OneSpan Inc.OSPN
OneSpan Inc. Income Taxes Disclosure
Income Taxes
Income (loss) before income taxes was generated in the following jurisdictions:
| Years Ended December 31, | |||||||||||||||||
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| U.S. | $ | 30,741 | $ | 41,309 | $ | (13,526) | |||||||||||
| Non-U.S. | 18,621 | 5,178 | (13,787) | ||||||||||||||
| Total | $ | 49,362 | $ | 46,487 | $ | (27,313) | |||||||||||
For the years ended December 31, 2025 and 2024, domestic income excludes intercompany dividend income of $63.5 million and $8.6 million, respectively. For the year ended December 31, 2023, there was no intercompany dividend included in domestic income. The (benefit) provision for income taxes consists of the following:
| Years Ended December 31, | |||||||||||||||||
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (2) | $ | 525 | $ | 2 | |||||||||||
| State | 299 | 266 | 54 | ||||||||||||||
| Foreign | 6,543 | 4,906 | 2,473 | ||||||||||||||
| Total current | 6,840 | 5,697 | 2,529 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 4,919 | (16,771) | 361 | ||||||||||||||
| State | (154) | (2,318) | (47) | ||||||||||||||
| Foreign | (35,147) | 2,797 | (357) | ||||||||||||||
| Total deferred | (30,382) | (16,292) | (43) | ||||||||||||||
| Total | $ | (23,542) | $ | (10,595) | $ | 2,486 | |||||||||||
For 2025, 2024, and 2023, the Company's U.S. federal statutory rate was 21%.
The differences between the income tax (benefit) and provisions computed using the statutory federal income tax rate and the (benefit) provisions for income taxes reported in the consolidated statements of operations are as follows:
| (In thousands, except percentages) | December 31, 2025 | |||||||
| US federal statutory income tax rate | $ | 10,366 | 21.0 | % | ||||
| Domestic state and local income taxes, net of federal effect (a) | 145 | 0.3 | % | |||||
| Domestic federal | ||||||||
| Tax credits | ||||||||
| Foreign tax credits | (594) | (1.2) | % | |||||
| Other credits | (277) | (0.6) | % | |||||
| Nontaxable and non deductible items | ||||||||
| Acquisition expenses | 556 | 1.1 | % | |||||
| Other | 199 | 0.4 | % | |||||
| Cross-border tax laws | ||||||||
| Global intangible low-taxed income | 1,568 | 3.2 | % | |||||
| Foreign-derived intangible income | (1,729) | (3.5) | % | |||||
| Subpart F income | (1,127) | (2.3) | % | |||||
| Other | 63 | 0.1 | % | |||||
| Changes in tax laws or rates enacted in current period | — | — | % | |||||
| Changes in valuation allowances | — | — | % | |||||
| Other | (155) | (0.3) | % | |||||
| Foreign tax effects | ||||||||
| Canada | ||||||||
| Research credits | (1,528) | (3.1) | % | |||||
| Provincial tax change in valuation allowance | (11,549) | (23.4) | % | |||||
| Changes in valuation allowance | (20,002) | (40.5) | % | |||||
| Other | (144) | (0.3) | % | |||||
| United Kingdom | ||||||||
| Changes in valuation allowance | (1,258) | (2.5) | % | |||||
| Other | 150 | 0.3 | % | |||||
| Other foreign jurisdictions | 1,774 | 3.6 | % | |||||
| Changes in unrecognized tax benefits | — | — | % | |||||
| Total | $ | (23,542) | (47.7) | % | ||||
(a) State taxes in California, Illinois, and Massachusetts made up the majority of the tax effect in this category.
| Years Ended December 31, | ||||||||||||||
| (In thousands) | 2024 | 2023 | ||||||||||||
| Expected tax at statutory rate | $ | 9,762 | $ | (5,736) | ||||||||||
| Foreign taxes at other rates | (532) | (213) | ||||||||||||
| Valuation allowance changes | (10,464) | 8,513 | ||||||||||||
| Global intangible low-taxed income inclusion | 5,571 | — | ||||||||||||
| State income taxes, net of federal benefit | (1,281) | (170) | ||||||||||||
| Research credits | (956) | (633) | ||||||||||||
| Worthless stock deduction | (12,632) | — | ||||||||||||
| Disallowed expenses and other | (63) | 725 | ||||||||||||
| Total | $ | (10,595) | $ | 2,486 | ||||||||||
The Company's release of the valuation allowance for the year ended December 31, 2025 was primarily attributable to Canada and resulted from a reassessment of the realizability of its deferred tax assets based on sufficient positive evidence, including recent and projected future taxable income, and including the impact of cost reduction actions. Based on this review, the Company determined that it is more likely than not that deferred tax assets are realizable and therefore reversed the valuation allowance in Canada during the year.
The Company's release of its valuation allowance in the year ended December 31, 2024 was partly due to the IP transfer discussed below, the cybersecurity division cost reduction actions, recent cumulative pretax income, and projections of future income. Based on a review of this evidence, the Company determined that there was sufficient positive evidence that it is more likely than not that certain deferred tax assets are realizable and therefore released a portion of the valuation allowance during the year.
During 2024, the Company completed an intra-entity asset transfer of certain intellectual property (“IP Transfer”) to the U.S., which was classified as an arm’s length transaction at fair value pursuant to the asset transfer agreement. The fair value of the IP asset was a non-recurring fair value measurement. With the assistance of a third-party valuation specialist, the fair value of the IP was determined using the income method, which reflects the Company's assumptions regarding projected revenue, earnings before interest and taxes and a discount rate. The assumptions used in the estimation of the IP asset involved Level 3 inputs of the fair value hierarchy. The tax deduction amortization related to the IP asset will be recognized in future periods over the next fifteen years.
The transaction resulted in a step-up of tax-deductible basis driven by the fair value of the IP Transfer, and accordingly, created a temporary difference where the tax basis exceeded the financial statement basis of such intangible asset, which resulted in the recognition of a discrete tax benefit of $3.7 million. The tax-deductible amortization related to the transferred IP rights will be recognized in future periods. The deferred tax asset and the tax benefit were measured based on the enacted tax rates expected to apply in the years the asset is expected to be realized. The Company expects to realize the deferred tax asset resulting from the IP Transfer and will assess the realizability of the deferred tax asset quarterly.
The Company recorded an income tax benefit related to a worthless stock deduction for the Company’s investment in one of its wholly owned subsidiaries. The worthless stock deduction was $60.2 million, resulting in an estimated tax benefit of $12.6 million.
In addition, the Company received a favorable response in connection with its Mutual Agreement Procedure ("MAP") request related to a Belgium audit concluded in 2020. The Company recorded a net tax benefit of $1.2 million during the year ended December 31, 2024 in connection with the MAP request.
The Company's policy is to record interest and penalties on income taxes as income tax expense. The Company recorded no expense or benefit in 2025 and a benefit of $0.2 million in 2024, and an expense of less than $0.1 million in 2023.
Significant components of the Company's deferred tax assets and liabilities as of December 31, 2025 and 2024, are as follows:
| December 31, | |||||||||||
| (In thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Stock and long-term compensation plans | $ | 1,424 | $ | 1,224 | |||||||
| Foreign NOL & other carryforwards | 43,597 | 48,705 | |||||||||
| U.S. and state NOL carryforwards | 8,152 | 8,128 | |||||||||
| Deferred revenue | 1,158 | 219 | |||||||||
| Pension liability | 359 | 436 | |||||||||
| Intangible assets | 5,197 | 7,855 | |||||||||
| Lease liability | 2,088 | 2,310 | |||||||||
| Capitalized research and development | 3,868 | 1,054 | |||||||||
| Accrued expenses and other | 1,842 | 1,036 | |||||||||
| Total gross deferred tax assets | 67,685 | 70,967 | |||||||||
| Less: Valuation allowance | (1,709) | (37,246) | |||||||||
| Net deferred income tax assets | $ | 65,976 | $ | 33,721 | |||||||
| Deferred tax liabilities: | |||||||||||
| Tax on unremitted foreign earnings | $ | 833 | $ | 3,516 | |||||||
| Right of use asset | 2,471 | 2,527 | |||||||||
| Depreciation and amortization | — | 2,378 | |||||||||
| Tax on credits | 5,047 | 4,810 | |||||||||
| Contract acquisition costs | 3,880 | 3,654 | |||||||||
| Deferred tax liabilities | $ | 12,231 | $ | 16,885 | |||||||
| Net deferred tax assets | $ | 53,745 | $ | 16,836 | |||||||
Deferred tax assets and liabilities are netted by tax jurisdiction.
The valuation allowance against the net deferred tax assets as of December 31, 2025 and 2024 was $1.7 million and $37.2 million, respectively.
The Company recorded changes in valuation allowance of $35.5 million and $10.5 million, during the years ended December 31, 2025 and 2024, respectively, against deferred tax assets that, based on the Company's assessment are considered not to be more likely than not to be realized. See above regarding the decrease in the valuation allowance in 2025 and 2024.
The Company assesses the need for a valuation allowance on a regular basis, weighing all positive and negative evidence to determine whether a deferred tax asset will be fully or partially realized. In evaluating the realizability of deferred tax assets, significant pieces of negative evidence such as 3-year cumulative losses are considered. The Company also reviews reversal patterns of temporary differences to determine if the Company would have sufficient taxable income due to the reversal of temporary differences to support the realization of deferred tax assets. In 2023, the Company continued to maintain a valuation allowance against certain deferred tax assets in jurisdictions where assets are not more likely than not to be realized. In 2025 and 2024, the Company reversed the valuation allowance in certain jurisdictions based on an assessment of the ability to utilize the deferred tax assets. For all other remaining deferred tax assets, the Company believes it is still more likely than not that the results of future operations or tax planning strategies will generate sufficient taxable income to realize the deferred tax assets.
At December 31, 2025, the Company had gross federal, foreign and state net operating loss (NOL) carryforwards and other foreign deductible carryforwards as shown in the following table:
| (In thousands) | Carryforward | Expiration | |||||||||
| NOL Carryforward | |||||||||||
| Canada | $ | 27,220 | 2036-2043 | ||||||||
| United States | 6,565 | 2032-2037 | |||||||||
| United States | 15,171 | None | |||||||||
| Other foreign | 5,411 | None | |||||||||
| Canada province | 23,229 | 2036-2044 | |||||||||
| U.S. states | 52,298 | 2031-2046 | |||||||||
| $ | 129,894 | ||||||||||
| Other Carryforwards | |||||||||||
| United States credit | $ | 1,323 | 2033-2035 | ||||||||
| Canada | 58,324 | None | |||||||||
| Canada province | 66,370 | None | |||||||||
| Capital loss | 375 | None | |||||||||
| Canada credits | 12,127 | 2033-2045 | |||||||||
| Canada province credits | 5,697 | 2036-2045 | |||||||||
| $ | 144,216 | ||||||||||
| $ | 274,110 | ||||||||||
ASC 740, Income Taxes sets a “more-likely-than-not” criterion for recognizing the tax benefit of uncertain tax positions. As of December 31, 2025, 2024, and 2023, the Company had no reserves.
The Company files income tax returns in the U.S. federal jurisdiction and in many state and foreign jurisdictions, and is subject to examination of its income tax returns by the IRS and other tax authorities.
The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company's tax audits are resolved in a manner not consistent with the Company's expectations, there could be a requirement to adjust the provision for income taxes in the period such resolution occurs. There are no unrecognized tax benefits as of December 31, 2025 that, if recognized, would affect the effective tax rate.
The Company's primary tax jurisdictions and the earliest tax year subject to audit are presented in the following table.
| Australia | 2017 | ||||
| Austria | 2019 | ||||
| Belgium | 2021 | ||||
| Canada | 2021 | ||||
| Netherlands | 2020 | ||||
| Singapore | 2020 | ||||
| Switzerland | 2023 | ||||
| United Kingdom | 2023 | ||||
| United States | 2022 | ||||
The Company's tax payments, net of refunds, were as follows:
| (In thousands) | 2025 | |||||||
| Federal | $ | 1,748 | ||||||
| State and local | 472 | |||||||
| Foreign | ||||||||
| Belgium | 566 | |||||||
| Switzerland | 3,310 | |||||||
| Zurich, Switzerland | 1,349 | |||||||
| Other | 2,196 | |||||||
| Total | $ | 9,641 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Mar 6, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Mar 16, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 8, 2018 | |
| 2016 | Mar 10, 2017 | |
| 2015 | Feb 29, 2016 | |
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.