PROCORE TECHNOLOGIES, INC.PCOR
PROCORE TECHNOLOGIES, INC. Income Taxes Disclosure
INCOME TAXES
The domestic and foreign components of loss before provision for income taxes consisted of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | (100,907) | $ | (110,860) | $ | (191,132) | |||||||||||
| Foreign | 6,926 | 6,679 | 2,711 | ||||||||||||||
| Total | $ | (93,981) | $ | (104,181) | $ | (188,421) | |||||||||||
The provision for income taxes is comprised of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| State | $ | 1,129 | $ | 1,094 | $ | 709 | |||||||||||
| Foreign | 12,493 | 1,562 | 1,333 | ||||||||||||||
| Total | 13,622 | 2,656 | 2,042 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 42 | 9 | 4 | ||||||||||||||
| State | 57 | 13 | 6 | ||||||||||||||
| Foreign | (6,919) | (903) | (779) | ||||||||||||||
| Total | (6,820) | (881) | (769) | ||||||||||||||
| Provision for income taxes | $ | 6,802 | $ | 1,775 | $ | 1,273 | |||||||||||
The following table provides a reconciliation between income taxes computed at the U.S. federal statutory rate and the Company’s provision for income taxes (in thousands) after the adoption of ASU 2023-09:
| Year ended December 31, 2025 | |||||||||||
| Dollar | Percent | ||||||||||
| US federal statutory tax rate | $ | (19,726) | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect(1) | 1,175 | (1.2) | % | ||||||||
| Foreign tax effects | |||||||||||
| Norway | |||||||||||
| IP restructuring | 3,951 | (4.2) | % | ||||||||
| Other foreign jurisdictions | 157 | (0.1) | % | ||||||||
| Effect of cross-border tax laws | |||||||||||
| Non-deductible base erosion expenses | 147 | (0.2) | % | ||||||||
| Tax credits | |||||||||||
| Research and development tax credits | (9,902) | 10.5 | % | ||||||||
| Changes in valuation allowances | 19,843 | (21.1) | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Share-based payment awards | (5,799) | 6.2 | % | ||||||||
| Disallowed executive compensation | 14,432 | (15.4) | % | ||||||||
| Meals and entertainment | 1,365 | (1.5) | % | ||||||||
| Other | 69 | 0.0 | % | ||||||||
| Changes in unrecognized tax benefits | 1,090 | (1.2) | % | ||||||||
| Effective Tax Rate | $ | 6,802 | (7.2) | % | |||||||
(1) The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include Louisiana, Massachusetts, New York, and Texas.
The following table provides a reconciliation between income taxes computed at the U.S. federal statutory rate and the Company’s provision for income taxes (in thousands) prior to the adoption of ASU 2023-09:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Computed expected income tax benefit | $ | (21,890) | $ | (39,568) | |||||||
| State income taxes - net of federal income tax benefit | (5,230) | (6,175) | |||||||||
| Change in valuation allowance | 50,681 | 42,855 | |||||||||
| Non-deductible expenses | 1,859 | 4,489 | |||||||||
| Non-deductible base erosion expenses | 4,481 | 11,403 | |||||||||
Non-deductible officers’ compensation | 9,885 | 12,775 | |||||||||
| Stock-based compensation | (8,676) | (9,678) | |||||||||
| Tax credits (federal and state) | (21,049) | (18,226) | |||||||||
| Foreign rate differential | (102) | 40 | |||||||||
| Return-to-provision | (8,127) | 3,110 | |||||||||
| Other | (57) | 248 | |||||||||
| Provision for income taxes | $ | 1,775 | $ | 1,273 | |||||||
Significant components of the Company’s deferred tax assets and liabilities are presented below (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss | $ | 227,150 | $ | 206,684 | |||||||
| Tax credits | 109,666 | 96,711 | |||||||||
| Lease liabilities | 17,122 | 17,108 | |||||||||
| Stock-based compensation | 8,408 | 9,824 | |||||||||
| Capitalized software cost | 73,163 | 91,563 | |||||||||
| Accrued bonus | 11,265 | — | |||||||||
| Other | 11,596 | 9,011 | |||||||||
| Total deferred tax assets | 458,370 | 430,901 | |||||||||
| Valuation allowance | (397,321) | (372,901) | |||||||||
| Total deferred tax assets, net | 61,049 | 58,000 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Lease assets | (11,303) | (12,264) | |||||||||
| Acquired intangible assets | (13,732) | (23,545) | |||||||||
| Contract cost asset | (30,579) | (18,922) | |||||||||
| Prepaid and accrued expenses | (3,374) | (3,816) | |||||||||
| Other | (1,078) | (897) | |||||||||
| Total deferred tax liabilities | (60,066) | (59,444) | |||||||||
| Total | $ | 983 | $ | (1,444) | |||||||
In assessing the realizability of deferred tax assets, management considers whether it is “more likely than not” that some portion or all of the deferred tax assets will be realized. Realization of future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Based on all available objective evidence management believes it is “more likely than not” that the net deferred tax assets will not be fully realizable in the U.S. as of December 31, 2025 and 2024. Accordingly, the Company’s U.S. net deferred tax assets have been fully offset by a valuation allowance. The Company periodically evaluates the recoverability of the deferred tax assets and when it is determined to be “more likely than not” that the deferred tax assets are realizable, the valuation allowance is reduced. The net deferred tax asset position at December 31, 2025 was primarily related to the Company’s India jurisdiction. The net deferred tax liability position at 2024 was primarily related to the Company’s Australia and Canada tax jurisdictions.
The following table summarizes the activity related to the valuation allowance (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 372,901 | $ | 324,422 | $ | 282,337 | |||||||||||
| Current year change | 24,420 | 48,479 | 40,810 | ||||||||||||||
| Increase in valuation allowance as a result of purchase accounting for business combinations | — | — | 1,275 | ||||||||||||||
| Ending balance | $ | 397,321 | $ | 372,901 | $ | 324,422 | |||||||||||
The current year change in the valuation allowance for the year ended December 31, 2025, resulted primarily from a net increase in our U.S. federal and state deferred tax assets. The Company did not provide for U.S. income taxes on the undistributed earnings and other outside temporary differences of foreign subsidiaries as they are considered indefinitely reinvested outside the U.S. At December 31, 2025 and 2024, the amount of temporary differences related to undistributed earnings and other outside temporary differences upon which U.S. income taxes have not been provided is immaterial to these consolidated financial statements.
As of December 31, 2025, the Company had federal net operating loss carryforwards (“NOL carryforwards”) of $913.9 million, which are comprised of definite and indefinite net operating losses. At December 31, 2025, the Company had federal NOL carryforwards of approximately $71.5 million, which expire at various intervals from the years 2036 through 2037 and had NOL carryforwards of $842.4 million which do not expire. As of December 31, 2025, the Company has state net operating losses of $660.9 million, which will begin to expire in 2029. The Internal Revenue Code (the “IRC”) of 1986, as amended, imposes restrictions on the utilization of net operating losses and credits when a Company experiences a cumulative change in ownership of more than 50% over a 3-year period. The Company has identified a portion of net operating losses and credit carryovers are subject to annual limitations, which the Company has also determined that it should be able to fully utilize these net operating losses and credit carryovers before they expire, provided the Company generates sufficient taxable income.
As of December 31, 2025, the Company had credits for research activities available for carryforward for federal income tax purposes of $109.5 million and for state income tax purposes of $47.8 million, which are available to offset future income tax in those jurisdictions and which began to expire in 2025 for federal and have no expiration for state.
The following table summarizes the activity related to unrecognized tax benefits (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 38,230 | $ | 29,041 | $ | 21,727 | |||||||||||
| Increases related to current period positions | 10,043 | 8,564 | 7,513 | ||||||||||||||
| Increases (decreases) related to prior period positions | 63 | 625 | (199) | ||||||||||||||
| Ending balance | $ | 48,336 | $ | 38,230 | $ | 29,041 | |||||||||||
Due to the Company’s full valuation allowance on federal and state taxes, none of the unrecognized tax benefits would affect the Company’s effective tax rate, if recognized. The Company does not anticipate any significant increases or decreases to its unrecognized tax positions within the next 12 months. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2025 and 2024, accrued interest and penalties related to income tax positions were immaterial.
The Company files U.S. federal, various state, and foreign income tax returns. In the normal course of business, the Company is subject to examination by taxing authorities. The tax years from 2005 forward remain subject to examination for federal purposes. Generally, state and foreign tax authorities may examine the Company’s tax returns for four years and five years, respectively, from the date an income tax return is filed. However, the taxing authorities may continue to examine the Company’s federal and state NOL carryforwards until the statute of limitations closes on the tax years in which the federal and state net operating losses are utilized.
The amount of cash income taxes paid, net of refunds, by the Company were as follows:
| Year Ended December 31, | ||||||||
| 2025 | ||||||||
| Federal | $ | — | ||||||
| State and Local | 1,326 | |||||||
| Foreign | ||||||||
| Australia | 1,015 | |||||||
| India | 2,194 | |||||||
| Ireland | 856 | |||||||
| Other Foreign | 137 | |||||||
| Total | $ | 5,528 | ||||||
The amount of cash income taxes paid by the Company during the years ended December 31, 2024 and 2023 was $2.7 million and $0.9 million, respectively.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 4, 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.