Income Taxes

9 Months Ended

Sep. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

(7) Income Taxes

The Company computes its year-to-date provision for (benefit from) income taxes by applying the estimated annual effective tax rate to year-to-date pretax income or loss and adjusts the provision for (benefit from) income taxes for discrete tax items recorded in the period. The estimated effective tax rate is subject to fluctuation based on the level and mix of earnings and losses by tax jurisdiction, foreign tax rate differentials, and the relative impact of permanent book to tax differences. Each quarter, a cumulative adjustment is recorded for any fluctuations in the estimated annual effective tax rate as compared to the prior quarter. As a result of these factors, and due to potential changes in the Company’s period-to-period results, fluctuations in the Company’s effective tax rate and respective tax provisions or benefits may occur. For the nine months ended September 30, 2024, the Company recorded a benefit from income taxes of $411.8 million on a pretax loss of $907.6 million, which resulted in an effective tax rate of 45.4%. For the nine months ended September 30, 2023, the Company recorded a benefit from income taxes of $403.9 million on a pretax loss of $63.9 million, which resulted in an effective tax rate of 632.2%. During the nine months ended September 30, 2024, the Company’s benefit from income taxes primarily related to tax benefits (i) from an increase in the Company’s deferred tax asset related to the impairment on its bitcoin holdings and (ii) related to share-based compensation (including the income tax effects of exercises of stock options and vesting of share-settled restricted stock units). During the nine months ended September 30, 2023, the Company’s benefit from income taxes primarily related to the release of a portion of the valuation allowance on the Company’s deferred tax asset related to the impairment on its bitcoin holdings, attributable to the increase in market value of bitcoin as of September 30, 2023 compared to December 31, 2022.

As of September 30, 2024, the Company had a valuation allowance of $1.4 million primarily related to the Company’s deferred tax assets related to foreign tax credits in certain jurisdictions that, in the Company’s present estimation, more likely than not will not be

realized. As of September 30, 2024, the excess of the market value of the Company’s bitcoin over the cost basis of the Company’s bitcoin results in a significant built-in gain for tax purposes and is therefore a source of future taxable income that is expected to allow all of the U.S. net deferred tax assets to be realized. If the market value of bitcoin declines in future periods, the Company would need to assess other sources of forecasted taxable income of proper character, which could result in additional valuation allowances being recorded. The Company will continue to regularly assess the realizability of deferred tax assets.

The Company records liabilities related to its uncertain tax positions. As of September 30, 2024, the Company had gross unrecognized income tax benefits, including accrued interest, of $8.7 million, of which $3.9 million was recorded in “Other long-term liabilities” and $4.8 million was recorded in “Deferred tax assets, net” in the Company’s Consolidated Balance Sheet. As of December 31, 2023, the Company had gross unrecognized income tax benefits, including accrued interest, of $8.3 million, all of which was recorded in “Other long-term liabilities” in the Company’s Consolidated Balance Sheet.

As of September 30, 2024 and December 31, 2023, the Company had income taxes receivable of $5.9 million and $15.3 million, respectively, recorded in “Prepaid expenses and other current assets” in the Company’s Consolidated Balance Sheets.