TaskUs, Inc.TASK
TaskUs, Inc. Income Taxes Disclosure
Income Taxes
The components of income before income taxes consists of the following, for the periods indicated:
| Year ended December 31, | |||||||||||||||||
(in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| United States | $ | 78,622 | $ | 33,595 | $ | 25,009 | |||||||||||
Foreign | 58,052 | 40,586 | 50,023 | ||||||||||||||
| Income before income taxes | $ | 136,674 | $ | 74,181 | $ | 75,032 | |||||||||||
The provision for income taxes consists of the following, for the periods indicated:
| Year ended December 31, | |||||||||||||||||
(in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
Current: | |||||||||||||||||
Federal | $ | 16,828 | $ | 16,716 | $ | 20,676 | |||||||||||
State | 4,750 | 5,044 | 6,328 | ||||||||||||||
Foreign | 20,294 | 17,440 | 10,297 | ||||||||||||||
| Total current tax expense | 41,872 | 39,200 | 37,301 | ||||||||||||||
Deferred: | |||||||||||||||||
Federal | (3,725) | (6,706) | (8,377) | ||||||||||||||
State | (821) | (386) | (1,060) | ||||||||||||||
Foreign | (2,927) | (3,797) | 1,478 | ||||||||||||||
| Total deferred tax benefit | (7,473) | (10,889) | (7,959) | ||||||||||||||
| Total provision for income taxes | $ | 34,399 | $ | 28,311 | $ | 29,342 | |||||||||||
The following table presents the tax effects of temporary differences that give rise to significant portions of deferred tax assets and deferred tax liabilities as of the dates indicated:
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
Deferred Tax Assets | |||||||||||
Accruals | $ | 4,853 | $ | 8,317 | |||||||
Allowances and reserves | 209 | 307 | |||||||||
Intercompany payable | 2,539 | 2,139 | |||||||||
State taxes | 645 | 810 | |||||||||
| Stock-based compensation expense | 7,468 | 7,720 | |||||||||
Deferred revenue | 740 | 840 | |||||||||
| Operating lease liabilities | 6,733 | 1,698 | |||||||||
Fixed assets | 10,872 | 7,254 | |||||||||
| Section 267 - Intercompany Payable | 4,283 | 3,757 | |||||||||
| Other capitalized costs | 3,679 | 3,147 | |||||||||
Other | 1,174 | 1,620 | |||||||||
Gross deferred tax assets | 43,195 | 37,609 | |||||||||
Valuation allowance | (907) | — | |||||||||
Total deferred tax assets | $ | 42,288 | $ | 37,609 | |||||||
Deferred Tax Liabilities | |||||||||||
Intangibles | (36,312) | (40,604) | |||||||||
| Operating lease right-of-use assets | (5,570) | (1,644) | |||||||||
Unrealized foreign exchange gain/loss | (762) | 147 | |||||||||
| Other | (1,582) | (4,123) | |||||||||
Total deferred tax liabilities | $ | (44,226) | $ | (46,224) | |||||||
Net deferred tax liabilities | $ | (1,938) | $ | (8,615) | |||||||
The Company assessed the available positive and negative evidence to estimate whether it was more likely than not that some portion, or all, of the deferred tax assets would be realized. Based on the level of historical taxable income and projections for future taxable income over the periods during which the Company’s deferred tax assets are deductible, management believes that it is more likely than not that the Company will realize the benefits of its deductible temporary differences and carry forwards, net of the existing valuation allowances as of December 31, 2025.
As of December 31, 2025, federal net operating loss carryforwards of subsidiaries in the Philippines and United Kingdom amounted to $0.8 million. Our United Kingdom net operating loss can be carried forward for an indefinite period. Our net operating losses in the Philippines can be carried forward until 2028. As of December 31, 2025, our U.S. federal foreign tax credit of $0.2 million will expire between 2031 and 2035.
The following is a reconciliation stated as a percentage of pretax income of the U.S. federal statutory income tax rate (21%) to the Company’s effective tax rate:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Federal tax rate | 21 | % | 21 | % | 21 | % | |||||||||||
State taxes, net of federal benefit | 2 | 4 | 4 | ||||||||||||||
| Nondeductible officers’ compensation | 2 | 4 | 6 | ||||||||||||||
Global Intangible Low Tax Income (GILTI) | 3 | 5 | 12 | ||||||||||||||
Foreign Derived Intangible Income (FDII) | (2) | (3) | (2) | ||||||||||||||
Return to accrual adjustment | — | 4 | 1 | ||||||||||||||
| Nondeductible litigation costs | — | 4 | — | ||||||||||||||
| Stock-based compensation expense | (1) | — | 7 | ||||||||||||||
Foreign jurisdiction income tax holiday | — | — | (2) | ||||||||||||||
Foreign tax credit | (3) | (4) | (10) | ||||||||||||||
Foreign tax rate differential | — | — | (4) | ||||||||||||||
| Tax credits | — | (1) | (1) | ||||||||||||||
Reserves for tax contingencies | 2 | 2 | 4 | ||||||||||||||
| Earn-out consideration | — | — | 2 | ||||||||||||||
Other adjustments | 1 | 2 | 1 | ||||||||||||||
Effective tax rate | 25 | % | 38 | % | 39 | % | |||||||||||
The Company operates under tax holidays in the Philippines, which were effective through December 31, 2025, and may be extended for certain sites, if certain additional requirements are satisfied. The tax holidays are conditional upon the Company meeting certain employment and investment thresholds. The impact of these tax holidays decreased foreign taxes by $4.3 million, $3.2 million and $5.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. The benefit of the tax holidays on net income per share (diluted) was $0.05, $0.03 and $0.05 for the years ended December 31, 2025, 2024 and 2023, respectively.
As of December 31, 2025, unremitted earnings of the subsidiaries outside of the U.S. were approximately $418.6 million, which the Company has not made a provision for U.S. or additional foreign withholding taxes and state taxes. The Company’s practice and intention are to indefinitely reinvest these earnings outside the U.S. Determination of the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable because of the complexities of the hypothetical calculation.
Members of the Organisation for Economic Co-operation and Development (the “OECD”) have agreed in principle to a global minimum tax of 15% of reported profits (“Pillar Two”). The OECD have published model rules on Pillar Two. Many countries have now incorporated Pillar Two model rule concepts into their domestic laws. On January 5, 2026, the OECD/G20 announced the Side-by-Side (“SbS”) package, implemented as administrative guidance and modifying the operation of Pillar Two rules. The package introduces simplifications and new safe harbors for U.S. and other multinational companies where domestic and international tax systems meet robust requirements to coexist with Pillar Two which would fully exempt U.S.-parented groups from the application of two of the three Pillar Two top up taxes. We continue to review the impact of Pillar Two in light of legislative changes in multiple countries. For the year ended December 31, 2025, the impact of Pillar Two rules on the effective tax rate of the Company was immaterial. Pursuant to introduction of SbS package, we anticipate that Pillar Two rules will not have any material impact on the tax expense of the Company for future years.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA permanently extends certain elements of the Tax Cuts and Jobs Act of 2017, revises international tax frameworks, and reinstates favorable tax treatment for certain business-related items. The Company has evaluated the provisions of the OBBBA and concluded that its enactment did not have a material impact on its consolidated financial statements or results of operations for the year ended December 31, 2025.
A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:
| Year ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
Uncertain tax benefit balance as of beginning of period | $ | 6,039 | $ | 4,229 | |||||||
Gross increases (decreases) - tax positions for current period | 2,181 | 2,021 | |||||||||
Gross increases (decreases) - tax position in prior periods | 502 | (211) | |||||||||
Uncertain tax benefit balance as of end of period | $ | 8,722 | $ | 6,039 | |||||||
As of December 31, 2025, the Company had approximately $8.7 million of unrecognized tax benefits that if recognized would affect the effective income tax rate. The Company estimates no material changes to its uncertain tax positions within the next 12 months.
The Company recognizes interest and penalties related to uncertain tax positions as components of provision for income taxes. As of December 31, 2025, the Company accrued interest and penalties of $0.5 million and $0.1 million, respectively.
The Company files income tax returns in US federal and state jurisdictions, as well as the foreign jurisdictions it operates in, including the Philippines, Canada, India, Greece, Mexico, Taiwan, the United Kingdom, Ireland, Colombia, Japan, Malaysia, Poland, Romania, Croatia, Serbia, Egypt and South Africa. As of December 31, 2025, the tax years 2020 to 2024 are subject to examination by tax authorities.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 5, 2026 | Showing above |
| 2024 | Mar 6, 2025 | |
| 2023 | Mar 8, 2024 | |
| 2022 | Mar 6, 2023 | |
| 2021 | Mar 9, 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.