RingCentral, Inc.RNG
RingCentral, Inc. Income Taxes Disclosure
Note 13. Income Taxes
Income (loss) before provision for income taxes consisted of the following (in thousands):
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | 14,948 | $ | (88,910) | $ | (190,912) | |||||||||||
| International | 41,289 | 41,685 | 34,067 | ||||||||||||||
| Total income (loss) before provision for income taxes | $ | 56,237 | $ | (47,225) | $ | (156,845) | |||||||||||
The provision for income taxes consisted of the following (in thousands):
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 248 | $ | 2,930 | $ | — | |||||||||||
| State | 4,516 | 5,919 | 1,792 | ||||||||||||||
| Foreign | 5,916 | 5,849 | 5,972 | ||||||||||||||
| Total current | $ | 10,680 | $ | 14,698 | $ | 7,764 | |||||||||||
| Deferred | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | — | — | — | ||||||||||||||
| Foreign | 2,166 | (3,635) | 631 | ||||||||||||||
| Total deferred | 2,166 | (3,635) | 631 | ||||||||||||||
| Total income tax provision | $ | 12,846 | $ | 11,063 | $ | 8,395 | |||||||||||
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the right to deduct research and development expenditures for tax purposes in the period the expenses were incurred and instead requires all U.S. and foreign research and
development expenditures to be amortized over five and fifteen tax years, respectively. The One Big Beautiful Bill Act (or “OBBB Act”), enacted on July 4, 2025, revised these rules, permitting the deduction of certain U.S. research and development expenditures incurred in tax years beginning on or after January 1, 2025 but expenditures attributable to research and development conducted outside the U.S. must continue to be capitalized and amortized over fifteen years. The OBBB Act also provides the option to accelerate the amortization of any remaining unamortized U.S. research and development expenditures incurred in tax years beginning on or after January 1, 2022, and before January 1, 2025, over a one or two year period beginning with the first taxable year beginning after December 31, 2024. The current income tax provision is primarily for federal, state and foreign taxes currently payable that we anticipate paying as a result of statutory limitations on our ability to offset expected taxable income with net operating loss carry forwards.
The table below provides the updated requirements of ASU 2023-09 for 2025. For more details, refer to Note 1 - Description of Business and Summary of Significant Accounting Policies of this Annual Report on Form 10-K.
The effective income tax rate for the year ended December 31, 2025 differs from the statutory federal income tax rate as follows (in thousands, except percentages):
| Year Ended December 31, 2025 | |||||||||||
| $ | % | ||||||||||
| U.S. Federal Statutory Tax Rate | $ | 11,810 | 21.00 | % | |||||||
State and local income tax, net of federal (national) income tax effect (1) | 4,516 | 8.03 | |||||||||
| Foreign Tax Effects: | |||||||||||
| United Kingdom | |||||||||||
| Share-based payment awards | (710) | (1.26) | |||||||||
| Other | 493 | 0.88 | |||||||||
| China | (697) | (1.24) | |||||||||
| Canada | 747 | 1.33 | |||||||||
| Spain | |||||||||||
| R&D Tax Credits | (1,071) | (1.90) | |||||||||
| Other | 190 | 0.34 | |||||||||
| Other Non-US Jurisdictions | 502 | 0.89 | |||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | |||||||||
| Effect of cross-border tax laws: | |||||||||||
| Foreign derived intangible income (FDII) | (78) | (0.14) | |||||||||
| Global Intangible Low-taxed Income (GILTI) | 2,203 | 3.92 | |||||||||
| Tax Credits | (1,393) | (2.48) | |||||||||
| Changes in valuation allowance | (29,808) | (53.00) | |||||||||
| Nontaxable or Nondeductible Items: | |||||||||||
| Share-based payment awards | 24,172 | 42.98 | |||||||||
| Non-deductible Meals and Entertainment Expenses | 687 | 1.22 | |||||||||
| Other | 245 | 0.44 | |||||||||
| Changes in unrecognized tax benefits | 745 | 1.32 | |||||||||
| Other Adjustments | 293 | 0.52 | |||||||||
| Total income tax provision | $ | 12,846 | 22.85 | % | |||||||
(1)State taxes in Illinois, Pennsylvania, and Texas made up the majority (greater than 50%) of the tax effect in this category
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
| Year ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Federal tax benefit at statutory rate | $ | (9,917) | $ | (32,937) | |||||||
| State tax, net of federal tax benefit | 4,676 | 1,415 | |||||||||
| Research and development credits | 6,650 | (11,574) | |||||||||
| Share-based compensation | 34,227 | 10,956 | |||||||||
| Global Intangible Low-Taxed Income (“GILTI”) | — | 3,035 | |||||||||
| Foreign derived intangible income (“FDII”) | (2,143) | — | |||||||||
| Other permanent differences | (983) | 1,674 | |||||||||
| Foreign tax rate differential | (2,624) | 548 | |||||||||
| Net operating (gains) losses not recognized | (18,823) | 35,278 | |||||||||
| Total income tax provision | $ | 11,063 | $ | 8,395 | |||||||
In general, it is the Company’s practice and intention to reinvest the earnings of its non-U.S. subsidiaries in those operations. Because the Company’s non-U.S. subsidiary earnings have previously been subject to the one-time transition tax on foreign earnings required by the 2017 Tax Act, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of its foreign investments would generally be limited to foreign withholding taxes and/or U.S. state income taxes.
The following table presents income taxes paid (net of refunds received) for the year ended December 31, 2025 (in thousands):
| 2025 | |||||
| Federal | $ | 1,361 | |||
| State | 4,756 | ||||
| Foreign | 6,318 | ||||
| $ | 12,435 | ||||
Income taxes paid (net of refunds) exceeded five percent of total income taxes paid (net of refunds) in the following jurisdictions:
| 2025 | |||||
| State | |||||
| Texas | $ | 851 | |||
| Illinois | $ | 1,357 | |||
| Pennsylvania | $ | 578 | |||
| Foreign | |||||
| Canada | $ | 1,853 | |||
| India | $ | 1,497 | |||
| Spain | $ | 1,130 | |||
The types of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows (in thousands):
| Year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets | |||||||||||
| Net operating loss carryforward | $ | 382,887 | $ | 407,235 | |||||||
| Research and development credits | 74,496 | 73,352 | |||||||||
| Research and development expenditure capitalization | 148,870 | 201,814 | |||||||||
| Basis difference in investments | 416 | 138 | |||||||||
| Sales tax accrual | 139 | 67 | |||||||||
| Share-based compensation | 5,668 | 5,926 | |||||||||
| Acquired intangibles | 111,750 | 91,943 | |||||||||
| Accrued liabilities | 11,847 | 15,141 | |||||||||
| Gross deferred tax assets | 736,073 | 795,616 | |||||||||
| Valuation allowance | (607,853) | (644,379) | |||||||||
| Total deferred tax assets | 128,220 | 151,237 | |||||||||
| Deferred tax liabilities | |||||||||||
| Deferred sales commissions | (85,101) | (104,236) | |||||||||
| Lease right of use assets | (4,247) | (6,948) | |||||||||
| Property and equipment | (36,802) | (35,837) | |||||||||
| Net deferred tax assets | $ | 2,070 | $ | 4,216 | |||||||
As of December 31, 2025, the Company has federal net operating loss carryforwards of approximately $1.3 billion, which does not expire. As of December 31, 2025, the Company had foreign net operating loss carryforwards of approximately $7.0 million that will carryforward indefinitely. As of December 31, 2025, the Company had state net operating loss carryforwards of approximately $1.0 billion that will begin to expire in 2026. The Company also has research credit carryforwards for federal and California tax purposes of approximately $69.6 million and $56.2 million, respectively, available to reduce future income subject to income taxes. The federal research credit carry-forwards will begin to expire in 2028 and the California research credits carry forward indefinitely.
The Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of net operating losses in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses may be limited as prescribed under Internal Revenue Code Section 382 (“IRC Section 382”). Events which may cause limitations in the amount of the net operating losses that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Utilization of the federal and state net operating losses may be subject to substantial annual limitation due to the ownership change limitations provided by the IRC Section 382 and similar state provisions.
The Company’s management believes that, based on a number of factors, it is more likely than not, that all or some portion of the deferred tax assets will not be realized; and accordingly, for the year ended December 31, 2025, the Company has provided a valuation allowance against the Company’s U.S. net deferred tax assets. The net change in the valuation allowance for the years ended December 31, 2025 and 2024 was a decrease of $36.5 million and $30.3 million, respectively.
The following shows the changes in the gross amount of unrecognized tax benefits as of December 31, 2025 (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Unrecognized tax benefits, beginning of the year | $ | 30,193 | $ | 31,976 | $ | 26,412 | |||||||||||
| Increases related to prior year tax positions | 400 | — | — | ||||||||||||||
| Decreases related to prior year tax positions | (462) | (3,088) | (418) | ||||||||||||||
| Increases related to current year tax positions | 608 | 1,305 | 5,982 | ||||||||||||||
| Unrecognized tax benefits, end of year | $ | 30,739 | $ | 30,193 | $ | 31,976 | |||||||||||
In accordance with ASC 740-10, Income Taxes, the Company has adopted the accounting policy that interest and penalties recognized are classified as part of its income taxes.
Included in the balance of unrecognized tax benefits as of December 31, 2025 are $0.2 million of tax benefit that, if recognized, would affect the effective tax rate. Otherwise, as a result of the full valuation allowance as of December 31, 2025, current adjustments to the unrecognized tax benefit will not have an impact on our effective income tax rate. Any adjustments made after the valuation allowance is released will have an impact on the tax rate.
The Company files U.S. and foreign income tax returns with varying statutes of limitations. Due to the Company’s net carry-over of unused operating losses and tax credits, all years from 2003 forward remain subject to future examination by tax authorities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 26, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 29, 2016 | |
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.