TERADATA CORP /DE/TDC
TERADATA CORP /DE/ Income Taxes Disclosure
Income Taxes
For the years ended December 31, income before income taxes consisted of the following:
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| Income before income taxes | |||||||||||||||||
| United States | $ | 44 | $ | 58 | $ | 35 | |||||||||||
| Foreign | 134 | 106 | 82 | ||||||||||||||
| Total income before income taxes | $ | 178 | $ | 164 | $ | 117 | |||||||||||
For the years ended December 31, income tax expense consisted of the following:
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| Income tax expense | |||||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | (6) | $ | 32 | $ | 25 | |||||||||||
| State and local | 1 | 5 | 5 | ||||||||||||||
| Foreign | 22 | 24 | 36 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 21 | (9) | (12) | ||||||||||||||
| State and local | 3 | (2) | (2) | ||||||||||||||
| Foreign | 7 | — | 3 | ||||||||||||||
| Total income tax expense | $ | 48 | $ | 50 | $ | 55 | |||||||||||
| Effective income tax rate | 27.0 | % | 30.5 | % | 47.0 | % | |||||||||||
The following table presents the principal components, (on a prospective basis, as enhanced by ASU No. 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures), of the difference between the effective tax rate and the United States federal statutory income tax rate for the years ended December 31:
| 2025 | 2025 | |||||||||||||
| (amounts in millions) | Amount | % | ||||||||||||
| Income tax expense at the U.S. federal tax rate | $ | 37 | 21.0 | % | ||||||||||
| Foreign tax effects | ||||||||||||||
| Ireland | ||||||||||||||
| Statutory tax rate difference between Ireland and U.S. | (8) | (4.5) | % | |||||||||||
| Argentina | ||||||||||||||
| Statutory tax rate difference between Argentina and U.S. | 1 | 0.6 | % | |||||||||||
| Permanent Tax Benefit for Hyperinflationary Adjustment | (4) | (2.4) | % | |||||||||||
| Valuation Allowance Offset | 4 | 2.2% | ||||||||||||
| Withholding Tax for Ireland | 3 | 1.7% | ||||||||||||
| Other foreign jurisdictions | 7 | 3.9 | % | |||||||||||
| Effect of Cross Border Tax Laws | ||||||||||||||
| GILTI Tax | 2 | 1.1 | % | |||||||||||
| Subpart F Income | 3 | 1.7 | % | |||||||||||
| Foreign Tax Credits | (5) | (2.8) | % | |||||||||||
| Incremental US Tax on US Branches | 2 | 1.1 | % | |||||||||||
State and local income taxes, net of federal benefits (a) | 2 | 1.1 | % | |||||||||||
| Non-Taxable or Non-Deductible Items | ||||||||||||||
| Share-Based Payment Awards | 15 | 8.4 | % | |||||||||||
| Tax Credits | ||||||||||||||
| US Research & Development Tax Credits | (5) | (2.8) | % | |||||||||||
| US Investment Tax Credit | (5) | (2.8) | % | |||||||||||
| Change in valuation allowance | 5 | 2.8 | % | |||||||||||
| Changes in unrecognized tax positions | (6) | (3.3) | % | |||||||||||
| Effective income tax rate | $ | 48 | 27.0 | % | ||||||||||
(a) State taxes in Arizona, California, Minnesota, Illinois, New Jersey, North Carolina, Rhode Island and Texas made up the majority (greater than 50 percent) of the tax effect in this category.
The following table presents the principal components, (as reported in prior years), of the difference between the effective tax rate and the United States federal statutory income tax rate for the years ended December 31:
| 2024 | 2023 | |||||||||||||
| Income tax expense at the U.S. federal tax rate | 21.0 | % | 21.0 | % | ||||||||||
| Foreign income tax differential | (3.2) | % | 1.5 | % | ||||||||||
| U.S. tax on foreign earnings | (0.7) | % | (1.7) | % | ||||||||||
| State and local income taxes | (1.3) | % | (3.2) | % | ||||||||||
| U.S. permanent book/tax differences | 1.8 | % | 3.7 | % | ||||||||||
| U.S. research and development tax credits | (4.2) | % | (6.1) | % | ||||||||||
| Change in valuation allowance | 10.7 | % | 18.6 | % | ||||||||||
Argentina hyperinflationary adjustment | — | % | 13.1 | % | ||||||||||
| Tax impact of stock compensation | 4.3 | % | 1.7 | % | ||||||||||
| Tax impact of uncertain tax positions | 2.1 | % | (0.8) | % | ||||||||||
| Other, net | — | % | (0.8) | % | ||||||||||
| Effective income tax rate | 30.5 | % | 47.0 | % | ||||||||||
The 2025 effective tax rate included a net $2 million of discrete tax benefit, of which $9 million of tax benefit resulted from the reversal of unrecognized tax benefits, a majority of which was due to the settlement of the Company's 2020 federal income tax audit in the first quarter. This benefit was largely offset by $7 million of additional tax expense from stock-based compensation vesting.
The 2024 effective tax rate included a net $3 million of discrete tax expense, a majority of which related to additional tax expense from stock-based compensation vesting.
The 2023 effective tax rate included a net $18 million of discrete tax expense, of which $15 million of tax expense related to the foreign currency exchange translation impact on deferred tax and tax payable balances for Teradata's Argentina operations due to hyperinflation in Argentina and $10 million of tax expense related to a valuation allowance recorded against deferred tax assets for Argentina and other reorganization and transformation activities. These were partially offset by $4 million tax benefit related to the reversal of a FIN 48 tax reserve due to the expiration of statute of limitations and $3 million of incremental tax benefit related to stock-based compensation.
Deferred income tax assets and liabilities included in the balance sheets at December 31 were as follows:
| In millions | 2025 | 2024 | |||||||||
| Deferred income tax assets | |||||||||||
| Employee pensions and other liabilities | $ | 42 | $ | 41 | |||||||
| Other balance sheet reserves and allowances | 30 | 29 | |||||||||
| Operating lease liabilities | 2 | 2 | |||||||||
| Tax loss and credit carryforwards | 133 | 115 | |||||||||
| Deferred revenue | 3 | 3 | |||||||||
| Intangibles and capitalized software | 161 | 184 | |||||||||
| Total deferred income tax assets | 371 | 374 | |||||||||
| Valuation allowance | (110) | (101) | |||||||||
| Net deferred income tax assets | 261 | 273 | |||||||||
| Deferred income tax liabilities | |||||||||||
| Right of use assets - operating lease | 2 | 2 | |||||||||
| Property and equipment | 30 | 24 | |||||||||
| Other | 32 | 31 | |||||||||
| Total deferred income tax liabilities | 64 | 57 | |||||||||
| Total net deferred income tax assets | $ | 197 | $ | 216 | |||||||
As of December 31, 2025, Teradata had NOL and tax credit carryforwards totaling $135 million (tax effected and before any valuation allowance offset and application of recognition criteria for uncertain tax positions). Of the total tax carryforwards, $12 million are NOLs in the United States and certain foreign jurisdictions, a small portion of which will begin to expire in 2026, which have a $4 million valuation allowance offset; $24 million are United States foreign tax credit carryforwards which expire in 2029, which have a $24 million valuation allowance offset; $5 million are federal R&D tax credit carryforward which will begin to expire in 2045; and $94 million are California R&D tax credits that have an indefinite carryforward period, which have a $69 million valuation allowance offset and $25 million of FIN 48 reserve recorded.
The Company considers a majority of its foreign earnings to not be indefinitely reinvested outside of the United States, and any distributions of profits from non-U.S. subsidiaries are not expected to cause a significant United States tax impact in the future. However, these distributions may be subject to non-U.S. withholding taxes if profits are distributed from certain jurisdictions. The Company has recorded $4 million of deferred foreign withholding tax expense with respect to certain earnings which are not considered permanently reinvested as they would be taxable upon remittance. Deferred taxes have not been provided on earnings considered indefinitely reinvested.
The Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The Company reflects any interest and penalties recorded in connection with its uncertain tax positions as a component of income tax expense.
As of December 31, 2025, the Company’s uncertain tax positions totaled approximately $38 million, of which $13 million is reflected in the other liabilities section of the Company’s balance sheet as a non-current liability and $25 million of uncertain tax positions relates to certain tax attributes generated by the Company, which are netted against the underlying deferred tax assets recorded on the balance sheet. The entire balance of $38 million in uncertain tax positions would cause a decrease in the effective income tax rate upon recognition. Teradata has recorded $2 million of interest accruals related to its uncertain tax liabilities as of December 31, 2025.
Below is a roll-forward of the Company’s liability related to uncertain tax positions at December 31:
| In millions | 2025 | 2024 | |||||||||
| Balance at January 1 | $ | 44 | $ | 40 | |||||||
| Gross increases for prior period tax positions | 1 | 1 | |||||||||
| Gross increases for current period tax positions | 3 | 3 | |||||||||
| Decreases due to the lapse of applicable statute of limitations | (2) | — | |||||||||
| Decreases relating to settlements with taxing authorities | (8) | — | |||||||||
| Balance at December 31 | $ | 38 | $ | 44 | |||||||
The Company and its subsidiaries file income tax returns in the United States and various state jurisdictions, as well as numerous foreign jurisdictions. As of December 31, 2025, the Company has ongoing tax audits related to a limited number of foreign jurisdictions. The Company's tax returns for years 2022-2025 are still open for assessment by tax authorities in its major jurisdictions.
Supplemental Cash Flow data
For the year ended December 31, 2025, the Company paid the following income taxes (net of refunds received), disaggregated by jurisdiction:
| In millions | 2025 | |||||||
| Income tax paid (net of refunds received) | ||||||||
| Domestic | ||||||||
| Federal | $ | 43 | ||||||
| State and local | 4 | |||||||
| Foreign | ||||||||
| Ireland | 7 | |||||||
| Other | 17 | |||||||
| Total income tax paid (net of refunds received) | $ | 71 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 27, 2017 | |
| 2015 | Feb 26, 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.