Rush Street Interactive, Inc.RSI
Rush Street Interactive, Inc. Income Taxes Disclosure
Income Taxes
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(1) States that contribute to the majority (greater than 50%) of the tax effect in this category are Pennsylvania, Delaware and Michigan.
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(1) Includes income taxes paid in Colombia of $30.6 million.
RSILP is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, RSILP is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by RSILP is passed through to and included in the taxable income or loss of its partners, including the Company (through its ownership of the Special Limited Partner), on a pro rata basis. The Company is subject to U.S. federal income taxes and state and local income taxes with respect to its allocable share of any taxable income or loss of RSILP, as well as any stand-alone income or loss generated by the Company.
Income Tax (Benefit) Expense
(Loss) income before income taxes, by jurisdiction, was as follows:
| Years Ended December 31, | |||||||||||||||||
| ($ in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
Domestic(1) | $ | (82,824) | $ | (36,311) | $ | (86,125) | |||||||||||
Foreign | 71,745 | 68,113 | 37,279 | ||||||||||||||
(Loss) income before income taxes | $ | (11,079) | $ | 31,802 | $ | (48,846) | |||||||||||
(1)A portion of the loss before income taxes in 2025 relates to change in tax receivable agreement liability of $107.8 million recorded for the recognition of the TRA liability.
The components of the income tax (benefit) expense are:
| Years Ended December 31, | |||||||||||||||||
| ($ in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current income taxes: | |||||||||||||||||
| Federal | $ | (210) | $ | 97 | $ | (188) | |||||||||||
| State and local | 630 | 46 | 9 | ||||||||||||||
| Foreign | 26,352 | 24,243 | 11,602 | ||||||||||||||
| 26,772 | 24,386 | 11,423 | |||||||||||||||
| Deferred income taxes: | |||||||||||||||||
| Federal | (92,265) | — | — | ||||||||||||||
| State and local | (19,613) | — | — | ||||||||||||||
| Foreign | (2) | 180 | (214) | ||||||||||||||
| (111,880) | 180 | (214) | |||||||||||||||
Income tax (benefit) expense | $ | (85,108) | $ | 24,566 | $ | 11,209 | |||||||||||
The tables below provide the updated requirements of ASU 2023-09 for 2025. See Note 2, “Summary of Significant Accounting Policies - Recently Adopted Accounting Pronouncements”, for additional details on the adoption of ASU 2023-09.
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 | |||||||||||
$ | % | ||||||||||
Loss before income taxes | $ | (11,079) | |||||||||
Income tax benefit at the federal statutory rate | (2,327) | 21.00 | % | ||||||||
State income taxes, net of federal benefit(1) | (19,458) | 175.61 | % | ||||||||
Foreign tax effects | |||||||||||
Colombia | |||||||||||
Foreign income tax rate differential | 7,774 | (70.16) | % | ||||||||
Limit on foreign deductions | 4,069 | (36.72) | % | ||||||||
Other | (219) | 1.97 | % | ||||||||
Canada (Domestic) | |||||||||||
Foreign income tax rate differential | (944) | 8.52 | % | ||||||||
Provincial taxes | 1,810 | (16.33) | % | ||||||||
Valuation allowance | (1,540) | 13.90 | % | ||||||||
Other | (180) | 1.62 | % | ||||||||
Other | 150 | (1.35) | % | ||||||||
Effect of change in tax laws | — | — | % | ||||||||
Effect of cross-border tax laws | |||||||||||
U.S. branch income | 15,431 | (139.27) | % | ||||||||
Tax credits | |||||||||||
Foreign tax credit | (15,637) | 141.13 | % | ||||||||
Nontaxable or nondeductible items | |||||||||||
Income not taxable to Rush Street Interactive, Inc. | (11,618) | 104.86 | % | ||||||||
Nondeductible compensation expense | 5,943 | (53.64) | % | ||||||||
Change in tax receivable agreement liability | 24,386 | (220.09) | % | ||||||||
Foreign taxes | 710 | (6.41) | % | ||||||||
Change in valuation allowance | (94,115) | 849.43 | % | ||||||||
Change in unrecognized tax benefits | — | — | % | ||||||||
Other adjustments | 657 | (5.92) | % | ||||||||
Income tax benefit and effective tax rate | $ | (85,108) | 768.15 | % | |||||||
(1) States that contribute to the majority (greater than 50%) of the tax effect in this category are Pennsylvania, Delaware and Michigan.
Income taxes paid, net of refunds, by the Company are as follows:
Year Ended December 31, 2025 | ||||||||
| ($ in thousands) | ||||||||
Federal | $ | 727 | ||||||
State | 1,196 | |||||||
Foreign(1) | 30,747 | |||||||
| Total income taxes paid | $ | 32,670 | ||||||
(1) Includes income taxes paid in Colombia of $30.6 million.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the reconciliations of income tax expense computed at the U.S. federal statutory income tax rate to the recognized income tax expense and the U.S. statutory income tax rate to effective tax rates are as follows:
| Years Ended December 31, | ||||||||||||||
| ($ in thousands) | 2024 | 2023 | ||||||||||||
| Net income (loss) before income taxes | $ | 31,802 | $ | (48,846) | ||||||||||
Less: net income (loss) before income taxes attributable to non-controlling interests | 19,621 | (33,820) | ||||||||||||
| Net income (loss) attributable to Rush Street Interactive, Inc. before income taxes | 12,181 | (15,026) | ||||||||||||
| Income tax expense (benefit) at the federal statutory rate | 2,558 | (3,155) | ||||||||||||
| State income taxes, net of federal benefit | 349 | (46) | ||||||||||||
| Nondeductible stock compensation | 2,691 | 1,351 | ||||||||||||
| Foreign operations | 24,423 | 11,387 | ||||||||||||
| Change in valuation allowance | (3,893) | 2,589 | ||||||||||||
| Other | (1,562) | (917) | ||||||||||||
| Income tax expense | $ | 24,566 | $ | 11,209 | ||||||||||
Deferred Tax Assets and Liabilities
The Company’s deferred tax position reflects the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting. Significant components of the deferred tax assets and liabilities are as follows:
| December 31, | |||||||||||
| ($ in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Investment in subsidiaries | $ | 198,117 | $ | 172,883 | |||||||
| Net operating losses | 17,238 | 26,196 | |||||||||
| Imputed interest | 7,447 | 5,501 | |||||||||
| Share-based compensation | 1,578 | 1,197 | |||||||||
Foreign tax credit | 14,568 | — | |||||||||
| Other assets | 902 | 539 | |||||||||
| Total gross deferred tax assets | 239,850 | 206,316 | |||||||||
| Valuation allowance | (81,988) | (205,794) | |||||||||
| Total deferred tax assets, net of valuation allowance | 157,862 | 522 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Investment in subsidiaries | (704) | (369) | |||||||||
| Total gross deferred tax liabilities | (704) | (369) | |||||||||
| Net deferred tax assets | $ | 157,158 | $ | 153 | |||||||
Deferred tax assets and liabilities have been offset to the extent they relate to the same tax jurisdiction. Deferred tax liabilities of $0.7 million and $0.4 million as of December 31, 2025 and 2024, respectively, are included in Other non-current liabilities on the Company’s consolidated balance sheets.
As of December 31, 2025, the Company had approximately $64.7 million and $76.1 million of federal and state net operating loss carryovers, respectively. As of December 31, 2024, the Company had approximately $92.1 million and $81.1 million of federal and state net operating loss carryovers, respectively. If not utilized, the entire federal net operating loss carryforward can be carried forward indefinitely. State net operating loss carryovers will expire in varying amounts beginning in 2032. As of December 31, 2025 and 2024, the Company has foreign net operating losses of nil and approximately $5.6 million, respectively. Additionally, the Company has foreign tax credits of $14.6 million which will begin expiring in 2034.
On a quarterly basis, management considers new evidence, both positive and negative, that could affect its view of the future realization of its deferred tax asset and adjusts the valuation allowance when it is more likely than not that all or a portion of the deferred tax asset may not be realized. As of December 31, 2025, management determined that there is sufficient positive evidence to conclude that it is more likely than not that deferred tax assets of $157.9 million, primarily in the U.S., are realizable. For purposes of forecasting taxable income, the Company relied on historical pre-tax earnings trends and incorporated assumptions about future performance that are expected to impact pre-tax results. These historical results support the expectation that the Company will generate taxable income in future periods. The Company did not recognize all U.S. deferred tax assets because the Company determined that a portion of excess income tax basis in RSILP will only reverse upon the occurrence of certain events, such as a sale of the Company’s interest in RSILP, none of which are expected to occur in the foreseeable future. As of December 31, 2025, the valuation allowance on U.S. deferred tax assets is $82.0 million.
On July 4, 2025, the U.S. Congress passed budget reconciliation bill H.R. 1, referred to as the One Big Beautiful Bill (“OBBB”). The OBBB contains several changes to corporate taxation including modifications to capitalization of research and development expenses, limitations on deductions for interest expense and accelerated fixed asset depreciation. The Company has evaluated OBBB and determined that it does not have a material impact on the consolidated financial statements.
In 2021, the Organization for Economic Co-operation and Development (the “OECD”) established an Inclusive Framework on Base Erosion and Profit Shifting and agreed on a two-pillar solution (“Pillar Two”) to global taxation,
focusing on global profit allocation and a 15% global minimum effective tax rate. On December 15, 2022, the European Union member states agreed to implement the OECD’s global minimum tax rate of 15%. The OECD issued Pillar Two model rules and continues to release guidance on these rules. The Inclusive Framework called for tax law changes by participating countries to take effect in 2024 and 2025. In response, a number of countries enacted tax laws to implement the global minimum tax. On January 5, 2026 the OECD issued a Side-by-Side package on Pillar Two which provides additional safe harbors and simplifications which may be adopted by participating countries. The Company evaluated Pillar Two in the relevant countries, and there is no impact to the tax provision for the year ended December 31, 2025. The Company will continue to evaluate the impact of these tax law changes on future reporting periods.
Uncertain Tax Positions
The Company evaluates its tax positions and recognizes tax benefits that, more-likely-than-not, will be sustained upon examination based on the technical merits of the position. The Company did not have any unrecognized tax benefits as of December 31, 2025 or 2024. The Company filed an initial year federal and state tax returns for tax year 2020, which was the first tax year subject to examination by taxing authorities. Additionally, although RSILP is treated as a partnership for U.S. federal and state income taxes purposes, it is still required to file an annual U.S. Return of Partnership Income, which is subject to examination by the Internal Revenue Service. The statute of limitations has expired for tax years through 2021 for RSILP.
Tax Receivable Agreement
Pursuant to RSILP’s election under Section 754 of the Internal Revenue Code, as amended from time to time (the “Code”), the Company expects to obtain an increase in share of the tax basis in the net assets of RSILP when RSILP Units are redeemed or exchanged by the unit holders and other qualifying transactions. The Company plans to make an election under Code Section 754 for each taxable year in which a redemption or exchange of RSILP Units occur. The Company intends to treat any redemptions and exchanges of RSILP Units by the unit holders as direct purchases of RSILP Units for U.S. federal income tax purposes. These increases in tax basis may reduce the amounts that the Company would otherwise pay in the future to various tax authorities. These increases in tax basis may also decrease gains (or increase losses) on future dispositions of certain capital assets to the extent tax basis is allocated to those capital assets.
In connection with the Business Combination, the Special Limited Partner entered into the TRA, which generally provides for the payment by it of 85% of certain net tax benefits, if any, that the Company (including the Special Limited Partner) realizes (or in certain cases is deemed to realize) as a result of an increase in tax basis and tax benefits related to the transactions contemplated under the Business Combination Agreement and the exchange of Retained RSILP Units (as defined in the Business Combination Agreement) for Class A Common Stock (or cash at the Company’s option) pursuant to RSILP’s amended and restated limited partnership agreement and tax benefits related to entering into the TRA, including tax benefits attributable to payments under the TRA. These payments are the obligation of the Special Limited Partner and not of RSILP. The actual increase in the Special Limited Partner’s allocable share of RSILP’s tax basis in its assets, as well as the amount and timing of any payments under the TRA, will vary depending upon a number of factors, including the timing of exchanges, the market price of the Class A Common Stock at the time of the exchange and the amount and timing of the recognition of RSI and its consolidated subsidiaries’ (including the Special Limited Partner’s) income. While many of the factors that will determine the amount of payments that the Special Limited Partner will make under the Tax Receivable Agreement are outside of the Company's control, the Company expects that the payments the Special Limited Partner will make under the TRA will be substantial and could have a material adverse effect on the financial condition of the Company.
Based primarily on the three-year cumulative income analysis and anticipated future earnings, management has determined that it is more likely than not that the Company will be able to utilize its deferred tax assets subject to the TRA. As of December 31, 2025 and 2024, the Company recognized a TRA liability of $130.1 million (including $1.2 million classified as current liability) and $0.7 million, respectively, based on tax benefits realized in the current and prior tax year. Unrecognized TRA liability was nil and $104.3 million as of December 31, 2025 and 2024, respectively. Change in tax receivable agreement liability of $107.8 million and $0.7 million during the years ended December 31, 2025 and 2024, respectively, was recorded upon recognition of the TRA liability. The increase in the liability is primarily due to the issuance of Class A Common Stock upon RSILP Unit exchanges.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 18, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Mar 7, 2024 | |
| 2022 | Mar 2, 2023 | |
| 2021 | Mar 7, 2022 | |
| 2020 | Mar 25, 2021 | |
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.