryforwards begin to expire in 2042. $10.6 million of the foreign net operating loss carryforwards do not expire. The remaining foreign net loss carryforwards began to expire in 2025.
At December 31, 2025, the Company had federal and state research tax credit carryforwards of $2.8 million and $0.7 million, respectively. The federal research tax credit carryforwards will begin to expire in 2042 and the state research tax credits do not expire.
At December 31, 2025 and 2024, the Company recorded $19.7 million, and $15.7 million, respectively, of unrecognized tax benefits. During the years ended December 31, 2025 and 2024, the Company recognized no interest and penalties related to uncertain tax positions. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2025 is zero, due to the valuation allowance that would otherwise be recorded on the deferred tax asset associated with the recognized position.
The following table summarizes the activity related to the Company’s unrecognized tax benefits (amounts in thousands):
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Balance at beginning of year | $ | 15,668 | $ | 1,399 | |||||||
| Increase related to prior year tax positions | 2,566 | 13,324 | |||||||||
| Decrease related to prior year tax positions | — | — | |||||||||
| Increase related to current year tax positions | 1,483 | 945 | |||||||||
| Balance at end of year | $ | 19,717 | $ | 15,668 | |||||||
During 2024, the Company recorded an uncertain tax position for the historical and current Switzerland net operating loss, related to unrecorded transfer pricing charges between Switzerland and the United States.
The tax years ended December 31, 2022 through December 31, 2025 remain open to examination by the Internal Revenue Service and California Franchise Tax Board. In addition, the utilization of net operating loss carryforwards are subject to federal and state review for the periods in which those net losses were incurred. The Company is not under audit by any taxing jurisdictions at this time. The foreign entities have statute of limitations ranging between one and five years from the filing date of the tax return.
Utilization of the net operating losses and tax credit carryforwards may be subject to an annual limitation based on changes in ownership, as defined by Sections 382 and 383 of the Internal Revenue Code (“IRC”) of 1986, as amended. Based on the Company’s Section 382 analysis, which has been updated through December 31, 2025, the Company has determined that none of the net operating losses will be permanently impaired due to Section 382 limitations.
The Inflation Reduction Act (“IRA”) was enacted in August 2022, providing significant incentives for businesses to improve energy efficiency by extending, increasing, or expanding tax credits related to the production of clean energy and fuels, among other provisions. During 2025, the Company generated $47.7 million of ITCs. On March 28, 2025, the Company entered into a Tax Credit Transfer Commitment, on behalf of its majority and wholly-owned subsidiary companies, with a third-party purchaser pursuant to which the Company agreed to sell these ITCs at a price equal to 85% of the value of the credits. The ITCs are accounted for under ASC 740, and the Company has recorded a valuation allowance for the 15% discount to reflect the expected net sale proceeds.
On February 26, 2026, the Company collected $11.8 million in proceeds from the transfer of the Cross Trails ITC to the third-party purchaser. As of the date of the Annual Report, the sales of the eligible ITCs generated by the CRC HESS and Snyder CDU are expected to close following the satisfaction of certain customary closing conditions.
The Company has recorded a full valuation allowance against substantially all of the Company’s deferred tax assets, except for the deferred tax assets associated with the ITCs that the Company intends to sell. The Company provides for a valuation allowance when it is more likely than not that some portion of, or all of the Company’s deferred tax assets will not be realized. Due to the Company’s history of losses, the Company determined that it is not more likely than not to realize its deferred tax assets, with the exception of deferred tax assets associated with the ITCs that the Company intends to sell.
On July 4, 2025, Public Law No. 119-21, commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”), was enacted. The OBBBA contains a broad range of changes to U.S. federal income tax laws. These changes include, among others, permanently restoring an EBITDA-based business interest deduction limitation, permanently restoring 100% bonus depreciation for certain property, permanently restoring immediate expensing for certain domestic research and experimental expenditures, and changes with respect to ITCs. The effects of changes in tax laws are recognized in the consolidated financial statements during the period of enactment. The effects of the OBBBA are not expected to have a material impact on the Company’s consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 18, 2026 | Showing above |
| 2024 | Apr 1, 2025 | |
| 2023 | Mar 13, 2024 | |
| 2022 | Apr 13, 2023 | |
| 2021 | Feb 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.