Ubiquiti Inc.UI
Ubiquiti Inc. Income Taxes Disclosure
INCOME TAXES
The components of income before provision for income taxes were as follows (in thousands):
| Year ended June 30, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Domestic | $ | 326,371 | $ | 149,523 | $ | 102,930 | ||||||||||||||
| Foreign | 479,281 | 274,305 | 383,412 | |||||||||||||||||
| $ | 805,652 | $ | 423,828 | $ | 486,342 | |||||||||||||||
The provision for income taxes consisted of the following (in thousands):
| Year ended June 30, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current | ||||||||||||||||||||
| Federal | $ | 131,505 | $ | 67,870 | $ | 78,774 | ||||||||||||||
| State | 21,906 | 8,019 | 9,443 | |||||||||||||||||
| Foreign | 12,511 | 9,946 | 7,341 | |||||||||||||||||
| Current tax expense | 165,922 | 85,835 | 95,558 | |||||||||||||||||
| Deferred | ||||||||||||||||||||
| Federal | (62,239) | (7,110) | (15,338) | |||||||||||||||||
| State | (8,374) | (627) | (1,745) | |||||||||||||||||
| Foreign | (1,579) | (4,230) | 226 | |||||||||||||||||
| Deferred tax benefit (expense) | (72,192) | (11,967) | (16,857) | |||||||||||||||||
| Provision for income taxes | $ | 93,730 | $ | 73,868 | $ | 78,701 | ||||||||||||||
The reconciliation of federal statutory income tax to the Company’s provision for income taxes is as follows:
| Year ended June 30, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | ||||||||||||||
| Effect of foreign operations | (5.0) | (5.7) | (6.8) | |||||||||||||||||
| State tax expense | 2.0 | 1.3 | 1.3 | |||||||||||||||||
| Share-based compensation | 0.1 | 0.3 | 0.1 | |||||||||||||||||
| Subpart F income | 0.2 | 0.4 | 1.1 | |||||||||||||||||
| Intangibles realignment | (6.6) | — | — | |||||||||||||||||
| Other permanent items | (0.1) | 0.1 | (0.5) | |||||||||||||||||
| Effective tax rate | 11.6 | % | 17.4 | % | 16.2 | % | ||||||||||||||
Significant components of the Company's deferred tax assets and liabilities as of June 30, 2025 are as follows (in thousands):
| June 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred tax assets | ||||||||||||||
| Reserves and allowances | $ | 10,182 | $ | 5,631 | ||||||||||
| Share-based compensation | 501 | 452 | ||||||||||||
| Accrued expenses | 792 | 824 | ||||||||||||
| Capitalized research expenditures | 97,584 | 30,296 | ||||||||||||
| State tax | 1,805 | 721 | ||||||||||||
| Investments | 1,325 | 1,325 | ||||||||||||
| Lease liabilities | 11,404 | 5,286 | ||||||||||||
| Other | 17,804 | 14,974 | ||||||||||||
| Total deferred tax assets | 141,397 | 59,509 | ||||||||||||
| Deferred tax liabilities | ||||||||||||||
| Property and equipment | (9,509) | (8,046) | ||||||||||||
| Right of use assets | (11,052) | (4,929) | ||||||||||||
| Other liabilities | (11,877) | (9,767) | ||||||||||||
| Total deferred tax liabilities | (32,438) | (22,742) | ||||||||||||
| Valuation allowance | (1,325) | (1,325) | ||||||||||||
| Net deferred tax assets | $ | 107,634 | $ | 35,442 | ||||||||||
During the fourth quarter of fiscal 2025, the Company transferred certain intangible properties held by our foreign subsidiaries to the U.S. The change in effective tax rates for fiscal 2025 as compared to fiscal 2024 was primarily driven by a one-time deferred tax benefit of $53.7 million relating to capitalized research expenditure as a result of this transaction.
A reconciliation of the beginning and ending balances of the unrecognized tax benefits during the years ended June 30, 2025, and 2024 consists of the following (in thousands):
| Year ended June 30, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Unrecognized benefit—beginning of year | $ | 33,049 | $ | 32,382 | ||||||||||
| Gross increases—current year tax positions | 7,023 | 5,347 | ||||||||||||
| Gross decreases—prior year tax positions due to statute lapse | (5,332) | (4,680) | ||||||||||||
| Unrecognized benefit—end of year | $ | 34,740 | $ | 33,049 | ||||||||||
As of June 30, 2025, the Company had approximately $34.7 million of unrecognized tax benefits, substantially all of which would, if recognized, affect its tax expense. The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying Consolidated Statements of Operations. Accrued interest and penalties are included within the related tax liability line in the Consolidated Balance Sheets. As of June 30, 2025 and 2024, the Company had $5.5 million and $4.8 million accrued interest related to uncertain tax matters, respectively.
The Company and one or more of its subsidiaries, file income tax returns in the United States federal jurisdiction, and various state, local, and foreign jurisdictions and is currently undergoing income tax examinations by the U.S. Internal Revenue Service (“IRS”) and the Hong Kong Inland Revenue Department ("IRD"). All material consolidated federal, state and local income tax matters have been concluded for years through 2015. The majority of the Company's foreign jurisdictions have been concluded through 2015, with the exception of Hong Kong which has been reviewed through 2009 and is currently under audit for the 2010-2019 statutory tax years.
In July 2018, the Company received a draft Notice of Proposed Adjustment (“Draft NOPA”) from the IRS proposing an adjustment to income for the fiscal 2015 and fiscal 2016 tax years based on its interpretation of certain obligations of the non-U.S. entities under the credit facility. This Draft NOPA was superseded by an Acknowledgement of Facts (“AOF”) issued to the Company by the IRS on January 17, 2020. The IRS in its AOF continued to propose an adjustment to the Company’s income for its fiscal 2015 and fiscal 2016 tax years based on the IRS’ interpretation of certain obligations of the Company’s foreign subsidiaries under the Company’s credit facilities. On May 12, 2020, the IRS issued a final NOPA to the Company with respect to the 2015/2016 tax years. The Company formally protested the adjustment and the case was moved from the Examination Division to the IRS Appeals Division where a formal review of the facts and the applicable law took place on May 9, 2022. The Appeals Officer issued a Notice of Deficiency on August 3, 2022, which upheld the position of the Examination Division. The Company filed a petition with the United States Tax Court seeking to have the Notice of Deficiency reversed. On November 8, 2023, the Company filed a Motion for Summary Judgement. The IRS responded to the Company's Motion on December 26, 2023 and filed a Cross-Motion for Summary Judgement. On January 22, 2024, the judge assigned to this case rejected both Motions for Summary Judgement. As such, the Company is awaiting a trial date to be set. The Company continues to believe that its tax position filed with the IRS with regard to this matter is more likely than not to be sustained based on technical merits. However, there can be no assurance that this matter will be resolved in the Company’s favor. Regardless of whether the matter is resolved in the Company’s favor, the final resolution of this matter could be expensive and time-consuming to defend and/or settle. The Company estimates the incremental tax liability associated with the income adjustment proposed in the AOF would be approximately $50.0 million, excluding potential interest and penalties, after adjusting for the impact of an adjustment on the amount of transition tax paid by the Company. As the Company believes that the tax originally paid in fiscal 2015 and fiscal 2016 is correct, it has not provided a reserve for this tax uncertainty. However, an adverse outcome may have a material and adverse effect on the Company’s results of operations and financial condition.
The Hong Kong Inland Revenue Department (the “IRD”) is examining the Company’s claims that its revenue is generated through activities performed wholly outside of the Hong Kong tax jurisdiction and are therefore exempt from Hong Kong tax. The Company is fully cooperating with the examination including submitting documentation in support of its position. The Company continues to believe that its tax positions filed with the IRD are more likely than not to be sustained based on their technical merits and therefore no reserve has been provided for this tax uncertainty. Between fiscal years 2018 and 2024, the Company made payments totaling a combined amount of $60.4 million as deposits, with the IRD in connection with extending the statute of limitation for income tax examinations currently under audit for 2010-2018 income tax audits. On March 28, 2025, the Company received notification that the IRD is seeking an additional $2.0 million deposit covering the 2019 statutory tax year. The Company filed a formal protest in response to this notice and the Assessor's office agreed to a reduced deposit of $0.2 million covering the 2019 statutory tax year. The refundable deposits are included within other long-term assets on our consolidated balance sheets. The Company expects the $60.3 million (net of foreign currency impact) of deposits made with the IRD to be refunded upon completion of the audit. However, there can be no assurance that this matter will be resolved in the Company’s favor and therefore it's possible that an adverse outcome of the matter could have a material effect on the Company’s results of operations and financial condition.
On July 4, 2025, the United States enacted tax reform legislation through the One Big Beautiful Bill Act (“OBBBA”). Included in this legislation are provisions that allow for the immediate expensing of domestic United States research and development expenses, immediate expensing of certain capital expenditures, and changes to the U.S. taxation of profits derived from foreign operations. ASC 740, "Income Taxes", requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. The legislation has multiple effective dates, with certain provisions effective in 2025 (our Fiscal year 2026) and others implemented through 2027 (our Fiscal year 2028). Although there is no effect on the Company’s current year financial statements, the Company will monitor and record, as necessary, the impact of these new provisions in the future consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 22, 2025 | Showing above |
| 2024 | Aug 23, 2024 | |
| 2023 | Aug 25, 2023 | |
| 2022 | Aug 26, 2022 | |
| 2021 | Aug 27, 2021 | |
| 2020 | Aug 21, 2020 | |
| 2019 | Aug 21, 2019 | |
| 2018 | Aug 24, 2018 | |
| 2017 | Aug 25, 2017 | |
| 2016 | Aug 22, 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.