Company: ACTG
Filing Date: 2025-11-06
Form Type: 10-Q
Source: 0000934549-25-000054
Chunk: 87

Company: ACACIA RESEARCH CORP
Filing Date: 2025-11-06
Form: 10-Q
Item: Part I, Item 1
Chunk 87
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 2025.

Income Taxes

Three Months EndedSeptember 30,Nine Months EndedSeptember 30,20252024$ Change% Change20252024$ Change% Change(In thousands, except percentage change values)Income tax benefit (expense)$968 $(5,497)$6,465 (118%)$(5,660)$2,673 $(8,333)(312%)Effective tax rate(29)%89 %n/a(118)%22 %(11)%n/a33 %

Our 2025 effective tax rate was slightly higher than the U.S. federal statutory rate primarily due to nondeductible stock based compensation. Our income tax benefit for the three months ended September 30, 2025 is primarily attributable to recognizing a benefit for losses incurred during the quarter offset by foreign withholding taxes. Our income tax expense for the nine months ended September 30, 2025 is primarily attributable to 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,