Core Scientific, Inc./tx

11. INCOME TAXES

Current income tax expense (benefit) 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 (benefit) and effective income tax rate for the periods indicated (dollars in thousands):

For the three and nine months ended September 30, 2026, income tax benefit consisted primarily of a deferred income tax benefit resulting from the release of a portion of the Company's valuation allowance and current state taxes. For the three and nine months ended September 30, 2025, income tax expense consisted of discrete state taxes. The Company’s estimated annual effective income tax rate without consideration of discrete items was 0.0% for both 2026 and 2025, compared to the U.S. federal statutory rate of 21.0%. The difference from the statutory rate for the three and nine months ended September 30, 2026 was primarily driven by a valuation allowance release resulting from deferred tax liabilities recognized in connection with the Polaris DS LLC acquisition. The acquisition resulted in the recognition of deferred tax liabilities, which provided an additional source of future taxable income to support realization of certain previously reserved deferred tax assets. Accordingly, the Company released a portion of its valuation allowance and recorded a corresponding deferred tax benefit during the period. The difference from the statutory rate for the three and nine months ended September 30, 2025 was primarily driven by nondeductible losses on warrant and contingent value right liabilities. The Company continues to maintain a valuation allowance against deferred tax assets that are not more likely than not to be realized based on the available positive and negative evidence.