SEMrush Holdings, Inc.SEMR
SEMrush Holdings, Inc. Income Taxes Disclosure
Income Taxes
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendment improves income tax disclosure requirements by requiring public entities, on an annual basis, to provide disclosure of defined categories in the income tax reconciliation, as well as disclosure of income taxes paid, disaggregated by jurisdiction. This guidance is effective for annual reporting periods in fiscal years beginning after December 14, 2024. As of December 31, 2025, the Company has adopted ASU 2023-09 prospectively and has enhanced its income tax disclosures included herein, to comply with the requirements. The adoption did not have an impact on the Company's financial statements.
(Loss) income before income taxes consists of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | (18,127) | $ | 17,039 | $ | (3,568) | |||||||||||
| Foreign | 8,025 | 3,363 | 8,214 | ||||||||||||||
| (Loss) income before income taxes | $ | (10,102) | $ | 20,402 | $ | 4,646 | |||||||||||
The Company is subject to income taxes in U.S. federal, state, and foreign jurisdictions. The provision for income taxes in the accompanying consolidated financial statements is comprised of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current taxes: | |||||||||||||||||
Federal | $ | 6,861 | $ | 9,477 | $ | 836 | |||||||||||
Foreign | 1,777 | 2,043 | 1,784 | ||||||||||||||
State | 1,127 | 2,521 | 775 | ||||||||||||||
| Total current taxes | 9,765 | 14,041 | 3,395 | ||||||||||||||
| Deferred taxes: | |||||||||||||||||
Federal | (44) | (871) | 227 | ||||||||||||||
Foreign | (376) | (222) | 74 | ||||||||||||||
State | 50 | 79 | — | ||||||||||||||
| Total deferred taxes | (370) | (1,014) | 301 | ||||||||||||||
| Provision for income taxes | $ | 9,395 | $ | 13,027 | $ | 3,696 | |||||||||||
The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023-09:
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| $ | % | ||||||||||
(Loss) income before income taxes | $ | (10,102) | |||||||||
| U.S. federal taxes at statutory rate | (2,122) | 21.0 | % | ||||||||
| State and local income tax, net of federal income tax effect | 845 | (8.4) | % | ||||||||
| Foreign tax effects | |||||||||||
| Semrush Development SL | |||||||||||
| Statutory tax rate difference | 175 | (1.7) | % | ||||||||
| Nontaxable or nondeductible items | 160 | (1.6) | % | ||||||||
| Change in valuation allowance | (128) | 1.3 | % | ||||||||
| Provision to return | (317) | 3.1 | % | ||||||||
| Semrush GmbH | |||||||||||
| Statutory tax rate difference | 122 | (1.2) | % | ||||||||
| Nontaxable or nondeductible items | (2) | — | % | ||||||||
| Change in valuation allowance | (22) | 0.2 | % | ||||||||
| Other items | 12 | (0.1) | % | ||||||||
| Brand 24 SA | |||||||||||
| Statutory tax rate difference | (166) | 1.6 | % | ||||||||
| Nontaxable or nondeductible items | 18 | (0.2) | % | ||||||||
| Provision to return | 47 | (0.5) | % | ||||||||
| Other items | (100) | 1.0 | % | ||||||||
| Other foreign jurisdictions | (137) | 1.4 | % | ||||||||
| Effect of cross border transactions | |||||||||||
| FDII | (1,039) | 10.3 | % | ||||||||
| Branch income (loss) | 176 | (1.7) | % | ||||||||
| Foreign withholding tax | 3 | — | % | ||||||||
| Enactment of new tax laws | 17 | (0.2) | % | ||||||||
| Nontaxable or nondeductible items | 1,287 | (12.7) | % | ||||||||
| Stock compensation | 2,854 | (28.3) | % | ||||||||
| Limitation on executive compensation | 4,620 | (45.7) | % | ||||||||
| Changes in valuation allowance | 1,734 | (17.2) | % | ||||||||
| Other items | 1,358 | (13.4) | % | ||||||||
| Total tax | $ | 9,395 | (93.0) | % | |||||||
The Company is required to disclose the states that make up greater than 50% of the state tax line item in the effective tax rate table, starting with the largest states first until the Company reaches greater than 50%. For the year ended December 31, 2025, these states were CA, FL, MA, and NY.
The following table is a reconciliation of the US federal statutory rate of 21% to the Company's effective rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal taxes at statutory rate | 21.0 | % | 21.0 | % | |||||||
| State taxes, net of federal benefit | 6.7 | 26.4 | |||||||||
| Foreign income tax rate differential | (1.7) | 10.1 | |||||||||
| Impact of disposition of foreign subsidiaries | — | — | |||||||||
| Non-deductible expenses | 0.0 | 0.0 | |||||||||
| Foreign derived intangible income deduction | (11.7) | (12.4) | |||||||||
| Non-deductible executive compensation | 4.4 | 26.3 | |||||||||
| Permanent differences | 2.7 | 7.0 | |||||||||
| Deferred statutory rate changes | 0.0 | (0.7) | |||||||||
| Stock compensation | 8.0 | 3.5 | |||||||||
| Foreign research and development incentive | (1.7) | (7.7) | |||||||||
| Tax attribute expiration | 4.3 | 37.4 | |||||||||
| Change in valuation allowance | 29.4 | (28.7) | |||||||||
| Other, net | 2.1 | (2.6) | |||||||||
| Effective tax rate | 63.5 | % | 79.6 | % | |||||||
The Company’s effective tax rate for the year ended December 31, 2025 differs from the U.S. statutory rate primarily due to non-deductible executive compensation, non-deductible stock compensation, non-deductible transaction-related costs, the jurisdictional mix of earnings, and state income taxes, partially offset by the change in the valuation allowance maintained against its net deferred tax assets. The Company’s effective tax rate for the years ended December 31, 2024 and December 31, 2023 differs from the U.S. statutory rate primarily due to the jurisdictional mix of earnings and the valuation allowance maintained against its net deferred tax assets.
Income taxes paid, net of refunds received, consisted of the following:
| Year Ended December 31, | |||||
| 2025 | |||||
| Federal | $ | 8,841 | |||
| State and local | 2,516 | ||||
| Foreign | |||||
| Netherlands | 1,488 | ||||
| Spain | 1,010 | ||||
| Other | 889 | ||||
| Total | $ | 14,744 | |||
Deferred tax assets and liabilities reflect the net tax effects of net operating loss carryovers and the temporary differences between the assets and liabilities carrying value for financial reporting and the amounts used for income tax purposes. The Company’s significant deferred tax assets (liabilities) components are as follows:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
Net operating loss carryforwards | $ | 6,940 | $ | 9,152 | |||||||
Capitalized research and development expenditures | 23,282 | 21,684 | |||||||||
Accruals and reserves | 2,359 | 3,109 | |||||||||
Stock-based compensation | 2,958 | 2,918 | |||||||||
Intangibles | 1,046 | 560 | |||||||||
Depreciation | 150 | 122 | |||||||||
Capital loss carryforwards | 1,846 | 1,837 | |||||||||
Finance lease | 2,920 | 2,881 | |||||||||
Other deferred tax asset carryforward | 372 | 331 | |||||||||
| Gross deferred tax assets | 41,873 | 42,594 | |||||||||
Valuation allowance | (32,483) | (33,037) | |||||||||
| Total deferred tax assets | 9,390 | 9,557 | |||||||||
| Deferred tax liabilities: | |||||||||||
Depreciation | (386) | (483) | |||||||||
Intangibles | (3,048) | (3,159) | |||||||||
Deferred commissions | (4,426) | (3,070) | |||||||||
Operating lease right-of-use assets | (2,606) | (2,602) | |||||||||
Other | (399) | (1,864) | |||||||||
| Total deferred tax liabilities | (10,865) | (11,178) | |||||||||
| Net deferred tax liabilities | $ | (1,475) | $ | (1,621) | |||||||
The Company’s valuation allowance decreased by $554, primarily as a result of our current year operating results, the expensing of domestic capitalized research and development expenses under the One Big Beautiful Bill Act and an increase in the deferral of certain stock-based compensation expenses against which a valuation allowance is maintained during the year ended December 31, 2025. In assessing the ability to realize the Company’s net deferred tax assets, management considers various factors including taxable income in carryback years, future reversals of existing taxable temporary differences, tax planning strategies, and future taxable income projections to determine whether it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Based on the negative evidence, the Company has determined that the uncertainty regarding realizing its deferred tax assets is sufficient to warrant the need for a full valuation allowance against its worldwide net deferred tax assets.
As of December 31, 2025, the Company had a U.S. capital loss carryforward of $8,066 that expires in 2027. As of December 31, 2025, the Company had U.S. state net operating loss carryforwards of $12,590, substantially all of which expire at various dates through 2044. As of December 31, 2025, the Company had net operating loss carryforwards of $6,015 in other foreign jurisdictions that expire at various dates through 2029.
At December 31, 2025, 2024, and 2023, the Company had no recorded liabilities for uncertain tax positions. In addition, at December 31, 2025, 2024, and 2023, the Company had no accrued interest or penalties related to uncertain tax positions. The Company’s accounting policy is to recognize interest and penalties related to uncertain tax positions in income tax expense.
The Company files income tax returns in the U.S. federal tax jurisdiction, various state, and various foreign jurisdictions. The Company is currently open to examination under the statute of limitations by the Internal Revenue Service and material state jurisdictions for the tax years ended 2022 through 2024. Additionally, certain non-U.S. jurisdictions are no longer subject to income tax examinations by authorities for tax years before 2019.
The Company has not provided U.S. deferred income taxes or foreign withholding taxes on unremitted earnings of foreign subsidiaries of approximately $423, as such amounts are considered to be indefinitely reinvested in these jurisdictions. The accumulated earnings in the foreign subsidiaries are primarily utilized to fund working capital requirements as its subsidiaries continue to expand their operations and to fund future foreign acquisitions. The amount of any unrecognized deferred tax liability related to undistributed foreign earnings is immaterial.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Mar 7, 2024 | |
| 2022 | Mar 15, 2023 | |
| 2021 | Mar 18, 2022 | |
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.