Wheels Up Experience Inc.UP
Wheels Up Experience Inc. Income Taxes Disclosure
INCOME TAXES
We are subject to U.S. federal, state and local income taxes with respect to our allocable share of any taxable income or loss from WUP, as well as any standalone income or loss Wheels Up generates. WUP is treated as a partnership for U.S. federal and most applicable state and local income tax purposes and generally does not pay income taxes in most jurisdictions. Instead, any taxable income or loss generated by WUP is passed through to and included in the taxable income or loss of its members, including Wheels Up. We are also subject to income taxes in the various foreign jurisdictions in which we operate.
Income Tax Expense
The components of Income (loss) before income taxes are follows (in thousands):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Domestic | $ | (296,030) | $ | (342,405) | $ | (493,787) | |||||||||||
Foreign | 5,316 | 3,996 | 7,783 | ||||||||||||||
Loss before income taxes | $ | (290,714) | $ | (338,409) | $ | (486,004) | |||||||||||
The components of Income tax expense are as follows (in thousands):
Year Ended December 31, | |||||||||||||||||
2025 | 2024 | 2023 | |||||||||||||||
Current income taxes | |||||||||||||||||
Federal | $ | — | $ | — | $ | — | |||||||||||
State and local | 125 | 150 | 139 | ||||||||||||||
Foreign | 4,587 | 2,574 | 1,999 | ||||||||||||||
Total current income taxes | 4,712 | 2,724 | 2,138 | ||||||||||||||
Deferred income taxes | |||||||||||||||||
Federal | — | — | — | ||||||||||||||
State and local | (21) | — | (2) | ||||||||||||||
Foreign | (1,188) | (1,498) | (753) | ||||||||||||||
Total deferred income taxes | (1,209) | (1,498) | (755) | ||||||||||||||
Total income taxes | |||||||||||||||||
Federal | — | — | — | ||||||||||||||
State and Local | 104 | 150 | 137 | ||||||||||||||
Foreign | 3,399 | 1,076 | 1,246 | ||||||||||||||
Total Income tax expense | $ | 3,503 | $ | 1,226 | $ | 1,383 | |||||||||||
The table below provides the updated requirements of ASU 2023-09 for 2025. See section Recent Accounting Pronouncements for additional details on the adoption of ASU 2023-09.
The effective income tax rate for the year ended December 31, 2025 differs from the statutory federal income tax rate as follows (in thousands, except percentages):
2025 | |||||||||||
Amount | Percent | ||||||||||
US federal statutory income tax rate | $ | (61,050) | 21.0 | % | |||||||
Domestic state and local income taxes, net of federal benefit(1) | 104 | — | |||||||||
Foreign tax effects | 2,282 | (0.8) | |||||||||
Effect of changes in tax laws | — | — | |||||||||
Effect of cross-border tax laws | — | — | |||||||||
Tax credits | — | — | |||||||||
Domestic Federal | |||||||||||
Nontaxable and nondeductible items | 61 | — | |||||||||
Changes in valuation allowance | 62,263 | (21.4) | |||||||||
Other | (157) | 0.1 | |||||||||
Changes in unrecognized tax benefits | — | — | |||||||||
Total | $ | 3,503 | (1.2) | % | |||||||
__________
(1) The states that contribute to the majority (greater than 50%) of the tax impact in this category include Texas for 2025.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
Year Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
Expected federal income taxes at statutory rate | 21.0 | % | 21.0 | % | ||||||||||
State and local income taxes | — | — | ||||||||||||
Permanent differences | (1.1) | (0.4) | ||||||||||||
Partnership earnings not subject to tax | — | — | ||||||||||||
Foreign tax rate differential | (0.3) | (0.3) | ||||||||||||
Change in valuation allowance | (20.1) | (20.6) | ||||||||||||
Effective income tax rate | (0.5) | % | (0.3) | % | ||||||||||
Our effective tax rate for the years ended December 31, 2025, 2024 and 2023 differs from the federal statutory rate of 21% primarily due to a full valuation allowance against our net deferred tax assets where it is more likely than not that the deferred tax assets will not be realized.
Cash Paid for Income Taxes
Cash taxes paid by the Company during the year ended December 31, 2025 were as follows (in thousands):
2025 | |||||
Federal | — | ||||
State and Local | 397 | ||||
Foreign | |||||
United Kingdom | 1,451 | ||||
Germany - Federal | 385 | ||||
Germany - Local | 561 | ||||
Other Countries | 176 | ||||
Total cash paid for Income taxes, net of amounts refunded | $ | 2,970 | |||
Deferred Tax Assets and Liabilities
The components of deferred tax assets and liabilities, which are presented within other assets in the consolidated balance sheets, were as follows (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
Deferred tax assets | |||||||||||
Investment in partnership | $ | 149,717 | $ | 160,644 | |||||||
Net operating loss carryforwards | 246,250 | 197,493 | |||||||||
Transaction costs | 942 | 1,103 | |||||||||
Tax credits | 5,454 | 5,454 | |||||||||
Deferred revenue | 1,823 | 1,363 | |||||||||
Equity-based compensation | 3,213 | 2,242 | |||||||||
Interest expense carryforwards | 59,962 | 40,003 | |||||||||
Other | 2,097 | 1,772 | |||||||||
Total deferred tax assets | 469,458 | 410,074 | |||||||||
Valuation allowance | (400,893) | (343,252) | |||||||||
Deferred tax assets, net | $ | 68,565 | $ | 66,822 | |||||||
Deferred tax liabilities | |||||||||||
Intangibles | $ | (1,118) | $ | (1,680) | |||||||
OID/DFC interest | (65,389) | (64,150) | |||||||||
Other | (1,081) | (1,224) | |||||||||
Total deferred tax liabilities | $ | (67,588) | $ | (67,054) | |||||||
Net deferred tax assets (liabilities) | $ | 977 | $ | (232) | |||||||
As of December 31, 2025, our U.S. federal and state net operating loss carryforwards for income tax purposes were $903.1 million and $1,040.0 million, respectively. Of our total federal net operating losses, $804.0 million can be carried forward indefinitely, and the remainder will begin to expire in 2032 and fully expire in 2037 if not utilized. Our state net operating losses begin to expire in 2027.
During the fourth quarter of 2024, the Company performed an analysis under Section 382 of the Internal Revenue Code of 1986 (as amended, the “Code”) and a debt-equity analysis related to transactions that occurred in 2023. As a result of the analysis, the Company adjusted its deferred tax assets for net operating losses to reflect Section 382 Recognized Built-In Loss (RBIL), as well as its deferred tax liability related to Original Issue Discount
(“OID”) and Deferred Financing Costs (“DFC”). However, due to our overall valuation allowance position in the U.S., we do not believe these adjustments will have a material impact on our consolidated financial statements.
We evaluate the realizability of our deferred tax assets on a quarterly basis and establish valuation allowances when it is more likely than not that all or a portion of the deferred tax assets may not be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income and tax-planning strategies. As of December 31, 2025 and 2024, we concluded, based on the weight of all available positive and negative evidence, that it is more likely than not that the majority of U.S. deferred tax assets will not be realized. Accordingly, a valuation allowance of $400.9 million has been established as of December 31, 2025. The $57.6 million increase in valuation allowance was the result of a charge to deferred tax benefit of $36.0 million from operations and a $21.6 million expense to Additional paid in capital.
We currently expect the undistributed earnings of our foreign subsidiaries to be indefinitely reinvested. Accordingly, the Company has not provided for the tax effect, if any, of limited outside basis differences of its foreign subsidiaries. If these foreign earnings are repatriated to the U.S., or if the Company determines that such earnings are repatriated to the U.S., or if the Company determines that such earnings will be remitted in a future period, additional tax provisions may be required.
Additionally, the Company is subject to the income tax effects associated with the Global Intangible Low-Taxed Income (“GILTI”) provisions and treats the tax effects of GILTI as a current period expense in the period incurred. The Company estimated $1.5 million of GILTI inclusion for 2025, which is fully offset by the loss generated in the current period. The One Big Beautiful Bill Act of 2025 (the “OBBBA”) renamed GILTI to Net CFC Tested Income (“NCTI”) for taxable years beginning after December 31, 2025, but as of the date of this Annual Report, we do not expect this change will have any significant impact on our analysis of NCTI in future periods.
Section 382 Transaction
In general, under Section 382 of the Code, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating losses or tax credits to offset future taxable income or taxes. As a result of the Initial Issuance, the Company experienced an ownership change for the purpose of Section 382 of the Code during the third quarter of 2023, that will limit the availability of our tax attributes offset future income. Our net operating losses and tax attributes are currently subject to a full valuation allowance. Accordingly, the limitation does not have a material impact on our consolidated financial statements.
OECD Pillar Two
The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% effective on January 1, 2024. While the U.S. has not adopted the Pillar Two rules, various other governments around the world have implemented the legislation, including jurisdictions in which certain of Wheels Up’s subsidiaries operate, and many other jurisdictions are in the process of implementing it. The Company continues to monitor the pending implementation of Pillar Two by individual countries and the potential effects of Pillar Two on our business. The Pillar Two rules did not have a material impact on our results of operations, financial condition or cash flows as of and for the year ended December 31, 2025.
OBBBA
On July 4, 2025, the OBBBA was signed into law in the U.S., which contains a broad range of tax reform provisions affecting businesses. The Company continues to evaluate the impact of the legislation on its estimated annual effective tax rate and cash tax position. Management believes that the financial statements reflect all known and estimable impacts of the OBBBA as of December 31, 2025. Due to the full valuation allowance, the legislation changes did not have a material impact on our consolidated financial statements as of and for the year ended December 31, 2025.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 10, 2026 | Showing above |
| 2024 | Mar 11, 2025 | |
| 2023 | Mar 7, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 10, 2022 | |
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.