TRINET GROUP, INC.TNET
TRINET GROUP, INC. Income Taxes Disclosure
INCOME TAXES
As of December 31, 2025 and 2024, the total amount of gross interest and penalties accrued were immaterial. The unrecognized tax benefit, including accrued interest and penalties, is included in other non-current liabilities on the consolidated balance sheets.
Provision for Income Taxes
We are subject to tax in U.S. federal and various state and local jurisdictions, as well as Canada and India. We are open to federal and significant state income tax examinations for tax year 2019 and subsequent years. The provision for income taxes consists of the following:
| Year Ended December 31, | |||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||
| Current: | |||||||||||
Federal | $ | 11 | $ | 50 | $ | 96 | |||||
State | 5 | 4 | 24 | ||||||||
| Foreign | 2 | — | 2 | ||||||||
| Total Current | 18 | 54 | 122 | ||||||||
| Deferred: | |||||||||||
Federal | 40 | (2) | 1 | ||||||||
State | 3 | 1 | 3 | ||||||||
| Foreign | 1 | — | — | ||||||||
| Total Deferred | 44 | (1) | 4 | ||||||||
| Total | $ | 62 | $ | 53 | $ | 126 | |||||
Income tax paid (net of refunds) exceeded five percent of total income taxes paid (net of refunds) in the following jurisdictions:
| Year Ended December 31, | |||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||
| Federal | $ | 23 | $ | 64 | $ | 90 | |||||
| State: | |||||||||||
| California | (1) | * | * | ||||||||
| New York State | * | 4 | 6 | ||||||||
| Other | 3 | 6 | 18 | ||||||||
| Total State | 2 | 10 | 24 | ||||||||
| Foreign: | |||||||||||
| Canada | 1 | * | * | ||||||||
| India | 1 | * | * | ||||||||
| Total Foreign | 2 | 2 | — | ||||||||
| Total | $ | 27 | $ | 76 | $ | 114 | |||||
*Jurisdiction below the threshold for the period presented.
The U.S. federal statutory income tax rate reconciled to our effective tax rate is as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (in millions, except percent) | Tax Expense/(Benefit) | Percent of Pre-Tax Income (Loss) | Tax Expense/(Benefit) | Percent of Pre-Tax Income (Loss) | Tax Expense/(Benefit) | Percent of Pre-Tax Income (Loss) | ||||||||||||||
| U.S. federal statutory tax rate | $ | 45 | 21 | % | $ | 48 | 21 | % | $ | 105 | 21 | % | ||||||||
State and local, net of federal income tax effect (1) | 7 | 3 | 4 | 2 | 23 | 5 | ||||||||||||||
| Foreign tax effects | 1 | — | — | — | — | — | ||||||||||||||
| Effect of cross-border tax laws | 1 | 1 | — | — | — | — | ||||||||||||||
| Tax credits: | ||||||||||||||||||||
| Research and development tax credits | (3) | (1) | (6) | (3) | (5) | (1) | ||||||||||||||
| Other | (1) | — | (1) | — | — | — | ||||||||||||||
| Changes in valuation allowances | 9 | 4 | — | — | — | |||||||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||||||||
| Nondeductible compensation | 3 | 1 | 5 | 2 | 4 | 1 | ||||||||||||||
| Share-based payment awards | 3 | 1 | (1) | — | (4) | (1) | ||||||||||||||
| Other | 4 | 2 | 2 | 1 | 2 | — | ||||||||||||||
| Changes in unrecognized tax benefit | — | — | 1 | — | — | — | ||||||||||||||
| Other adjustments: | ||||||||||||||||||||
| Capital loss | (7) | (3) | — | — | — | — | ||||||||||||||
| Other | — | — | 1 | — | 1 | — | ||||||||||||||
| Total | $ | 62 | 29 | % | $ | 53 | 23 | % | $ | 126 | 25 | % | ||||||||
(1) State taxes in California, New York State and New York City made up the majority (greater than 50%) of the tax effect in this category.
Our effective income tax rate increased by 6% to 29% in 2025 from 23% in 2024. The increase in the rate as compared to the same periods of 2024 was primarily attributable to decreases in tax benefits for stock-based compensation and charges to valuation allowances.
Global tax developments from the Organization for Economic Cooperation and Development proposes implementation of a global minimum tax under the Pillar Two model rules. Management has determined this development applicable to multinational businesses does not have a material impact to our business, cash flows, or financial results.
Deferred Income Taxes
Significant components of our deferred tax assets and liabilities are as follows:
| Year Ended December 31, | ||||||||
| (in millions) | 2025 | 2024 | ||||||
| Deferred tax assets: | ||||||||
| Net operating losses (federal and state) | $ | 8 | $ | 5 | ||||
| Accrued expenses | 15 | 15 | ||||||
| Accrued workers' compensation costs | 9 | 9 | ||||||
| Operating lease liabilities | 12 | 9 | ||||||
| Stock based compensation | 3 | 2 | ||||||
| Tax benefits relating to uncertain positions | — | 1 | ||||||
| Tax credits (federal, state and foreign) | 7 | 8 | ||||||
| Section 174 Capitalized R&D | 3 | 18 | ||||||
| Other | 14 | 3 | ||||||
| Total | 71 | 70 | ||||||
| Valuation allowance | (18) | (8) | ||||||
| Total deferred tax assets | 53 | 62 | ||||||
| Deferred tax liabilities: | ||||||||
| Depreciation and amortization | (71) | (35) | ||||||
| Prepaid commission expenses | (26) | (28) | ||||||
| Operating lease right-of-use assets | (8) | (5) | ||||||
| Total deferred tax liabilities | (105) | (68) | ||||||
| Net deferred tax liabilities | $ | (52) | $ | (6) | ||||
As of December 31, 2025 and 2024, we have capital loss carryforwards of $12 million and $3 million respectively. As a result of the sale of our wholly owned subsidiary Clarus, we generated approximately $9 million of capital loss carryforwards totaling $12 million which will begin to expire in 2027. We have recorded an increase in the valuation allowance of $9 million to reflect the estimated amount of deferred tax assets that may not be realized related to the capital loss carryforwards. As of December 31, 2025 and 2024, we have various gross state net operating loss carryforwards of $131 million and $82 million, respectively, most of which, if unused, will expire in years 2026 through 2045. As of December 31, 2025 and 2024, we have state tax credit carryforwards (net of federal benefit) of $5 million that will begin expiring in 2026. In addition, Canada tax credit carryforwards of $1 million will begin expiring in 2037. We have recorded an increase in the valuation allowance of $1 million to reflect the estimated amount of Canada tax credits that may not be realized.
Valuation Allowance
We have recorded a valuation allowance to reflect the estimated amount of deferred tax assets that may not be realized, related to state tax credits, state net operating loss and capital loss carryforwards. A reconciliation of the beginning and ending amount of the valuation allowance is presented in the table below:
| Year Ended December 31, | |||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||
| Valuation allowance at January 1 | $ | 8 | $ | 8 | $ | 8 | |||||
| Charged to net income | 10 | — | — | ||||||||
| Valuation allowance at December 31 | 18 | 8 | 8 | ||||||||
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits (excluding interest and penalties) related to uncertain income tax provisions, which would affect the effective tax rate if recognized, is presented in the table below:
| Year Ended December 31, | |||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||
| Unrecognized tax benefits at January 1 | $ | 8 | $ | 7 | $ | 7 | |||||
Additions for tax positions of prior periods | — | 1 | — | ||||||||
Additions for tax positions of current period | 3 | 2 | 2 | ||||||||
Reductions for tax positions of prior period: | |||||||||||
Lapse of applicable statute of limitations | (2) | (2) | (2) | ||||||||
| Unrecognized tax benefits at December 31 | $ | 9 | $ | 8 | $ | 7 | |||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2021 | Feb 14, 2022 | |
| 2020 | Feb 16, 2021 | |
| 2019 | Feb 13, 2020 | |
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.