TransUnion

16. Income Taxes

The provision for income taxes consisted of the following:

The components of income before income taxes consisted of the following:

The effective income tax rate reconciliation consisted of the following:

For 2024, we reported a 24.6% effective tax rate, which is higher than the 21.0% U.S. federal corporate statutory rate due primarily to nondeductible expenses primarily in connection with executive compensation limitations, foreign withholding taxes, and uncertain tax positions, partially offset by benefits from the research and development credit and the foreign rate differential. In addition, certain deferred tax assets related to expiring foreign tax credits were written off with an offsetting reduction of the valuation allowance.

For 2023, we reported a (30.8)% effective tax rate, which is lower than the 21.0% U.S. federal corporate statutory rate due primarily to the impact of non-deductible goodwill impairment partially offset by benefits on the remeasurement of deferred taxes due to changes in state apportionment rates.

For 2022, we reported a 31.0% effective tax rate, which is higher than the 21.0% U.S. federal corporate statutory rate due primarily to increases in valuation allowances on foreign tax credit carryforwards, nondeductible expenses in connection with certain legal and regulatory matters and executive compensation limitations, and other rate-impacting items, partially offset by benefits from the research and development credit and excess tax benefits on stock-based compensation.

Components of net deferred income tax consisted of the following:

Deferred tax assets and liabilities result from temporary differences between tax and accounting methods. Our balance sheet includes deferred tax assets of $10.1 million and $11.1 million at December 31, 2024 and 2023, respectively, which are included in other assets.

If certain deferred tax assets are not likely recoverable in future years a valuation allowance is recorded. As of December 31, 2024 and 2023, a valuation allowance of $93.4 million and $104.7 million, respectively, reduced deferred tax assets related to worldwide net operating losses and tax credit carryforwards. Our estimate of the amount of the deferred tax asset we can realize requires significant assumptions about projected revenues and income that are impacted by future market and economic conditions. Our carryforwards will expire as follows: U.S. federal net operating loss carryforwards over three years to an indefinite number of years, foreign loss carryforwards overone year to an indefinite number of years, foreign tax credit carryforwards overten years, interest expense carryforwards over an indefinite number of years, state net operating loss carryforwards overone year to an indefinite number of years and state tax credit carryforwards overone year to an indefinite number of years. As of December 31, 2024, the deferred tax assets associated with U.S. foreign tax credit carryforwards and U.S. federal net operating loss carryforwards were $48.4 million and $6.3 million, respectively. Deferred tax assets associated with foreign net operating loss carryforwards and foreign interest expense carryforwards were $27.0 million and $73.2 million, respectively. Deferred tax assets associated with U.S. federal and state interest expense carryforwards is $110.4 million. Deferred tax assets associated with other loss and tax credit carryforwards were not significant.

The total amount of gross unrecognized tax benefits consisted of the following:

The amounts that would affect the effective tax rate if recognized are $34.4 million, $34.5 million and $30.5 million, respectively, for the years ended December 31, 2024, 2023 and 2022.

We classify interest and penalties as income tax expense in the Consolidated Statements of Operations and their associated liabilities as other liabilities in the Consolidated Balance Sheets. Interest and penalties on unrecognized tax benefits were $17.7 million, $14.0 million and $10.1 million, respectively, for the years ended December 31, 2024, 2023 and 2022.

We are regularly audited by federal, state and foreign taxing authorities. Given the uncertainties inherent in the audit process, it is reasonably possible that certain audits could result in a significant increase or decrease in the total amounts of unrecognized tax benefits. An estimate of the range of the increase or decrease in unrecognized tax benefits due to audit results cannot be made at this time. Tax years 2007 and forward remain open for examination in some foreign jurisdictions, 2015 and forward in some state jurisdictions, and 2012 and forward for U.S. federal purposes.