Ribbon Communications Inc. Income Taxes Disclosure

(24) INCOME TAXES

The components of loss from continuing operations before income taxes consisted of the following (in thousands):

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The (benefit) provision for income taxes from continuing operations consisted of the following (in thousands):

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A reconciliation of the Company’s effective tax rate for continuing operations to the U.S. statutory federal rate for the year ended December 31, 2025 is as follows:

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The state and local jurisdictions that make up the majority (greater than 50%) of the state and local income tax category in the above table, for the year ended December 31, 2025, are as follows, beginning with the largest effect in descending order: Pennsylvania, New York, New Jersey, Georgia, and California.

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A reconciliation of the Company’s effective tax rate for continuing operations to the U.S. statutory federal rate for the years ended December 31, 2024 and 2023 is as follows:

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The amount of income taxes paid, net of refunds received, by the Company for the year ended December 31, 2025 is as follows (in thousands):

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The following is a summary of the significant components of deferred income tax assets and liabilities (in thousands):

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The deferred tax assets and liabilities based on tax jurisdictions are presented in the Company’s consolidated balance sheets as follows:

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The One Big Beautiful Bill Act (the "Act") was signed into law on July 4, 2025. The Act reinstates bonus depreciation, allows for full expensing of R&D expenses, and increases the limitation of interest deductibility for 2025, amongst many other provisions. Since the Act became law during the third quarter of 2025, the Company accounted for the effects of the Act on our tax provision in the third quarter of 2025. The most significant impact of the Act for the Company is the ability to deduct the unamortized balance of capitalized R&D costs. The Company plans to accelerate this deduction over two years as permitted by the Act.

At December 31, 2025, the Company had U.S. federal net operating losses (“NOLs”) of $462.1 million, including $362.4 million of indefinite-lived federal NOLs. The Company also had U.S. state NOLs of $271.5 million. In addition, the Company had $1.6 billion of Israel NOLs. The U.S. federal NOL carryforwards that are not indefinite-lived expire between 2026 and 2038. The U.S. state NOLs begin to expire in 2026, and the Company also has indefinite-lived state NOLs. The Israel NOLs do not expire.

The Company also has available federal, state and foreign income tax credit carryforwards of $27.4 million. The federal foreign tax credit carryforwards expire between 2030 and 2032. The state tax credits, which are primarily

research and development credits, begin to expire in 2026, while others can be carried forward until exhausted. The foreign income tax credits expire in various periods.

The Company has provided for income taxes on the undistributed earnings of its non-U.S. subsidiaries as of December 31, 2025, excluding Ireland and Israel. These subsidiaries, excluding Ireland and Israel, are cost-plus or limited risk distributors that are not anticipated to need to use excess funds locally. Accordingly, the Company is required to recognize and record deferred taxes in 2025. The deferred taxes, which are primarily future withholding taxes, are recorded on the entire outside basis differences related to the foreign subsidiaries, the largest of these differences being undistributed earnings. Undistributed profits of Ireland and Israel, as well as other outside basis differences in foreign subsidiaries, were indefinitely reinvested in foreign operations. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings and outside basis differences was not practicable.

Under the provisions of the Internal Revenue Code, the net operating losses and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service. As a result of the Sonus and GENBAND merger in 2017, the Company has $92.8 million of U.S. federal net operating loss carryforwards remaining as of December 31, 2025 with an annual section 382 limitation of $9.7 million. The Company believes these NOLs are fully realizable. As a result of the ECI Acquisition in 2020, the Company has $9.6 million of U.S. federal NOLs remaining as of December 31, 2025 with an annual section 382 limitation of $1.1 million. The Company does not believe all of these NOLs are realizable and, therefore, have recorded a partial valuation allowance against these NOLs.

The Company performed an analysis to determine if, based on all available evidence, it considered it more likely than not that some portion or all of the recorded deferred tax assets will not be realized in a future period. Accordingly, the Company has recorded a valuation allowance against its U.S. deferred tax assets of $21.5 million at December 31, 2025 and $18.6 million at December 31, 2024. The increase to the U.S. valuation allowance is a result of the current year taxable loss, which does not allow the Company to utilize NOLs that are section 382 limited and therefore will expire unutilized in a future period. The Company also maintains a valuation allowance against certain of its foreign deferred tax assets, predominantly Israel, amounting to approximately $491 million at December 31, 2025 and approximately $475 million at December 31, 2024, respectively. The deferred tax assets recognized with no valuation allowance at December 31, 2025 and 2024 primarily relate to other foreign subsidiaries where recoverability is concluded to be more likely than not based on the Company’s cost-plus compensation policy, as well as NOLs and tax credits in the U.S. that are expected to be utilized prior to expiration.

A reconciliation of the Company’s unrecognized tax benefits is as follows (in thousands):

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The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. The Company had $2.9 million, $6.7 million and $14.0 million of unrecognized tax benefits, including penalties and interest, at December 31, 2025, 2024 and 2023, respectively. Of these amounts, $2.4 million, $3.6 million and $10.5 million represent the amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate for the years ended December 31, 2025, 2024 and 2023, respectively. The Company recorded income tax expense (benefit) for potential penalties and interest of $(0.2) million, $(2.2) million and $0.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. The Company had $0.7 million and $0.9 million accrued in Other long-term liabilities for penalties and interest at December 31, 2025 and 2024, respectively. The Company believes that it is reasonably possible that $0.9 million in tax positions related to its unrecognized tax benefits will be recognized within the next twelve months.

The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as various state and foreign jurisdictions. Generally, the tax years 2022 through 2025 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company’s federal and state NOLs generated prior to 2020 could be adjusted on examination even though the year in which the loss was generated is otherwise closed by the statute of limitations.

As of December 31, 2025, the Company had ongoing income tax audits in certain foreign countries. Management believes that an adequate provision has been recorded for any adjustments that may result from tax examinations.