Rimini Street, Inc.RMNI
Rimini Street, Inc. Income Taxes Disclosure
INCOME TAXES
For the years ended December 31, 2025, 2024 and 2023, income (loss) before income taxes was as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 45,437 | $ | (50,316) | $ | 29,299 | |||||||||||
| International | 10,194 | 13,673 | 11,933 | ||||||||||||||
| Income (loss) before income taxes | $ | 55,631 | $ | (36,643) | $ | 41,232 | |||||||||||
For the years ended December 31, 2025, 2024 and 2023, income taxes consisted of the following (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Current income tax expense: | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | (181) | (261) | (282) | ||||||||||||||
| Foreign | (7,187) | (9,198) | (8,246) | ||||||||||||||
| Total current income tax expense | (7,368) | (9,459) | (8,528) | ||||||||||||||
| Deferred income tax (expense) benefit: | |||||||||||||||||
| Federal | (10,251) | 9,248 | (7,477) | ||||||||||||||
| State | (993) | 419 | 734 | ||||||||||||||
| Foreign | 79 | 163 | 98 | ||||||||||||||
| Total deferred income tax (expense) benefit | (11,165) | 9,830 | (6,645) | ||||||||||||||
| Total (provision) benefit for income taxes | $ | (18,533) | $ | 371 | $ | (15,173) | |||||||||||
The Company has elected to prospectively adopt the guidance in ASU 2023-09, “Income Taxes - Improvements to Income Tax Disclosures.” In accordance with the guidance in ASU 2023-09, the reconciliation between the income tax expense computed by applying the statutory U.S. federal income tax rate to the pre-tax income before income taxes and total income tax expense recognized in the financial statements was as follows for the year ended December 31, 2025 (dollars in thousands):
| 2025 | |||||||||||
| Amount | Percent | ||||||||||
| U.S. Federal Statutory Tax Rate | $ | (11,682) | 21.0 | % | |||||||
State and Local Income Taxes, Net of Federal Income Tax Effect1 | (959) | 1.7 | % | ||||||||
| Foreign Tax Effects | |||||||||||
| Korea | |||||||||||
| Withholding taxes | (3,368) | 6.1 | % | ||||||||
| Other | 84 | (0.2) | % | ||||||||
| Taiwan | |||||||||||
| Withholding taxes | 1,092 | (2.0) | % | ||||||||
| Other | 1 | — | % | ||||||||
| Other foreign jurisdictions | (2,776) | 5.0 | % | ||||||||
| Effect of Cross-Border Tax Laws | |||||||||||
| Foreign WHT | 700 | (1.3) | % | ||||||||
| Changes in Valuation Allowances | 104 | (0.2) | % | ||||||||
| Nontaxable or Nondeductible Items | |||||||||||
| Stock based compensation | (655) | 1.2 | % | ||||||||
| Other | (693) | 1.2 | % | ||||||||
| Other Adjustments | (381) | 0.7 | % | ||||||||
| Total income tax expense and effective tax rate | $ | (18,533) | 33.3 | % | |||||||
1 California, Georgia, Illinois, New York, Texas and Wisconsin make up the majority of the state tax expense.
Prior to the adoption of ASU 2023-09, the reconciliation between the income tax benefit (expense) computed by applying the statutory U.S. federal income tax rate to the pre-tax (loss) income before income taxes and total income taxes recognized in the financial statements was as follows for the years ended December 31, 2024 and 2023 (in thousands):
| 2024 | 2023 | ||||||||||
| Income tax (expense) benefit at statutory U.S. federal rate | $ | 7,695 | $ | (8,658) | |||||||
| Income tax benefit attributable to U.S. states, net | 112 | 491 | |||||||||
| Permanent differences: | |||||||||||
| Non-deductible expenses | (329) | (116) | |||||||||
| Stock-based compensation | (1,275) | (1,666) | |||||||||
| Other | (328) | 543 | |||||||||
| Global intangible low taxed income | (170) | (40) | |||||||||
| Foreign rate differential and foreign tax credits | (499) | (600) | |||||||||
| Foreign withholding taxes | (5,422) | (4,679) | |||||||||
| Other | 512 | (464) | |||||||||
| Decrease in valuation allowance | 75 | 16 | |||||||||
| Total income tax (expense) benefit | $ | 371 | $ | (15,173) | |||||||
The difference between the federal statutory tax rate and the Company’s effective tax rate is primarily driven by foreign withholding taxes. The Company has been exploring opportunities to reduce withholding taxes such that its effective tax rate may decrease in future periods. After full utilization of net operating losses, the benefit of foreign tax and other credits would further reduce the Company’s effective tax rate.
In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, extending several key provisions of the 2017 Tax Cuts and Jobs Act. Among its updates are provisions that allow for the immediate expensing of qualifying research and development expenses and certain capital expenditures. The impacts of OBBBA are reflected in the results for the year ended December 31, 2025, and there was no material impact to the Consolidated Financial Statements.
As of December 31, 2025 and 2024, the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities were as follows (in thousands):
| 2025 | 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 35,731 | $ | 42,155 | |||||||
| Deferred revenue | 2,236 | 4,005 | |||||||||
| Accounts payable and accrued expenses | 13,402 | 13,302 | |||||||||
| Stock-based compensation | 828 | 918 | |||||||||
| Operating lease liabilities | 1,245 | 1,888 | |||||||||
| Tax credit carryforwards | 145 | 230 | |||||||||
| Other | 3,920 | 4,197 | |||||||||
| Foreign deferred assets | 2,099 | 2,012 | |||||||||
| Business interest carryforwards | 11,906 | 13,821 | |||||||||
| Gross deferred income tax assets | 71,512 | 82,528 | |||||||||
| Valuation allowance for deferred income tax assets | (230) | (225) | |||||||||
| Net deferred income tax assets | 71,282 | 82,303 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Deferred contract costs | (10,025) | (9,102) | |||||||||
| Operating lease right-of-use assets | (701) | (966) | |||||||||
| Other | (3,016) | (3,652) | |||||||||
| Deferred tax assets, net | $ | 57,540 | $ | 68,583 | |||||||
For the years ended December 31, 2025 and 2024, the change in the valuation allowance was a net decrease of $0.1 million and $0.1 million, respectively.
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 not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on management’s analysis of all available positive and negative evidence, the Company has determined that a valuation allowance is not required to be recorded on its federal and state deferred tax assets as of December 31, 2025 and 2024, respectively.
As of December 31, 2025, the Company has federal net operating tax loss carryforwards of approximately $125.4 million and varying amounts of U.S. state net operating loss carryforwards, totaling $123.3 million, that begin to expire in 2036 and 2026, respectively. As of December 31, 2025, the Company has federal foreign tax credits carryforwards of $0.1 million expiring beginning in 2026.
The Company considers any undistributed foreign subsidiaries’ earnings to be indefinitely reinvested and, accordingly, no related provision for U.S. federal or state income taxes has been provided. Upon distribution of the foreign earnings in the form of dividends or otherwise, the company could be subject to both U.S. income taxes subject to an adjustment for foreign tax credits and withholding taxes in the various countries. As of December 31, 2025, the cumulative amount of unremitted earnings of the Company’s foreign subsidiaries was approximately $65.7 million. The unrecognized deferred tax liability for these earnings was approximately $5.0 million, consisting primarily of foreign withholding taxes.
The Company files income tax returns in the U.S. federal jurisdiction, the State of California and various other state and foreign jurisdictions. The Company’s federal and state tax years for 2015 and 2010, respectively, and forward are subject to examination by taxing authorities, due to unutilized net operating losses. All foreign jurisdictions tax years are also subject to examination. The Company does not have any unrecognized tax benefits to date.
Income Taxes Paid
The following table presents income taxes paid, net of refunds received, for the year ended December 31, 2025 (in thousands):
| 2025 | |||||
| U.S. Federal | $ | — | |||
| U.S. State | 217 | ||||
| Foreign: | |||||
| Korea | 3,489 | ||||
| India | 1,075 | ||||
| Japan | 836 | ||||
| Australia | 546 | ||||
| Israel | 524 | ||||
| UK | 374 | ||||
| Taiwan | (1,071) | ||||
| Other | 1,359 | ||||
| Total income taxes paid, net | $ | 7,349 | |||
Income taxes paid, net of refunds received, were $8.8 million and $9.6 million for the years ended December 31, 2024 and 2023, respectively.
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.