Upland Software, Inc.UPLD
Upland Software, Inc. Income Taxes Disclosure
5. Income Taxes
The Company's loss before provision of income taxes was as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Loss before provision for income taxes: | |||||||||||||||||
| United States | $ | (27,370) | $ | (76,081) | $ | (117,208) | |||||||||||
| Foreign | (11,302) | (34,011) | (65,159) | ||||||||||||||
| $ | (38,672) | $ | (110,092) | $ | (182,367) | ||||||||||||
The components of the provision for (benefit from) income taxes attributable to continuing operations were as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 155 | $ | 126 | $ | — | |||||||||||
| State | 407 | 1,216 | 901 | ||||||||||||||
| Foreign | 4,976 | 4,922 | 1,613 | ||||||||||||||
| Total current | $ | 5,538 | $ | 6,264 | $ | 2,514 | |||||||||||
| Deferred | |||||||||||||||||
| Federal | $ | (95) | $ | 87 | $ | (468) | |||||||||||
| State | 30 | (876) | (771) | ||||||||||||||
| Foreign | (5,241) | (2,835) | (3,768) | ||||||||||||||
| Total deferred | (5,306) | (3,624) | (5,007) | ||||||||||||||
| Provision for (benefit from) income taxes | $ | 232 | $ | 2,640 | $ | (2,493) | |||||||||||
As of December 31, 2025 the Company had total net operating loss carryforwards of approximately $216.7 million consisting of $195.4 million and $21.3 million related to the U.S federal and foreign net operating loss carryforwards, respectively. In addition, as of December 31, 2025 the Company had research and development credit carryforwards of $4.2 million. $136.5 million of the U.S. federal net operating loss carryforwards are related to years prior to 2018 and begin to expire in 2026 and the remaining $58.9 million carry forward indefinitely. Utilization of the U.S. federal net operating loss and tax credits may be subject to substantial annual limitation due to the “change of ownership” provisions of the Internal Revenue Code of 1986. The annual limitation will result in the expiration of approximately $153.9 million of U.S. federal net operating losses and $4.2 million of credit carryforwards before utilization. $21.3 million of foreign net operating loss carryforwards carry forward indefinitely.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred taxes are as follows (in thousands):
| As of December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Deferred tax assets: | |||||||||||||||||
| Accrued expenses and allowances | $ | 424 | $ | 722 | $ | 583 | |||||||||||
| Deferred revenue | 798 | 794 | 571 | ||||||||||||||
| Stock compensation | 297 | 512 | 489 | ||||||||||||||
| Net operating loss and tax credit carryforwards | 21,218 | 27,683 | 40,222 | ||||||||||||||
| Disallowed interest expense carryforwards | 20,185 | 19,482 | 17,670 | ||||||||||||||
| Capital expenses | 41 | 346 | 66 | ||||||||||||||
| Tax credit carryforwards | 70 | 216 | — | ||||||||||||||
| Lease liability | 705 | 453 | 960 | ||||||||||||||
| Unrealized losses | 1,168 | — | — | ||||||||||||||
| Research and development expenses | 19,484 | 19,402 | 13,247 | ||||||||||||||
| Other | 563 | 550 | 410 | ||||||||||||||
| Valuation allowance | (53,936) | (50,385) | (41,259) | ||||||||||||||
| Net deferred tax assets | $ | 11,017 | $ | 19,775 | $ | 32,959 | |||||||||||
| Deferred tax liabilities: | |||||||||||||||||
| Prepaid expenses | $ | (148) | $ | (142) | $ | — | |||||||||||
| Intangible assets | (11,832) | (23,409) | (36,342) | ||||||||||||||
| Goodwill | (1,890) | (195) | (2,850) | ||||||||||||||
| Tax credit carryforwards | — | — | (15) | ||||||||||||||
| Right of use asset | (430) | (326) | (670) | ||||||||||||||
| Unrealized gains | — | (2,143) | (4,049) | ||||||||||||||
| Deferred commissions | (3,063) | (4,562) | (5,003) | ||||||||||||||
| Net deferred tax liabilities | $ | (17,363) | $ | (30,777) | $ | (48,929) | |||||||||||
| Net deferred taxes | $ | (6,346) | $ | (11,002) | $ | (15,970) | |||||||||||
Due to the uncertainty surrounding the timing of realizing the benefits of its favorable tax attributes in future tax returns, the Company has placed a valuation allowance against its domestic net deferred tax assets, exclusive of goodwill. During the years ended December 31, 2025 and 2024 the valuation allowance increased by $4.0 million and $9.1 million, respectively. The valuation allowance for the year ended December 31, 2025 increased $7.0 million related to the U.S. valuation allowance, offset by a $3.0 million decrease in the U.K. valuation allowance. The valuation allowance for the year ended December 31, 2024 increased by $9.1 million due to an increase of $10.1 million related primarily to current U.S., U.K. and Australia operations, offset with the tax effects of $1.0 million of items recorded in other comprehensive income.
At December 31, 2025, we did not provide deferred income taxes on temporary differences resulting from earnings of certain foreign subsidiaries which are indefinitely reinvested. The reversal of these temporary differences could result in additional tax; however, it is not practicable to estimate the amount of any unrecognized deferred income tax liabilities at this time. Deferred income taxes are provided as necessary with respect to earnings that are not indefinitely reinvested.
The Tax Cuts and Jobs Act of 2017 subjects a U.S. shareholder to current tax on certain earnings of foreign subsidiaries under a provision commonly known as the global intangible low-taxed income (“GILTI”). Under U.S. GAAP, an accounting policy election can be made to either recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years, or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to account for GILTI as the of effects of cross-border taxes in the year the tax is incurred.
The Company’s provision for income taxes differs from the expected tax expense (benefit) computed by applying the statutory federal income tax rate to income before taxes due to the following:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
| U.S.federal statutory rate | $ | (8,121) | 21.0 | % | $ | (23,119) | 21.0 | % | $ | (38,297) | 21.0 | % | |||||||||||||||||||||||
| Nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
| Stock compensation | 1,419 | (3.6) | % | 1,300 | (1.2) | % | 3,518 | (1.9) | % | ||||||||||||||||||||||||||
| Goodwill impairment | — | — | % | 8,301 | (7.5) | % | 13,717 | (7.5) | % | ||||||||||||||||||||||||||
| Divestiture tax impact | 2,207 | (5.7) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Other | (258) | 0.7 | % | 725 | (0.7) | % | 640 | (0.4) | % | ||||||||||||||||||||||||||
| Effects of cross-border taxes | — | — | % | 2,810 | (2.6) | % | 2,317 | (1.3) | % | ||||||||||||||||||||||||||
| Changes in valuation allowance | 2,428 | (6.3) | % | 3,182 | (2.9) | % | 3,454 | (1.9) | % | ||||||||||||||||||||||||||
| State taxes, net of federal income tax effect | 428 | (1.1) | % | 308 | (0.3) | % | 571 | (0.3) | % | ||||||||||||||||||||||||||
| Foreign tax effects: | |||||||||||||||||||||||||||||||||||
| United Kingdom | |||||||||||||||||||||||||||||||||||
| Statutory rate difference between United Kingdom and United States | 1,656 | (4.3) | % | 2,068 | (1.9) | % | (906) | 0.5 | % | ||||||||||||||||||||||||||
| Dividends received deduction | (1,150) | 3.0 | % | (2,736) | 2.5 | % | — | — | % | ||||||||||||||||||||||||||
| Goodwill impairment | — | — | % | 215 | (0.2) | % | 2,184 | (1.2) | % | ||||||||||||||||||||||||||
| Changes in valuation allowance | (3,471) | 9.0 | % | 2,465 | (2.2) | % | 3,493 | (1.9) | % | ||||||||||||||||||||||||||
| Divestiture tax impact | 3,812 | (9.9) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Other | (134) | 0.4 | % | 830 | (0.8) | % | (522) | 0.3 | % | ||||||||||||||||||||||||||
| Canada | |||||||||||||||||||||||||||||||||||
| Statutory rate difference between Canada and United States | 1,160 | (3.0) | % | (1,056) | 1.0 | % | 21.0 | % | (722) | 0.7 | % | ||||||||||||||||||||||||
| Goodwill impairment | — | — | % | 3,920 | (3.6) | % | (0.3) | % | 4,678 | (2.6) | % | ||||||||||||||||||||||||
| Changes in valuation allowance | (277) | 0.7 | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Other | 145 | (0.4) | % | 793 | (0.7) | % | — | % | (571) | 0.1 | % | ||||||||||||||||||||||||
| Ireland | |||||||||||||||||||||||||||||||||||
| Statutory rate difference between Ireland and United States | (2,299) | 5.9 | % | 908 | (0.8) | % | 2,378 | (1.3) | % | ||||||||||||||||||||||||||
| Goodwill impairment | — | — | % | 1,647 | (1.5) | % | 2,198 | (1.2) | % | ||||||||||||||||||||||||||
| Divestiture tax impact | 2,964 | (7.7) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Other | (108) | 0.3 | % | (56) | 0.1 | % | (565) | 0.3 | % | ||||||||||||||||||||||||||
| Other foreign jurisdictions | (169) | 0.4 | % | 135 | (0.1) | % | 558 | (0.3) | % | ||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | — | — | % | — | — | % | (616) | 0.3 | % | ||||||||||||||||||||||||||
| $ | 232 | (0.6) | % | $ | 2,640 | (2.4) | % | $ | (2,493) | 1.4 | % | ||||||||||||||||||||||||
The Company periodically reviews the uncertainties and judgments related to the application of complex income tax regulations to determine income tax liabilities in several jurisdictions. The Company uses a “more likely than not” criterion for recognizing an asset for unrecognized income tax benefits or a liability for uncertain tax positions. The Company has determined it has an immaterial exposure related to uncertain tax positions as of December 31, 2025. To the extent the Company is required to recognize interest and penalties related to unrecognized tax liabilities, this amount will be recorded as an accrued liability.
The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2025, the Company has not accrued any interest or penalties related to uncertain tax positions.
Cash paid (received) for taxes was as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Australia | $ | (5) | $ | (2) | $ | (12) | |||||||||||
| Canada (Federal) | 2,806 | (1,024) | 2,701 | ||||||||||||||
| Canada (Provincial) | 1,073 | (171) | 951 | ||||||||||||||
| Ireland | 1,079 | 1,121 | 1,971 | ||||||||||||||
| India | 320 | 331 | 244 | ||||||||||||||
| Netherlands | (140) | 62 | 226 | ||||||||||||||
| US (Federal) | 676 | — | — | ||||||||||||||
| US (State): | |||||||||||||||||
| Texas | 477 | 238 | 249 | ||||||||||||||
| New Jersey | (77) | 196 | 197 | ||||||||||||||
| US (State - Other) | 660 | 1,247 | 597 | ||||||||||||||
| Other | 77 | 17 | (18) | ||||||||||||||
| Total cash taxes paid | $ | 6,946 | $ | 2,015 | $ | 7,106 | |||||||||||
The Company and its subsidiaries file tax returns in the U.S. federal jurisdiction and in several state and foreign jurisdictions. The Company is no longer subject to U.S. federal income tax examinations for years ending before December 31, 2020 and is no longer subject to state and local or foreign income tax examinations by tax authorities for years ending before December 31, 2019 US operating losses generated in years prior to 2020 remain open to adjustment until the statute of limitations closes for the tax year in which the net operating losses are utilized.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 3, 2026 | Showing above |
| 2024 | Mar 12, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2021 | Feb 24, 2022 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 9, 2018 | |
| 2016 | Mar 30, 2017 | |
| 2015 | Mar 30, 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.