TAKE TWO INTERACTIVE SOFTWARE INCTTWO
TAKE TWO INTERACTIVE SOFTWARE INC Income Taxes Disclosure
INCOME TAXES
Components of Loss before income taxes are as follows:
| Fiscal Year Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| Domestic | $ | (447.2) | $ | (2,471.1) | $ | (2,081.8) | ||||||||||||||
| Foreign | 249.4 | (2,020.2) | (1,621.0) | |||||||||||||||||
| Loss before income taxes | $ | (197.8) | $ | (4,491.3) | $ | (3,702.8) | ||||||||||||||
Provision for (benefit from) current and deferred income taxes consists of the following:
| Fiscal Year Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| Current: | ||||||||||||||||||||
| U.S. federal | $ | 9.9 | $ | 0.2 | $ | 23.0 | ||||||||||||||
| U.S. state and local | 2.1 | 11.5 | 12.4 | |||||||||||||||||
| Foreign | 166.1 | 115.0 | 107.5 | |||||||||||||||||
| Total current income taxes | 178.1 | 126.7 | 142.9 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| U.S. federal | 0.3 | (55.3) | 24.6 | |||||||||||||||||
| U.S. state and local | — | — | (22.6) | |||||||||||||||||
| Foreign | (78.0) | (83.8) | (103.5) | |||||||||||||||||
| Total deferred income taxes | (77.7) | (139.1) | (101.5) | |||||||||||||||||
| Provision for (benefit from) income taxes | $ | 100.4 | $ | (12.4) | $ | 41.4 | ||||||||||||||
Beginning with fiscal year ended March 31, 2026, we adopted ASU 2023-09 prospectively (refer to Note 1 – Basis of Presentation and Significant Accounting Policies). A reconciliation of our effective tax rate to the U.S. statutory federal income tax rate pursuant to the disclosure requirements of ASU 2023-09 for the fiscal year ended March 31, 2026 is as follows:
| Fiscal Year Ended March 31, 2026 | ||||||||||||||
| U.S. federal statutory rate | $ | (41.5) | 21.0 | % | ||||||||||
State and local taxes, net of U.S. federal benefit(1) | 4.9 | (2.5) | % | |||||||||||
Foreign tax effects(2) | ||||||||||||||
| Turkey | ||||||||||||||
| Withholding taxes | 62.6 | (31.7) | % | |||||||||||
| Nondeductible and other | 10.6 | (5.4) | % | |||||||||||
| United Kingdom | ||||||||||||||
Nondeductible and other(3) | 11.2 | (5.6) | % | |||||||||||
| Switzerland | ||||||||||||||
| Foreign tax rate differential | 9.3 | (4.7) | % | |||||||||||
| Nondeductible and other | 7.1 | (3.6) | % | |||||||||||
| Other foreign jurisdictions | 9.9 | (5.0) | % | |||||||||||
Effect of cross-border tax laws(4) | (30.4) | 15.3 | % | |||||||||||
| Research & development credits | (45.1) | 22.8 | % | |||||||||||
Changes in valuation allowances(5) | 103.8 | (52.5) | % | |||||||||||
| Nontaxable or nondeductible items | ||||||||||||||
| Excess tax benefits from stock-based compensation | (25.3) | 12.8 | % | |||||||||||
| Nondeductible compensation | 7.0 | (3.6) | % | |||||||||||
| Nondeductible and other | 2.4 | (1.1) | % | |||||||||||
Changes in unrecognized tax benefits, including interest(6) | 13.9 | (7.0) | % | |||||||||||
| Effective tax rate | $ | 100.4 | (50.8) | % | ||||||||||
(1) California and Minnesota state taxes make up the majority (greater than 50%) of this category. Changes in state valuation allowances as a result of a determination in the fiscal year ended March 31, 2026 that it was more likely than not that such deferred tax assets would not be realized, are reflected in this category.
(2) Foreign tax effects include the changes in our valuation allowance on deferred tax assets as a result of a determination in the fiscal year ended March 31, 2026 that it was more likely than not that such deferred tax assets would not be realized. The changes are included in their respective international jurisdictions.
(3) Includes the impact of Pillar Two.
(4) Effect of cross-border tax laws are presented on a net basis, primarily related to Net Controlled Foreign Corporation Tested Income (NCTI), formally known as Global Intangible Low Taxed Income (GILTI) and foreign tax credits.
(5) The change in domestic valuation allowance includes an increase in our valuation allowance on deferred tax assets as a result of a determination in the fiscal year ended March 31, 2026 that it was more likely than not that such deferred tax assets would not be realized.
(6) Changes in unrecognized tax benefits are presented on an aggregated basis for all jurisdictions.
| Fiscal Year Ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| U.S. federal statutory rate | 21.0 | % | 21.0 | % | ||||||||||
| State and local taxes, net of U.S. federal benefit | 0.4 | % | 0.6 | % | ||||||||||
Foreign tax rate differential(1) | (0.2) | % | 0.2 | % | ||||||||||
Foreign earnings(2) | (0.5) | % | (1.5) | % | ||||||||||
Tax credits(3) | 1.2 | % | 1.7 | % | ||||||||||
| Excess tax benefits from stock-based compensation | 0.2 | % | (0.1) | % | ||||||||||
| Earn-out adjustments | — | % | 0.1 | % | ||||||||||
Valuation allowance-domestic(4) | (5.0) | % | (9.1) | % | ||||||||||
Valuation allowance-foreign(4) | (0.6) | % | (1.1) | % | ||||||||||
| Nondeductible compensation | (0.1) | % | (0.1) | % | ||||||||||
| Global intangible low-taxed income | (0.5) | % | (1.0) | % | ||||||||||
| Foreign-derived intangible income | 0.3 | % | 0.5 | % | ||||||||||
| Change in reserves | — | % | 0.9 | % | ||||||||||
| Goodwill impairment | (16.0) | % | (12.8) | % | ||||||||||
| Other | 0.1 | % | (0.4) | % | ||||||||||
| Effective tax rate | 0.3 | % | (1.1) | % | ||||||||||
(1) The foreign rate differentials in relation to foreign earnings, for all periods presented, are primarily driven by changes in the mix of our foreign earnings and the difference between the foreign and U.S. income tax rates.
(2) Fiscal year ended March 31, 2024 includes tax expense of $29.2 from a decrease in the deferred tax assets related to Switzerland's Federal Act on Tax Reform and AVH Financing ("TRAF") enacted on January 1, 2020.
(3) Tax benefits were recorded for fiscal years ended March 31, 2025 and 2024 attributable to certain tax credits related to software development activities.
(4) The change in domestic and foreign valuation allowance includes an increase in our valuation allowance on deferred tax assets as a result of a determination in the fiscal years ended March 31, 2025 and 2024 that it was more likely than not that such deferred tax assets would not be realized.
The effects of temporary differences that gave rise to our deferred tax assets and liabilities were as follows:
| March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| Capitalized development costs, software and depreciation | $ | 388.4 | $ | 440.6 | ||||||||||
| Tax credit carryforward | 339.3 | 232.5 | ||||||||||||
| Net operating loss carryforward | 199.8 | 104.1 | ||||||||||||
| Equity-based compensation | 146.0 | 158.3 | ||||||||||||
| Tax basis step up related to TRAF | 131.4 | 131.1 | ||||||||||||
| Operating lease liabilities | 108.3 | 100.2 | ||||||||||||
| Accrued compensation expense | 101.6 | 79.7 | ||||||||||||
| Disallowed interest | 7.7 | 20.8 | ||||||||||||
| Deferred revenue | 8.9 | 2.8 | ||||||||||||
| Business reorganization | 0.8 | 1.1 | ||||||||||||
| Other | 22.6 | 25.7 | ||||||||||||
| Total deferred tax assets | 1,454.8 | 1,296.9 | ||||||||||||
| Less: Valuation allowance | (1,262.3) | (1,127.0) | ||||||||||||
| Net deferred tax assets | $ | 192.5 | $ | 169.9 | ||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Intangible amortization | $ | (207.8) | $ | (338.1) | ||||||||||
| Right-of-use assets | (89.3) | (76.3) | ||||||||||||
| Withholding taxes | (77.6) | (15.0) | ||||||||||||
| Total deferred tax liabilities | (374.7) | (429.4) | ||||||||||||
Net deferred tax liability(1) | $ | (182.2) | $ | (259.5) | ||||||||||
(1) As of March 31, 2026 and 2025, $0.1 and $0.1 are included in Deferred tax assets, included within Other assets, respectively, on our Consolidated Balance Sheets. As of March 31, 2026 and 2025, $182.3 and $259.6 are included in Deferred tax liabilities, net, respectively, on our Consolidated Balance Sheets.
We assess the realizability of the deferred tax assets based on the available positive and negative evidence in order to determine the amount which is more likely than not to be realized and record a valuation allowance as necessary. Due to our cumulative loss position, which provides significant negative evidence, we recognized a tax expense of $135.3 from an increase in our valuation allowance on U.S. and foreign deferred tax assets, as a result of a determination that it was more likely than not that such deferred tax assets would not be realized. The remaining net deferred tax liability is primarily related to a basis difference in intangibles as a result of the acquisition of Zynga in May 2022.
At March 31, 2026, we had domestic net operating loss carryforwards totaling $1,077.8 of which $34.9 will expire from 2027 to 2029, $205.1 will expire from 2030 to 2040, $339.8 will expire from 2041 to 2045, and the remainder will be carried forward indefinitely. In addition, we had foreign net operating loss carryforwards of $356.4, of which $272.8 will expire from 2027 to 2033, $14.6 will expire from 2042 to 2044 and the remainder may be carried forward indefinitely.
At March 31, 2026, we had domestic tax credit carryforwards totaling $514.8, of which $159.1 expire from 2039 to 2046, and the remainder may be carried forward indefinitely. In addition, we had international tax credits of $17.2 which will expire from 2034 to 2043.
As of March 31, 2026, it is our intention to reinvest indefinitely undistributed earnings of certain foreign subsidiaries. Accordingly, no provision has been made for foreign withholding taxes or U.S. income taxes which may become payable if undistributed earnings of such certain foreign subsidiaries are repatriated. It is not practicable to estimate the tax liability that would arise if these earnings were remitted.
We are regularly audited by domestic and foreign taxing authorities. Audits may result in tax assessments in excess of amounts claimed and the payment of additional taxes. We believe that our tax return positions comply with applicable tax law and that we have adequately provided for reasonably foreseeable assessments of additional taxes. Additionally, we believe that any assessments in excess of the amounts provided for will not have a material adverse effect on our Consolidated Financial Statements. It is possible that settlement of audits or the expiration of the statute of limitations may have an impact on our effective tax rate in future periods.
We recognize interest and penalties related to uncertain tax positions in the provision for income taxes in our Consolidated Statements of Operations. For the fiscal years ended March 31, 2026, 2025, and 2024, we recognized an increase
of interest and penalties of $7.2, $14.8, and $13.5, respectively. The gross amount of interest and penalties accrued as of March 31, 2026 and 2025 was $55.6 and $48.4, respectively.
As of March 31, 2026, we had gross unrecognized tax benefits, including interest and penalties, of $274.5, of which $110.6 would affect our effective tax rate if realized. For the fiscal year ended March 31, 2026, gross unrecognized tax benefits increased by $7.4.
We are no longer subject to audit for U.S. federal income tax returns for periods prior to our fiscal year ended March 31, 2022, and with a few exceptions, and state income tax returns for periods prior to the fiscal year ended March 31, 2021. We are no longer subject to income tax examinations in non-U.S. jurisdictions for years prior to fiscal year ended March 31, 2018. Certain U.S. federal, state and foreign taxing authorities are currently examining our income tax returns for the fiscal years ended March 31, 2018 through March 31, 2025.
The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year. The actual amount could vary significantly depending on the ultimate timing and nature of any settlements.
The aggregate changes to the liability for gross uncertain tax positions, excluding interest and penalties, were as follows:
| Fiscal Year Ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| Balance, beginning of period | $ | 218.6 | $ | 242.8 | $ | 274.7 | ||||||||||||||
| Additions: | ||||||||||||||||||||
| Current year tax positions | 28.7 | 63.6 | 41.4 | |||||||||||||||||
| Prior year tax positions | — | — | 2.3 | |||||||||||||||||
| Reduction of prior year tax positions | (10.2) | (60.3) | — | |||||||||||||||||
| Lapse of statute of limitations | (18.3) | (28.1) | (76.2) | |||||||||||||||||
| Other | — | 0.6 | 0.6 | |||||||||||||||||
| Balance, end of period | $ | 218.8 | $ | 218.6 | $ | 242.8 | ||||||||||||||
We believe that we have provided for any reasonably foreseeable outcomes related to our tax audits and that any settlement will not have a material adverse effect on our consolidated financial statements. However, there can be no assurances as to the possible outcomes.
Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the fiscal year ended March 31, 2026 were as follows:
| Fiscal Year Ended March 31, 2026 | ||||||||
| U.S. federal | $ | — | ||||||
| U.S. state and local | 0.7 | |||||||
| Foreign: | ||||||||
| Finland | 26.0 | |||||||
| Turkey | 83.6 | |||||||
| United Kingdom | 19.3 | |||||||
| Other | 19.8 | |||||||
| Total | $ | 149.4 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 22, 2026 | Showing above |
| 2025 | May 20, 2025 | |
| 2024 | May 22, 2024 | |
| 2023 | May 26, 2023 | |
| 2022 | May 17, 2022 | |
| 2021 | May 19, 2021 | |
| 2020 | May 22, 2020 | |
| 2019 | May 14, 2019 | |
| 2018 | May 17, 2018 | |
| 2017 | May 24, 2017 | |
| 2016 | May 19, 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.