Core Scientific, Inc./tx

11. INCOME TAXES

Current income tax expense represents the amount expected to be reported on the Company’s income tax returns, and deferred tax expense or benefit represents the change in net deferred tax assets and liabilities. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates that will be in effect when these differences reverse. Valuation allowances are recorded as appropriate to reduce deferred tax assets to the amount considered likely to be realized.

The following table presents income tax expense and effective income tax rate for the periods indicated (dollars in thousands):

For the three and six months ended June 30, 2026 and 2025, income tax expense consisted of discrete state taxes. The Company’s estimated annual effective income tax rate without consideration of discrete items was (0.2)% and 0.0% for 2026 and 2025, respectively, compared to the U.S. federal statutory rate of 21.0%. The difference from the statutory rate for the three and six months ended June 30, 2026 was primarily driven by projected changes in the valuation allowance. The difference from the statutory rate for the three and six months ended June 30, 2025 was primarily driven by nondeductible losses on warrant and contingent value right liabilities. The Company has a full valuation allowance on its net deferred tax assets as evidence indicates it is not more likely than not that such asset will be realized.