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INCOME TAXES | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The domestic and foreign components of income (loss) before income taxes were as follows (in thousands):
| Year Ended December 31,
2024 |  | 2023 |  | 2022
Domestic | $ | 1,332,836 |  |  | $ | (30,304) |  |  | $ | (347,968) |
Foreign | 24,318 |  |  | 1,161 |  |  | (217,349) |
Income (loss) before income taxes | $ | 1,357,154 |  |  | $ | (29,143) |  |  | $ | (565,317) |
The components of the provision for income taxes were as follows (in thousands):
| Year Ended December 31,
2024 |  | 2023 |  | 2022
Current: |  |  |  |  |
Federal | $ | 46,390 |  |  | $ | 12,003 |  |  | $ | 14,352 |
State | 38,489 |  |  | 14,351 |  |  | 17,504 |
Foreign | 71,590 |  |  | 51,506 |  |  | 25,425 |
Total current provision for income taxes | 156,469 |  |  | 77,860 |  |  | 57,281 |
Deferred: |  |  |  |  |
Federal | (1,481,491) |  |  | (58,532) |  |  | (59,909) |
State | (189,913) |  |  | (25,072) |  |  | (7,677) |
Foreign | 5,592 |  |  | (2,275) |  |  | (2,007) |
Total deferred benefit from income taxes | (1,665,812) |  |  | (85,879) |  |  | (69,593) |
Total benefit from income taxes | $ | (1,509,343) |  |  | $ | (8,019) |  |  | $ | (12,312) |
The following is a reconciliation of the statutory federal income tax rate to the Company's effective tax rate:
| December 31,
2024 |  | 2023 |  | 2022
Tax at federal statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State taxes, net of federal benefit | 3.9 |  |  | 45.9 |  |  | (1.1) |
Foreign rate differential | 1.4 |  |  | (175.6) |  |  | (2.0) |
Other non-deductible expenses | 2.7 |  |  | (21.7) |  |  | (1.2) |
Credits | (4.8) |  |  | 292.9 |  |  | 27.0 |
Other items | 0.1 |  |  | (2.2) |  |  | 0.6 |
Change in valuation allowance | 0.4 |  |  | 11.2 |  |  | (46.7) |
Share-based compensation | (2.7) |  |  | (16.1) |  |  | 7.5 |
Change in uncertain tax positions | 1.3 |  |  | (27.4) |  |  | (1.5) |
Income/loss inclusions of U.S. foreign subsidiaries | 0.9 |  |  | (216.5) |  |  | 2.1 |
Non-deductible executive compensation | 0.2 |  |  | (9.2) |  |  | (0.3) |
Non-deductible acquisition related costs | — |  |  | (15.0) |  |  | (3.0) |
Foreign exchange gain/loss | 0.1 |  |  | 174.1 |  |  | (0.2) |
Impairment loss | 2.1 |  |  | (60.8) |  |  | — |
Return to provision adjustments | 0.3 |  |  | 26.9 |  |  | — |
U.S. valuation allowance release | (96.3) |  |  | — |  |  | — |
Internal Restructuring | (44.4) |  |  | — |  |  | — |
Non-deductible penalties | 2.6 |  |  | — |  |  | — |
Total | (111.2) | % |  | 27.5 | % |  | 2.2 | %
The tax effects of temporary differences and related deferred tax assets and liabilities were as follows (in thousands):
| December 31,
| 2024 |  | 2023
Deferred tax assets: |  |  |
Capitalized costs & research and development capitalization | $ | 886,474 |  |  | $ | 552,731 |
Accrued expenses | 122,470 |  |  | 173,556 |
Net operating loss carryforwards | 388,199 |  |  | 935,289 |
Tax credit carryforwards | 485,266 |  |  | 529,314 |
Share-based compensation | 34,979 |  |  | 45,153 |
Intangible and other assets | 375,316 |  |  | — |
Other | 105,976 |  |  | 61,489 |
Operating lease liability | 81,885 |  |  | 85,154 |
Cryptocurrency investment | — |  |  | — |
Deferred consideration | 9,192 |  |  | 6,943 |
Convertible notes | 18,339 |  |  | 33,952 |
Total deferred tax assets | 2,508,096 |  |  | 2,423,581 |
Valuation allowance | (646,223) |  |  | (2,001,438) |
Total deferred tax assets, net of valuation allowance | 1,861,873 |  |  | 422,143 |
Deferred tax liabilities: |  |  |
Intangible and other assets | — |  |  | (332,512) |
Unrealized gain on investments | (36,582) |  |  | (25,618) |
Operating lease right-of-use asset | (52,849) |  |  | (60,600) |
Cryptocurrency investment | (133,883) |  |  | (29,711) |
Total deferred tax liabilities | (223,314) |  |  | (448,441) |
Net deferred tax assets (liabilities) | $ | 1,638,559 |  |  | $ | (26,298) |
Reported on the consolidated balance sheets as (after valuation allowance and jurisdictional netting): |  |  |
Deferred tax assets | $ | 1,800,994 |  |  | $ | 9,397 |
Deferred tax liabilities | (162,435) |  |  | (35,695) |
Net deferred tax assets (liabilities) | $ | 1,638,559 |  |  | $ | (26,298) |
On December 31, 2024, the Company completed certain internal restructuring steps resulting in the internal transfer of rest of world intellectual property from certain international subsidiaries into the U.S. The result of the intellectual property integration is the generation of an Internal Revenue Code ("IRC") Section IRC 197 tax amortizable intangible for the Block, Inc. U.S. consolidated federal tax filing. The IRC 197 intangible is amortizable over 15 years and a deferred tax asset of $376 million is recognized as of December 31, 2024. In addition, as part of the internal restructuring steps, the Company integrated into the Block, Inc. U.S. federal consolidated tax filing group several international subsidiaries: Clearpay S.A.U. (Spain), Clearpay Technology SL (Spain)., Clearpay Finance Limited (UK), and Squareup Pte Ltd. (Singapore). The result of the integration is the generation of additional tax amortizable IRC 197 intangibles and IRC 174 tax amortization for the Block Inc. US consolidated federal tax filing, resulting in a deferred tax asset of $226 million. Realization of deferred tax assets is dependent upon the generation of future taxable income, the timing and amount of which are uncertain. The Company's deferred tax assets and liabilities are primarily related to U.S. operations. In 2024, the Company's U.S. consolidated group generated a current tax provision resulting from, among other factors, increased net earnings, the requirement to capitalize research and development expenses under Internal Revenue Code ("IRC") Section 174, and a decline in stock-based compensation deductions. The Company's U.S. consolidated group has significant deferred tax assets in the form of net operating loss carryovers, tax credit carryovers, capitalized costs resulting from the IRC Section 174 capitalization requirement, and other tax deductible temporary differences. In the fourth quarter of 2024, based on the relative weight of positive and negative evidence, we concluded that it is more likely than not that a material portion of our U.S. federal and certain state deferred tax assets are realizable due to the following forms of positive evidence: our emergence into a three year cumulative income position, a history of U.S. federal and state taxable income on recent tax return filings, continued utilization and net reduction of federal and state tax attribute carryovers, reversal of deferred tax liabilities, and forecasts of worldwide and U.S. pre-tax earnings. Therefore, we released the valuation allowance associated with a significant portion of our U.S. federal and certain states' deferred tax assets, resulting in a $1.3 billion non-cash benefit to the provision for income taxes. Additionally, the Company has maintained a valuation allowance on certain federal deferred tax assets in the form of loss carryovers that have federal limits or restrictions on utilization, foreign tax credit carryovers, and capital losses which do not have sufficient evidence of future income of the appropriate character to recognize. Further, the Company has maintained a full valuation allowance against its California deferred tax assets, which consist primarily of tax loss carryovers and tax credit carryovers. The Company does not have sufficient evidence of future income to realize the California deferred tax assets on a more likely than not basis. The Company also has a history of tax losses in certain foreign jurisdictions, which it believes are not more likely than not to be realized as of December 31, 2024. Accordingly, the Company retained a full valuation allowance on its deferred tax assets in these jurisdictions. The amount of deferred tax assets considered realizable in future periods may change as management continues to reassess the underlying factors it uses in estimating future taxable income. The valuation allowance decreased by approximately $1.4 billion and decreased by $98.9 million during the years ended December 31, 2024, and 2023, respectively. Further, in the fourth quarter of 2024, we reached a settlement with the Singapore tax authorities in relation to historical tax losses incurred by our Singapore subsidiary. The result is a reduction to our tax loss carryover asset of $140 million and a corresponding release of the uncertain tax positions and valuation allowance against the tax loss carryover asset. As of December 31, 2024, the Company had $669.0 million of federal, $3.8 billion of state, and $767.5 million of foreign net operating loss carryforwards. The remaining federal net operating loss carryforwards have no expiration date. The state operating losses will begin to expire in 2025 and the foreign net operating loss carryforwards will begin to expire in 2027. As of December 31, 2024, the Company had $427.4 million of federal, $316.8 million of state, and $47.3 million of foreign research credit carryforwards. The remaining federal research credit carryforwards will begin to expire in 2040. The state and foreign credit carryforwards have no expiration date. Utilization of the net operating loss carryforwards and credits may be subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before they are able to be utilized. The Company does not expect any previous ownership changes, as defined under Section 382 and 383 of the Internal Revenue Code, to result in an ultimate limitation that will materially reduce the total amount of net operating loss carryforwards and credits that can be utilized. As of December 31, 2024, the Company had unrecognized tax benefits of $633.6 million, of which $107.5 million would impact the annual effective tax rate if recognized and the remainder of which would result in a corresponding adjustment to the valuation allowance. The change in the balance of unrecognized tax benefit was as follows (in thousands):
| Year Ended December 31,
2024 |  | 2023 |  | 2022
Unrecognized tax benefit, beginning of the period | $ | 465,103 |  |  | $ | 506,512 |  |  | $ | 448,392 |
Gross increases and decreases related to prior period tax positions | 34,050 |  |  | (7,348) |  |  | 5,431 |
Gross increases and decreases related to current period tax positions | 139,217 |  |  | (30,063) |  |  | 30,988 |
Reductions related to lapse of statute of limitations | (4,781) |  |  | (3,998) |  |  | (2,950) |
Gross increases related to acquisitions | — |  |  | — |  |  | 24,651 |
Unrecognized tax benefit, end of the period | $ | 633,589 |  |  | $ | 465,103 |  |  | $ | 506,512 |
The Company recognizes interest and penalties related to income tax matters as a component of income tax expense. The Company had total accrued interest and penalties of $23.8 million, $22.1 million, and $9.1 million related to uncertain tax positions for the years ended December 31, 2024, 2023, and 2022, respectively. It is reasonably possible that over the next 12-month period the Company may experience a decrease in its unrecognized tax benefits as a result of tax examinations or lapses of statute of limitations. The estimated decrease in unrecognized tax benefits may range up to $23.8 million. The Company is subject to taxation in the United States and various state and foreign jurisdictions. The Company is currently under examination in California for tax years 2013, 2014, and 2016 and in Texas for tax years 2015 to 2019. The Company’s various tax years starting with 2009 to 2023 remain open in various taxing jurisdictions. As of December 31, 2024, the Company has not provided deferred U.S. income taxes or foreign withholding taxes on temporary differences resulting from earnings for certain non-U.S. subsidiaries, which are permanently reinvested outside the U.S. cumulative undistributed earnings for these non-U.S. subsidiaries as of December 31, 2024 are $125.4 million.

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