Everpure, Inc.P
Everpure, Inc. Income Taxes Disclosure
Income Taxes
As disclosed in Note 2, we adopted ASU 2023-09 on a prospective basis for our fiscal year 2026. Accordingly, comparative financial information for prior periods has not been restated and continues to be reported under the accounting standards in effect for those periods.
The geographical breakdown of income before provision for income taxes is as follows (in thousands):
| Fiscal Year Ended | |||||||||||||||||
| 2024 | 2025 | 2026 | |||||||||||||||
| Domestic | $ | (2,565) | $ | 32,566 | $ | 84,344 | |||||||||||
| International | 93,151 | 115,268 | 139,940 | ||||||||||||||
| Total | $ | 90,586 | $ | 147,834 | $ | 224,284 | |||||||||||
The components of the provision for income taxes are as follows (in thousands):
| Fiscal Year Ended | |||||||||||||||||
| 2024 | 2025 | 2026 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 2,407 | $ | 268 | $ | 637 | |||||||||||
| State | 9,678 | 5,474 | 3,459 | ||||||||||||||
| Foreign | 15,239 | 26,631 | 24,152 | ||||||||||||||
| Total | $ | 27,324 | $ | 32,373 | $ | 28,248 | |||||||||||
| Deferred: | |||||||||||||||||
| Foreign | $ | 1,951 | $ | 8,722 | $ | 7,855 | |||||||||||
| Provision for income taxes | $ | 29,275 | $ | 41,095 | $ | 36,103 | |||||||||||
The reconciliation of income taxes at the federal statutory income tax rate to the provision for income taxes is as follows (in thousands):
| Fiscal Year Ended | |||||||||||
| 2024 | 2025 | ||||||||||
| Tax at federal statutory rate | $ | 19,023 | $ | 31,045 | |||||||
| State tax, net of federal benefit | 7,559 | 3,966 | |||||||||
| Stock-based compensation expense | (21,779) | (50,981) | |||||||||
| Research and development tax credits | (19,033) | (36,379) | |||||||||
| U.S. taxes on foreign income | 10,956 | 12,701 | |||||||||
Foreign-derived intangible income deduction | (8,706) | (2,882) | |||||||||
| Foreign rate differential | (5,861) | 4,327 | |||||||||
| Withholding tax | 3,490 | 6,820 | |||||||||
| Change in valuation allowance | 37,529 | 69,432 | |||||||||
| Non-deductible expenses | 2,943 | 2,646 | |||||||||
| Other | 3,154 | 400 | |||||||||
| Provision for income taxes | $ | 29,275 | $ | 41,095 | |||||||
The tabular rate reconciliation table below for fiscal 2026 is as follows (in thousands):
Fiscal Year Ended 2026 | |||||||||||
| Amount | Percent | ||||||||||
| U.S. federal statutory tax rate | $ | 47,100 | 21.0 | % | |||||||
State and local income taxes, net of federal benefit (1) | 2,714 | 1.2 | |||||||||
| Foreign tax effects: | |||||||||||
| Ireland | |||||||||||
| Statutory rate differential | (8,158) | (3.6) | |||||||||
| Interest income | 6,432 | 2.9 | |||||||||
| Other | (249) | (0.1) | |||||||||
| Brazil | 2,496 | 1.1 | |||||||||
| Czech Republic | |||||||||||
| Research and development tax credits | (5,630) | (2.5) | |||||||||
| Other | (821) | (0.4) | |||||||||
| United Kingdom | |||||||||||
| Intercompany revenue true up | 2,560 | 1.1 | |||||||||
| Other | (1,971) | (0.9) | |||||||||
| Other foreign jurisdictions | |||||||||||
| Withholding taxes | 3,269 | 1.5 | |||||||||
| Other | 2,965 | 1.3 | |||||||||
| Effect of cross-border tax laws: | |||||||||||
| Subpart F income | 17,618 | 7.9 | |||||||||
| Other | 106 | 0.0 | |||||||||
| Tax credits: | |||||||||||
| Research and development tax credits | (41,761) | (18.6) | |||||||||
| Changes in valuation allowances | 50,891 | 22.7 | |||||||||
| Non-taxable or non-deductible items: | |||||||||||
| Stock-based compensation expense | (46,806) | (20.9) | |||||||||
| Other adjustments | 2,896 | 1.3 | |||||||||
| Changes in unrecognized tax benefits | 1,727 | 0.8 | |||||||||
| Other | 725 | 0.3 | |||||||||
| Total tax provision and effective tax rate | $ | 36,103 | 16.1 | % | |||||||
_________________________________
(1) State taxes in Illinois, Minnesota, and Texas made up the majority of the tax effect in this category.
The table below provides the summary of income taxes paid by jurisdiction for fiscal 2026 (in thousands):
Fiscal Year Ended 2026 | |||||
| State and local | $ | 4,439 | |||
| Foreign: | |||||
| Ireland | 7,097 | ||||
| India | 6,350 | ||||
| United Kingdom | 3,095 | ||||
| Brazil | 2,602 | ||||
| Other | 8,936 | ||||
| Total | $ | 32,519 | |||
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of our deferred tax assets and liabilities were as follows (in thousands):
| At the End of Fiscal | |||||||||||
| 2025 | 2026 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 32,227 | $ | 122,115 | |||||||
| Tax credit carryover | 248,502 | 334,957 | |||||||||
| Accruals and reserves | 34,259 | 40,766 | |||||||||
| Deferred revenue | 110,176 | 113,005 | |||||||||
| Stock-based compensation expense | 19,067 | 20,700 | |||||||||
| ASC 842 lease liabilities | 42,375 | 51,598 | |||||||||
| Capitalized research and development | 430,114 | 373,906 | |||||||||
| Other | 3,240 | 4,188 | |||||||||
| Total deferred tax assets | $ | 919,960 | $ | 1,061,235 | |||||||
| Valuation allowance | (755,509) | (837,625) | |||||||||
| Total deferred tax assets, net of valuation allowance | $ | 164,451 | $ | 223,610 | |||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and amortization | $ | (62,494) | $ | (97,158) | |||||||
| Deferred commissions | (70,219) | (89,323) | |||||||||
| ASC 842 right-of-use assets | (39,552) | (44,137) | |||||||||
| Interest income | (13,423) | (22,085) | |||||||||
| Total deferred tax liabilities | $ | (185,688) | $ | (252,703) | |||||||
| Net deferred tax liabilities | $ | (21,237) | $ | (29,093) | |||||||
At the end of fiscal 2026, we had $476.0 million of undistributed earnings from our non-U.S. operations held by our foreign subsidiaries. Of this amount, $361.7 million is intended to be remitted to the U.S. without incurring additional U.S. income taxes or foreign withholding taxes because these earnings have already been subject to U.S. taxation in prior years.
The remaining $114.3 million is intended to be indefinitely reinvested outside the U.S., and accordingly, no additional U.S. income taxes or foreign withholding taxes have been provided on these earnings. Determination of the amount of unrecognized deferred tax liability related to the remaining foreign jurisdictions is not practicable.
At the end of fiscal 2026, we had net operating loss carryforwards for federal income tax purposes of approximately $407.4 million and state income tax purposes of approximately $602.1 million. The federal net operating loss carryforwards have an indefinite life while the state net operating loss carryforwards begin to expire in fiscal 2027.
We had federal and state research and development tax credit carryforwards of approximately $255.0 million and $205.3 million at the end of fiscal 2026. The federal research and development tax credit carryforwards will expire commencing in fiscal 2029, while the state research and development tax credit carryforwards have no expiration date.
Realization of deferred tax assets is dependent on future taxable income, the existence and timing of which is uncertain. Based on our history of losses, management has determined that it is more likely than not that the U.S. deferred tax assets will not be realized, and accordingly has placed a full valuation allowance on the net U.S. deferred tax assets. The valuation allowance increased by $93.7 million and $82.1 million, respectively, during fiscal 2025 and 2026.
Utilization of the net operating loss carryforwards and credits may be subject to substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. In February 2026, we completed an analysis through the end of fiscal 2026 to evaluate whether there are any limitations of our net operating loss carryforwards and concluded that there was not a limitation that would result in the permanent expiration of carryforwards before they are utilized.
Uncertain Tax Positions
The activity related to the unrecognized tax benefits is as follows (in thousands):
| Fiscal Year Ended | |||||||||||||||||
| 2024 | 2025 | 2026 | |||||||||||||||
| Gross unrecognized tax benefits—beginning balance | $ | 68,897 | $ | 82,115 | $ | 101,390 | |||||||||||
| Decreases related to tax positions taken during prior years | (274) | (1,597) | (5,853) | ||||||||||||||
| Increases related to tax positions taken during prior years | — | 3,193 | — | ||||||||||||||
Decreases related to tax positions taken during current year | (16) | — | — | ||||||||||||||
Increases related to tax positions taken during current year | 13,508 | 17,679 | 20,624 | ||||||||||||||
| Gross unrecognized tax benefits—ending balance | $ | 82,115 | $ | 101,390 | $ | 116,161 | |||||||||||
At the end of fiscal 2026, our gross unrecognized tax benefit was approximately $116.2 million, $8.7 million of which if recognized, would have an impact on the effective tax rate.
At the end of fiscal 2026, we had no current or cumulative interest and penalties related to uncertain tax positions.
We file income tax returns in the U.S. federal jurisdiction as well as many U.S. states and foreign jurisdictions. The tax returns for fiscal years 2009 and forward remain open to examination by the major jurisdictions in which we are subject to tax. The tax returns for fiscal years outside the normal statutes of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized.
The Organization for Economic Co-operation and Development (OECD) has developed a framework to implement a 15% global minimum corporate tax rate (Pillar Two), and certain countries in which we operate have enacted or are implementing related legislation. In January 2026, additional administrative guidance was released to coordinate the application of these rules. Although the United States has not adopted Pillar Two, the guidance is expected to limit certain top-up taxes on U.S.-parented groups. While we continue to monitor developments, we do not expect Pillar Two to materially impact our effective tax rate or consolidated financial statementsHistorical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 25, 2026 | Showing above |
| 2025 | Mar 27, 2025 | |
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.