XML 29 R18.htm IDEA: XBRL DOCUMENT v3.25.3
INCOME TAXES
 9 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Our income tax provision for interim periods is determined using an estimate of our annual effective tax rate, adjusted for discrete items.
Provision (benefit) for income taxes and Income (loss) from continuing operations before provision (benefit) for income taxes for the three and nine months ended September 30, 2025 and 2024 were as follows (in thousands):
Three Months Ended September 30, Nine Months Ended September 30,
2025202420252024
Provision (benefit) for income taxes$21,249 $2,321 $33,603 $17,802 
Income (loss) from continuing operations before provision (benefit) for income taxes
$(96,534)$16,843 $(55,559)$11,406 
Our U.S. Federal income tax rate is 21%. The primary factor impacting the effective tax rate for the three and nine months ended September 30, 2025 and 2024 was the pretax losses incurred in jurisdictions that have valuation allowances against their net deferred tax assets, including U.S. pre-tax losses in the third quarter of 2025 due to a loss on the extinguishment of debt, and the accrual of an Italy tax assessment. For the three and nine months ended September 30, 2025 and 2024, we continue to maintain a full valuation allowance against all U.S. federal and state deferred tax assets.
Given the Company’s recent history of U.S. taxable earnings, we believe that there is a reasonable possibility that within the next twelve months sufficient positive evidence may become available to allow the Company to reach a conclusion that a significant portion of the U.S. federal and state valuation allowance recorded will no longer be needed. The reversal would result in an income tax benefit for the quarterly and annual fiscal period in which the Company releases the valuation allowance. However, the exact timing and amount of the valuation allowance release, if at all, are subject to significant judgment and are dependent on the level of profitability and likelihood of future utilization of attributes that we are able to actually achieve.
We expect that our consolidated effective tax rate in future periods will continue to differ significantly from the U.S. federal income tax rate as a result of our tax obligations in jurisdictions with profits and valuation allowances in jurisdictions with losses.
In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations or remit such earnings in a tax-efficient manner. Additionally, an actual repatriation from our non-U.S. subsidiaries could be subject to foreign and U.S. state income taxes. Aside from limited exceptions for which the related deferred tax liabilities recognized as of September 30, 2025 and December 31, 2024 are immaterial, we do not intend to distribute earnings of foreign subsidiaries for which we have an excess of the financial reporting basis over the tax basis of our investments and therefore have not recorded any deferred taxes related to such amounts. The actual tax cost resulting from a distribution would depend on income tax laws and circumstances at the time of distribution. Determination of the amount of unrecognized deferred tax liability related to the excess of the financial reporting basis over the tax basis of our foreign subsidiaries is not practical due to the complexities associated with the calculation.
We are currently under audit by several foreign jurisdictions. It is likely that the examination phase of some of those audits will conclude in the next 12 months. There are many factors, including factors outside of our control, which influence the progress and completion of those audits.
We are subject to claims for tax assessments by foreign jurisdictions, including the Italy 2012 Assessment for $134.9 million (€114.8 million), inclusive of estimated incremental interest. The subsidiary subject to the Italy 2012 Assessment is Groupon S.r.l., one of the Company's Italian subsidiaries with operations formerly relating specifically to the local voucher business in Italy. Additionally, unrelated to the tax matter above, Groupon S.r.l. is subject to the Italy 2017 Assessment of approximately $35.1 million (€30.1 million) related to a 2017 distribution made to its parent entity.
Groupon S.r.l. disputes all the assessments and is presently pursuing multiple appeals of these matters at various levels of the Italian tax courts.
As a result of Italian tax court procedures that require the deposit of “provisional” amounts while tax appeals are pending, Groupon S.r.l. has made installment payments specifically relating to the Italy 2012 Assessment totaling $10.5 million (€8.9 million) towards provisional amounts owed.
On August 5, 2025, Groupon S.r.l. and the Italian Tax Authority reached an agreement in principle to resolve the Italy 2012 and 2017 Assessments. With respect to the Italy 2012 Assessment, the agreement provides that the Italian Tax Authority would reduce the Italy 2012 Assessment from $134.9 million (€114.8 million) to $20.5 million (€17.5 million) against which approximately $10.1 million (€8.6 million) would be credited from previous installment payments made by Groupon S.r.l. With respect to the Italy 2017 Assessment, the agreement provides that the Italian Tax Authority would reduce the Italy 2017 Assessment from $35.1 million (€30.1 million) to approximately $4.8 million (€4.1 million). Accordingly, under the terms of the agreement, the combined total amount that would be owed by Groupon S.r.l. is $25.3 million (€21.6 million) of which $10.1 million (€8.6 million) has already been paid. Therefore, Groupon S.r.l. would pay an additional $15.2 million (€13.0 million).
In October 2025, the Italian Tax Authority informed Groupon S.r.l., that the proposed agreement has been approved by the Administrative Review Committee, an Italian non-governmental oversight group; and the Central Directorate on Tax Audit for the Italian Internal Revenue Service.
Groupon S.r.l. expects to receive a revised version of the Italy 2012 Assessment from the Italian Tax Authority that reflects the terms of the agreement, at which time the parties will voluntarily dismiss all pending appeals. A hearing is scheduled on December 5, 2025, at which time the parties expect to jointly seek judicial approval of the settlement of the Italy 2017 Assessment. Once finalized, Groupon S.r.l. could be required to pay all settled amounts before the end of 2025. Until such time that the revised assessments have been issued and agreed to and the settlement of the Italy 2017 Assessment receives judicial approval, the proposed settlement agreement, in its entirety, remains non-binding on all parties.
As of September 30, 2025, considering all information available, we have determined that it is more likely than not that the reduced assessments under the agreement in principle will be payable. Accordingly, we have recorded foreign income tax expense of $25.3 million (€21.6 million) for the Italy 2012 Assessment and Italy 2017 Assessment during the three and nine months ended September 30, 2025, of which $15.2 million (€13.0 million) is presented in Accrued expenses and other current liabilities on the Condensed Consolidated Balance Sheets as of September 30, 2025 related to payments not yet remitted.
Including the above, we believe it is reasonably possible that reductions of up to $18.0 million in unrecognized tax benefits may occur within the 12 months following September 30, 2025 upon closing of income tax audits or the expiration of applicable statutes of limitations.
Enactment of the One Big Beautiful Bill Act
On July 4, 2025, the “One Big Beautiful Bill Act” (the “OBBB Act”) was enacted into law in the U.S.. The OBBB Act introduces significant changes to the federal income tax code, including changes to the deductibility of
research and development (“R&D”) expenses, bonus depreciation, limitation on interest deductibility, international taxation and minimum tax rules.
We have included the impact of the OBBB Act in our financial statements as of September 30, 2025. This resulted in a benefit to our annual effective tax rate for the three and nine months ended September 30, 2025, primarily due to the elimination of the requirement to capitalize and amortize U.S. based R&D expenditures. The application of this provision will also result in favorable cash tax impacts for the 2025 tax year. Additionally, the Company utilized U.S. deferred tax assets, offset by a reduction in the valuation allowance.
We will continue to evaluate the implications of the OBBB Act, including potential state income tax conformity, and will adjust estimates and the impact to our income tax provision as additional guidance is issued.