Pagaya Technologies Ltd.PGY
Pagaya Technologies Ltd. Income Taxes Disclosure
INCOME TAXES
Corporate Income Tax - Ordinary taxable income in Israel is subject to a corporate tax rate of 23%.
Ordinary taxable income in Israel is subject to a corporate tax rate of 23%. However, the Company has received an approval from the Israeli Tax authorities on November 18, 2021 for Preferred Technological Enterprise (“PTE”) status. The Company is eligible for PTE status which is implemented commencing 2020. Income from a PTE is subject to 12% tax rate. The Company is currently in the process of obtaining a renewal of its PTE status.
Foreign Exchange Regulations in Israel
Under the Foreign Exchange Regulations, the Company calculates its tax liability in U.S. Dollars according to certain orders. The tax liability, as calculated in U.S. Dollars is translated into NIS according to the exchange rate as of December 31st of each year.
One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the U.S. which contains a broad range of tax reform provisions affecting businesses. The Company took an accelerated deduction following the enactment of new tax law. The OBBBA legislation is not expected to have a material impact on our effective tax rate, deferred tax position, or results of operations in 2026.
Non-Israeli subsidiaries are taxed according to the tax laws in their respective countries of residence. The components of income (loss) before income taxes are as follows (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic (Israel) | $ | (74,582) | $ | (8,480) | $ | (53,292) | |||||||||||
| Foreign | 126,207 | (412,642) | (127,876) | ||||||||||||||
| Total income (loss) before income taxes | $ | 51,625 | $ | (421,122) | $ | (181,168) | |||||||||||
The income tax (benefit) expense consists of (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Domestic | $ | (57) | $ | (247) | $ | 593 | |||||||||||
| Foreign | (19,499) | 24,741 | 16,601 | ||||||||||||||
| Total current | (19,556) | 24,494 | 17,194 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Domestic | (189) | 82 | (461) | ||||||||||||||
| Foreign | — | — | (1,162) | ||||||||||||||
| Total deferred | (189) | 82 | (1,623) | ||||||||||||||
| Total income tax provision | $ | (19,745) | $ | 24,576 | $ | 15,571 | |||||||||||
Effective Tax Rate
The following table presents the reconciliation between Company’s statutory tax and effective income taxes the for the year ended December 31, 2025 after the adoption of ASU 2023-09 (in thousands):
| December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| Theoretical income taxes at Israel statutory rate | $ | 11,874 | 23 | % | |||||||
| Foreign tax effects: | |||||||||||
| United States: | |||||||||||
| State and local income taxes, net of federal income tax effect | (3,158) | (6) | % | ||||||||
| Statutory tax rate difference | (3,081) | (6) | % | ||||||||
| Interest expense adjustments | (7,183) | (14) | % | ||||||||
| Base Erosion and Anti-Abuse Tax (BEAT) | 6,255 | 12 | % | ||||||||
| Change in valuation allowances | (25,404) | (49) | % | ||||||||
| Non-deductible compensations | 3,294 | 6 | % | ||||||||
| Contingent consideration | (1,241) | (2) | % | ||||||||
| Other | (247) | — | % | ||||||||
| Cayman Islands | 2,814 | 5 | % | ||||||||
| Other foreign jurisdictions | 16 | — | % | ||||||||
| Change in valuation allowances | 6,420 | 12 | % | ||||||||
| (Nontaxable) or nondeductible items: | |||||||||||
| Share-based payment awards | 5,690 | 11 | % | ||||||||
| Statutory tax rate difference (Preferred technological enterprise) | 4,874 | 9 | % | ||||||||
| Changes in unrecognized tax benefits | (20,592) | (40) | % | ||||||||
| Other adjustments | (76) | — | % | ||||||||
| Effective income tax benefit | $ | (19,745) | NM* | ||||||||
The following tables presents the reconciliation between Company’s statutory tax and effective income taxes the years ended December 31, 2024 and 2023 prior to the adoption of ASU 2023-09 (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Loss before income taxes | $ | (421,122) | $ | (181,168) | |||||||
| Israel statutory income tax rate | 23 | % | 23 | % | |||||||
| Theoretical income taxes at statutory rate | (96,858) | (41,669) | |||||||||
| Preferred technological enterprise benefit | 949 | 5,891 | |||||||||
| Deferred tax assets for which valuation allowance was provided | 82,602 | 16,067 | |||||||||
| Permanent differences | 10,033 | 7,643 | |||||||||
| Uncertain tax positions | 9,035 | 13,500 | |||||||||
| Prior year taxes | (1,416) | (2,312) | |||||||||
| Subsidiaries taxed at a different tax rate | 17,594 | 16,443 | |||||||||
Changes in valuation allowance | — | (1,162) | |||||||||
Other adjustments | 2,637 | 1,170 | |||||||||
Effective income tax | $ | 24,576 | $ | 15,571 | |||||||
| Effective tax rate | NM* | NM* | |||||||||
*NM = Not meaningful.
Deferred Tax Assets and Liabilities
Deferred taxes reflect the tax 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 Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2025 and 2024, a
valuation allowance was provided reducing the deferred tax assets due to uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets.
As of December 31, 2025 and 2024, deferred tax assets and deferred tax liabilities presented in the consolidated balance sheets are comprised as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Carry forward tax losses | $ | 19,854 | $ | 13,912 | |||||||
| Research and development cost | 5,657 | 8,930 | |||||||||
| Compensations and benefits | 7,218 | 9,748 | |||||||||
| Operating lease liability | 4,847 | 5,525 | |||||||||
| Investments credit loss | 64,327 | 96,324 | |||||||||
| Interest expense (Section 163j) | — | 8,082 | |||||||||
| Other comprehensive income | 10,911 | 2,715 | |||||||||
| Capital loss | 1,262 | 948 | |||||||||
| Equity method and other investments | 3,228 | 1,062 | |||||||||
| Other | 3,837 | 983 | |||||||||
| Deferred tax assets before valuation allowance | 121,141 | 148,229 | |||||||||
| Valuation allowance | 111,648 | 140,020 | |||||||||
| Deferred tax assets | 9,493 | 8,209 | |||||||||
| Intangible assets | (1,066) | (1,838) | |||||||||
| Right-of-use assets | (4,305) | (5,401) | |||||||||
| Capitalized research and development costs | (3,759) | — | |||||||||
| Equity method and other investments | — | (904) | |||||||||
| Property, equipment and software | (335) | (246) | |||||||||
| Other | (28) | (9) | |||||||||
| Deferred tax liabilities | (9,493) | (8,398) | |||||||||
| Deferred tax liabilities, net | $ | — | $ | (189) | |||||||
As of December 31, 2025 the Company has an accumulated tax loss carry forward of approximately $110.7 million in Israel and $32.3 million federal and state losses in the U.S which can be offset with the limitation as described in Section 382 of the IRS Code due to U.S subsidiary prior change in ownership. These losses do not have an expiration date.
Uncertain Tax Positions
A reconciliation of the beginning and ending balances of the total amounts of unrecognized tax benefits is as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Uncertain tax positions, beginning of the year | $ | 31,170 | $ | 22,135 | |||||||
| (Decrease) increase in tax positions for prior years | (25,724) | (13,001) | |||||||||
| Increases related to current year tax positions | 5,543 | 21,622 | |||||||||
| Revaluation | (411) | 414 | |||||||||
| Uncertain tax positions, end of year | $ | 10,578 | $ | 31,170 | |||||||
As of December 31, 2025 and 2024, unrecognized tax benefits of $10.6 million and $31.2 million, respectively, if recognized, would affect our effective tax rate in a future period. The Company currently does not expect uncertain tax positions to change significantly over the next twelve months.
The Company accrued interest and penalties related to uncertain tax positions recorded during the years ended December 31, 2025, 2024, and 2023. The amounts were immaterial.
Cash Income Taxes Paid (Net of Refunds)
The components of income taxes paid (net of refunds) for the year ended December 31, 2025 are as follows (in thousands):
December 31, 2025 | |||||
| Domestic (Israel) | $ | 114 | |||
| Foreign (U.S.) | 2,381 | ||||
Total | $ | 2,495 | |||
Tax Assessments
The Company files income tax return in various jurisdictions with varying statue of limitations. As of December 31, 2025, the Company have received final tax assessments in Israel through 2020. In 2025, the Company is currently subject to tax audits in Israel and federal and state tax audits in U.S. The tax audits are ongoing and to date, no material issues have been raised and no adjustments have been proposed.
Pillar Two Taxation
On October 8, 2021, the Organisation for Economic Co-operation and Development (“OECD”)/G20 inclusive framework (the “Inclusive Framework”) on Base Erosion and Profit Shifting published a statement updating and finalizing the key components
of a two-pillar plan on global tax reform. The Inclusive Framework plan has now been agreed to by more than 140 OECD
members. While many countries have adopted some or all aspects of these rules, some countries have not adopted any or all of
them, and many interpretive questions remain that are expected to be addressed in future guidance. In December 2025, Israel enacted Pillar Two legislation to implement a 15% global minimum tax on multinational enterprise groups with consolidated revenues exceeding €750 million in at least two of the four preceding fiscal years, effective from January 1, 2026. The Company is evaluating the effects of the legislation on our effective tax rate and cash tax position.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 12, 2025 | |
| 2023 | Apr 25, 2024 | |
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.