Trade Desk, Inc.TTD
Trade Desk, Inc. Income Taxes Disclosure
Note 11—Income Taxes
The following are the domestic and foreign components of the Company’s income before income taxes (in thousands):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 677,722 | $ | 579,338 | $ | 328,853 | |||||||||||
| Foreign | (18,967) | (72,036) | (60,858) | ||||||||||||||
| Income before income taxes | $ | 658,755 | $ | 507,302 | $ | 267,995 | |||||||||||
The following are the components of the provision for income taxes (in thousands):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 11,117 | $ | 147,802 | $ | 120,049 | |||||||||||
| State and local | 22,740 | 33,019 | 24,827 | ||||||||||||||
| Foreign | 8,886 | 8,770 | 5,000 | ||||||||||||||
| Total current provision | 42,743 | 189,591 | 149,876 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 160,917 | (57,454) | (51,822) | ||||||||||||||
| State and local | 15,280 | (14,853) | (7,842) | ||||||||||||||
| Foreign | (3,489) | (3,058) | (1,157) | ||||||||||||||
| Total deferred provision | 172,708 | (75,365) | (60,821) | ||||||||||||||
| Total provision for income taxes | $ | 215,451 | $ | 114,226 | $ | 89,055 | |||||||||||
A reconciliation of the statutory tax rate to the effective tax rate for the periods presented is as follows:
Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| (in thousands) | % | (in thousands) | % | (in thousands) | % | ||||||||||||||||||||||||||||||
| United States federal statutory income tax rate | $ | 138,339 | 21.0 | % | $ | 106,533 | 21.0 | % | $ | 56,279 | 21.0 | % | |||||||||||||||||||||||
State and local income taxes, net of federal income tax effects (1) | 30,224 | 4.6 | 14,355 | 2.8 | 13,579 | 5.1 | |||||||||||||||||||||||||||||
| Foreign tax effects | |||||||||||||||||||||||||||||||||||
| United Kingdom | |||||||||||||||||||||||||||||||||||
| Statutory tax rate difference between the United Kingdom and United States | (1,380) | (0.2) | (3,518) | (0.7) | (2,926) | (1.1) | |||||||||||||||||||||||||||||
Stock-based awards (2) | (9,075) | (1.4) | (19,808) | (3.9) | (15,132) | (5.6) | |||||||||||||||||||||||||||||
| Other | (2,244) | (0.3) | (978) | (0.2) | (792) | (0.3) | |||||||||||||||||||||||||||||
Changes in valuation allowances (3) | 16,784 | 2.6 | 42,776 | 8.4 | 34,210 | 12.7 | |||||||||||||||||||||||||||||
| Other foreign jurisdictions | 2,136 | 0.3 | 2,368 | 0.5 | 1,263 | 0.5 | |||||||||||||||||||||||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Effect of cross-border tax laws | (515) | (0.1) | 9 | 0.0 | (528) | (0.2) | |||||||||||||||||||||||||||||
| Tax credits | |||||||||||||||||||||||||||||||||||
| Research and development tax credits | (17,781) | (2.7) | (30,038) | (5.9) | (23,918) | (8.9) | |||||||||||||||||||||||||||||
| Other | 33 | 0.0 | — | — | — | — | |||||||||||||||||||||||||||||
| Changes in valuation allowances | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
Stock-based awards (2) | 47,008 | 7.1 | (4,462) | (0.9) | 22,408 | 8.4 | |||||||||||||||||||||||||||||
| Other | 7,130 | 1.1 | 5,228 | 1.0 | 4,270 | 1.5 | |||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | 4,792 | 0.7 | 1,761 | 0.4 | 342 | 0.1 | |||||||||||||||||||||||||||||
| Other adjustments | — | — | — | — | — | — | |||||||||||||||||||||||||||||
| Effective income tax rate | $ | 215,451 | 32.7 | % | $ | 114,226 | 22.5 | % | $ | 89,055 | 33.2 | % | |||||||||||||||||||||||
____________
(1) | |||||
(2) | Reconciling items for stock-based awards include nondeductible stock-based compensation and benefits or detriments from stock-based awards. | ||||
(3) | See discussion below regarding the valuation allowance associated with the United Kingdom (“U.K.”). | ||||
| Certain percentages may not foot due to rounding. | |||||
Set forth below are income taxes paid, net of refunds (in thousands):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States - Federal | $ | 98,724 | $ | 134,717 | $ | 125,600 | |||||||||||
United States - State - California* | 9,361 | * | * | ||||||||||||||
United States - Other State and Local | 29,740 | 18,027 | 23,286 | ||||||||||||||
| Foreign | 12,289 | 5,835 | 3,013 | ||||||||||||||
| Total income taxes paid, net of refunds | $ | 150,114 | $ | 158,579 | $ | 151,899 | |||||||||||
* | Income taxes paid, net of refunds, for California do not meet the disaggregation threshold in years 2024 and 2023. Such amounts are not presented as comparative disclosures because such disclosures are not required. | ||||
Set forth below are the tax effects of temporary differences that give rise to a significant portion of the deferred tax assets and deferred tax liabilities (in thousands):
As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Reserves and allowances | $ | 5,971 | $ | 5,931 | |||||||
| Accrued expenses | 13,318 | 13,761 | |||||||||
| Net operating losses | 321,226 | 292,022 | |||||||||
| Research and development tax credit | 27,762 | 22,948 | |||||||||
| Stock-based compensation | 33,483 | 23,431 | |||||||||
| Prepaid expenses | (1,472) | (1,167) | |||||||||
| Property and equipment | (47,327) | (27,171) | |||||||||
Intangibles (1) | 139,822 | 161,060 | |||||||||
| Capitalized software development costs | 6,836 | 181,862 | |||||||||
| Operating lease assets | (79,563) | (57,846) | |||||||||
| Operating lease liabilities | 102,815 | 69,493 | |||||||||
| Other | 8,218 | 4,495 | |||||||||
| Valuation allowance | (475,389) | (458,605) | |||||||||
| Total deferred tax assets, net | $ | 55,700 | $ | 230,214 | |||||||
____________
| (1) | As of December 31, 2025 and 2024, includes intangibles associated with international restructuring, net of amortization, offset by a reserve for uncertain tax position. See discussion below. | ||||
Realization of the Company’s deferred tax assets is dependent primarily on the generation of future taxable income. As of each reporting date, the Company’s management considers historical, as well as future, projected taxable income along with other objectively verifiable evidence, both positive and negative. Objectively verifiable evidence includes the realization of tax attributes, assessment of tax credits and utilization of net operating loss carryforwards during the year. During 2025, management recorded an additional $17 million to maintain a full valuation allowance against its U.K. net deferred tax assets, based on the history of cumulative losses and the conclusion that future taxable income may not be available for the utilization of the deferred tax assets for U.K. income tax purposes. The Company expects to maintain this valuation allowance for the near term, until it becomes more likely than not that the benefit of these U.K. deferred tax assets will be realized by way of expected future taxable income. To the extent sufficient positive evidence becomes available, the Company may release all or a portion of its valuation allowance in one or more future periods. A release of the valuation allowance, if any, would result in the recognition of certain deferred tax assets and may result in a material income tax benefit for the period in which such release is recorded.
As of December 31, 2025, for tax return purposes, the Company had federal, state and foreign net operating loss carryforwards of approximately $0.4 million, $10 million and $1.4 billion, respectively. The federal, state and foreign net
operating loss carryforwards are subject to limitations under applicable tax law. State net operating loss carryforwards have varied expiration years beginning in 2032. Federal and foreign net operating losses carry forward indefinitely.
As of December 31, 2025, for tax return purposes, the Company had federal, state and foreign research and development tax credits of approximately $7 million, $38 million and $5 million, respectively, which can be carried forward as prescribed under applicable tax law. Federal and state tax credits will expire at various dates beginning in 2045 and 2035, respectively, unless utilized. Foreign research and development tax credits carry forward indefinitely.
As of December 31, 2025, the Company has not recorded a deferred tax liability for unremitted foreign earnings as the Company’s intention is to indefinitely reinvest these earnings outside the United States. Upon distribution of those earnings in the form of a dividend or otherwise, the Company would be subject to both state income taxes and withholding taxes payable to various foreign countries. The amounts of such tax liabilities that might be payable upon repatriation of foreign earnings are not material.
As of December 31, 2025, the Company had gross unrecognized tax benefits of approximately $116 million, $83 million of which is a reduction to deferred tax assets and the remaining $33 million which would affect the Company’s effective tax rate if recognized. As of December 31, 2024, the Company had gross unrecognized tax benefits of approximately $107 million, $73 million of which is a reduction to deferred tax assets and the remaining $34 million which would affect the Company’s effective tax rate if recognized.
The following table presents changes in gross unrecognized tax benefits (in thousands):
Year Ended December 31, | |||||||||||||||||
2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 106,989 | $ | 97,703 | $ | 90,932 | |||||||||||
| Increases related to prior year tax positions | 3,158 | 881 | 229 | ||||||||||||||
| Decreases related to prior year tax positions | (504) | — | — | ||||||||||||||
| Increases related to current year tax positions | 5,923 | 8,405 | 6,601 | ||||||||||||||
| Settlements | — | — | (59) | ||||||||||||||
| Expiration of statute of limitations | — | — | — | ||||||||||||||
| Ending balance | $ | 115,566 | $ | 106,989 | $ | 97,703 | |||||||||||
Interest and penalties related to the Company’s unrecognized tax benefits accrued as of December 31, 2025 were not material.
The Company files U.S. federal, state and foreign tax returns. The Company is currently under examination by the Internal Revenue Service for the years ended December 31, 2015, 2016, 2017, 2018, 2019 and 2020. The Company is also currently under examination by various state and foreign jurisdictions.
The Company remains subject to examination for its federal and state tax returns for the periods 2015 through 2024, and 2020 through 2024, respectively. The majority of the Company’s foreign subsidiaries remain subject to examination by local taxing authorities for 2019 and subsequent years.
In 2021, the Organization for Economic Cooperation and Development (“OECD”) announced an Inclusive Framework on Base Erosion and Profit Shifting, including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Many non-U.S. tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules in 2024 (including the European Union Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. This legislation did not impact the Company’s provision for income taxes or effective tax rate in 2025. The Company continues to monitor for evolving tax legislation in the individual jurisdictions in which it operates and for changes to its operations that could be impacted by legislation.
On July 4, 2025, the United States enacted the One Big Beautiful Bill Act (the “OBBBA”), which changes or makes permanent certain tax laws for corporations, including provisions relating to domestic research and development costs, bonus depreciation and foreign derived intangible income. The primary impact to the Company is the option to immediately deduct research and development costs paid or incurred after December 31, 2024, for income tax purposes. In
addition, the OBBBA allows for the accelerated deduction of any remaining unamortized domestic research and development costs over a one-year or two-year period beginning after December 31, 2024, at the Company’s election. As a result, during the year ended December 31, 2025, the Company recognized $175 million relating to domestic research and development costs as income taxes receivable, presented in prepaid expenses and other current assets, with a corresponding reduction in deferred tax assets. The Company continues to monitor for changes in its operations that could be impacted by the legislation.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 15, 2023 | |
| 2021 | Feb 16, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 16, 2017 | |
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.