Company: ACTG
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0000934549-25-000054
Chunk: 191

Company: ACACIA RESEARCH CORP
Filing Date: 2025-11-06
Form: 10-Q
Item: Part I, Item 2
Chunk 191
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 the statutory rate applied to our year-to date earnings and foreign withholding taxes for which a foreign tax credit cannot be benefited.

Our 2024 effective tax rate in each period differed from the U.S. federal statutory rate primarily due to favorable withholding taxes which we could not recognize as a foreign tax credit and non-deductible items. Our income tax expense for the three months ended September 30, 2024 is primarily attributable to changes to the forecasted benefit of losses estimated for 2024. Our income tax benefit for the nine months ended September 30, 2024 is primarily attributable to recognizing an income tax benefit on losses incurred offset by foreign withholding taxes.

The effective tax rate may be subject to fluctuations during the year as new information is obtained which may affect the assumptions used to estimate the effective tax rate, including factors such as expected utilization of net operating loss carryforwards, changes in or the interpretation of tax laws in jurisdictions where the Company conducts business, the Company’s expansion into new states or foreign countries, and the amount of valuation allowances against deferred tax assets.

The Company has recorded a partial valuation allowance against our net deferred tax assets as of September 30, 2025 and December 31, 2024 for foreign tax credits and certain state net operating losses.

At September 30, 2025 and December 31, 2024, the Company had total unrecognized tax benefits of approximately $758,000 and $935,000, respectively which were recorded in other long-term liabilities. No interest and penalties have been recorded for the unrecognized tax benefits for the periods presented. At September 30, 2025, if recognized $758,000 of tax benefits would impact the Company’s effective tax rate subject to valuation allowance. The Company does not expect that the long-term liability for unrecognized benefits will change significantly within the next 12 months. The Company recognizes interest and penalties with respect to unrecognized tax benefits in income tax expense (benefit).

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. 

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ASC 740, “Income Taxes,” requires the effects of changes in tax rates and laws to