ON24 INC.ONTF
ON24 INC. Income Taxes Disclosure
Income Taxes
The components of loss before the provision for income taxes is summarized as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | (29,391) | $ | (44,116) | $ | (54,585) | |||||||||||
| Foreign | 936 | 2,593 | 3,794 | ||||||||||||||
Loss before provision for income taxes | $ | (28,455) | $ | (41,523) | $ | (50,791) | |||||||||||
The Company’s provision for income taxes were as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current tax expense | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | 63 | 70 | 31 | ||||||||||||||
| Foreign | 341 | 652 | 773 | ||||||||||||||
Total current tax expense | 404 | 722 | 804 | ||||||||||||||
| Deferred tax expense: | |||||||||||||||||
| Federal | — | — | — | ||||||||||||||
| State | — | — | — | ||||||||||||||
| Foreign | (6) | (89) | 191 | ||||||||||||||
Total deferred tax expense | (6) | (89) | 191 | ||||||||||||||
| Provision for income taxes | $ | 398 | $ | 633 | $ | 995 | |||||||||||
The provision for income taxes differs from the amount computed by applying the statutory federal tax rate as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Tax benefit at U.S. statutory rate | $ | (5,976) | $ | (8,720) | $ | (10,666) | |||||||||||
| State income taxes, net of federal benefit | 11 | 70 | 24 | ||||||||||||||
| Foreign income and withholding taxes | 63 | 80 | 135 | ||||||||||||||
Change in uncertain tax positions | 25 | 44 | 115 | ||||||||||||||
| Stock-based compensation | 1,725 | 2,848 | 2,728 | ||||||||||||||
| Section 162(m) | 2,001 | 2,649 | 2,311 | ||||||||||||||
| Expired attributes | 250 | 151 | 49 | ||||||||||||||
| Change in valuation allowance | 2,229 | 3,705 | 5,791 | ||||||||||||||
| Research and development credits | (348) | (445) | (599) | ||||||||||||||
| Global Intangible Low-Taxed Income | 243 | 82 | 495 | ||||||||||||||
Non-deductible transactions costs | 251 | — | 554 | ||||||||||||||
| Other | (76) | 169 | 58 | ||||||||||||||
Provision for income taxes | $ | 398 | $ | 633 | $ | 995 | |||||||||||
Under the current tax law, foreign accumulated earnings that were subject to the mandatory transition tax as of December 31, 2017 may be repatriated to the U.S. without incurring additional U.S. federal income tax, including through the availability of a 100% dividend received deduction for the foreign‑source portion of dividends from controlled foreign subsidiaries. The Company continues to evaluate the indefinite reinvestment assertions with regard to unremitted earnings for our foreign subsidiaries. As of December 31, 2025, 2024 and 2023, the total undistributed earnings of the Company’s foreign subsidiaries were approximately $2.3 million, $0.4 million and $4.9 million, respectively. Historically, the Company has asserted its intention to indefinitely reinvest the undistributed earnings of foreign subsidiaries. The unrecognized deferred tax liability on the portion of the undistributed earnings considered indefinitely reinvested is not material.
Deferred income taxes result from differences in the recognition of expenses for tax and financial reporting purposes, as well as operating loss and tax credit carryforwards. Significant components of our deferred income tax assets as of the periods presented are as follows (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred tax assets | |||||||||||
| Accrued expense and others | $ | 3,100 | $ | 3,548 | |||||||
| Stock-based compensation | 4,494 | 4,830 | |||||||||
| Net operating losses | 34,832 | 33,518 | |||||||||
| Tax credit carryforwards | 9,873 | 9,196 | |||||||||
| Fixed assets | 196 | 583 | |||||||||
Intangibles and capitalized R&D costs | 12,733 | 11,153 | |||||||||
| Lease liability | 1,195 | 596 | |||||||||
| Gross deferred tax assets | $ | 66,423 | $ | 63,424 | |||||||
| Valuation allowance | (59,921) | (56,991) | |||||||||
| Total deferred tax assets | $ | 6,502 | $ | 6,433 | |||||||
| Deferred tax liabilities | |||||||||||
| Right-of-use Asset | (1,158) | (326) | |||||||||
| Deferred commissions | (4,904) | (5,698) | |||||||||
| Total deferred tax liabilities | $ | (6,062) | $ | (6,024) | |||||||
| Net deferred tax assets | $ | 440 | $ | 409 | |||||||
The Company assesses the realizability of deferred tax assets based on the available evidence, including a history of taxable income and estimates of future taxable income. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that all or some portion of deferred tax assets will not be realized. Due to the losses the Company generated in prior years, management believes it is more likely than not that the deferred tax assets will not be realized. Accordingly, the Company established a full valuation allowance on its U.S. net deferred tax assets. The valuation allowance increased by $2.9 million in 2025. The Company has not recorded a valuation allowance on its net foreign deferred tax assets as the Company believes it will generate sufficient future taxable income to realize the deferred tax asset in its foreign jurisdictions.
As of December 31, 2025, the Company had net operating loss carryforwards of approximately $137.1 million for federal income tax purposes, a portion of which will begin to expire in 2026 if unused. Of this amount, $85.4 million of the federal net operating loss carryovers will carry over indefinitely and are limited to 80% of taxable income. The Company had net operating loss carryforwards of approximately $109.1 million for state income tax purposes, which will also begin to expire in the year 2026 if unused.
As of December 31, 2025, the Company has research and development credit carryforwards of approximately $7.2 million for federal income tax and $7.1 million for state income tax purposes. The federal research and development tax credit will begin to expire in 2028 if unused. State research and development tax credits carry forward indefinitely.
The federal and state net operating loss carryforwards may be subject to significant limitations under Section 382 and Section 383 of the Internal Revenue Code of 1986, as amended, and similar provisions under state law. The Tax Reform Act of 1986 contains provisions that limit the federal net operating loss carryforwards that may be used in any given year in the event of special occurrences, including significant ownership changes. In the event of significant ownership changes, the Company’s ability to realize the potential future benefit of tax losses and tax credits that existed at the time of the ownership change will be significantly reduced. As of December 31, 2025, the Company has not yet performed a Section 382 study to determine the amount of reduction, if any.
The Company complies with ASC 740-10, Accounting for Uncertainty in Income Taxes, which prescribes a comprehensive model for the recognition, measurement, presentation and disclosure in financial statements of any uncertain tax positions that have been taken or expected to be taken on a tax return. This pronouncement sets a “more likely than not” criterion for recognizing the tax benefit of uncertain tax positions. There are no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within 12 months of the reporting date. If recognized, $0.6 million would affect the Company’s effective tax rate.
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. The Company recognized an immaterial amount of interest and penalties associated with unrecognized tax benefits in 2025, 2024 and 2023.
A reconciliation of the beginning and ending balance of total unrecognized tax position is as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 3,586 | $ | 3,151 | $ | 2,882 | |||||||||||
Increase related to prior year tax provisions | 683 | 164 | — | ||||||||||||||
Increase related to current year tax positions | 366 | 340 | 289 | ||||||||||||||
Decrease due to lapse of applicable statute of limitations | (128) | (69) | (20) | ||||||||||||||
| Ending balance | $ | 4,507 | $ | 3,586 | $ | 3,151 | |||||||||||
The Company files income tax returns in the U.S. federal jurisdiction, various state jurisdictions and various foreign jurisdictions. As of December 31, 2025, all of the years remain open to examination by the federal and state tax authorities for or four years from the tax year in which net operating losses or tax credits are utilized. There have been no examinations of our income tax returns by any tax authority.
In July 2025, the U.S. enacted tax legislation referred to as the One Big Beautiful Bill (“OBBB”). The OBBB includes significant changes to U.S. income tax laws, including tax cut extensions and modifications to the international tax framework with certain provisions effective in 2025 and others effective in 2026 and later years. The OBBB did not have a material impact on the Company’s 2025 effective tax rate due to the Company’s loss position. Management will continue to analyze and adjust future amounts as related administrative guidance, notices, implementation regulations, potential legislative amendments and interpretations of the OBBB continue to evolve
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 14, 2024 | |
| 2022 | Mar 15, 2023 | |
| 2021 | Mar 14, 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.