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INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Entity Information [Line Items]  
INCOME TAXES INCOME TAXES
The domestic and foreign components of the Company’s Net Income (Loss) Before Income Taxes consists of the following for the periods presented (in thousands):
 Years Ended December 31,
 202520242023
United States$(35,534)$(53,963)$(106,384)
Foreign— — — 
Net Loss Before Income Taxes$(35,534)$(53,963)$(106,384)
The components of the Company’s Income Tax Expense are as follows for the periods presented (in thousands):
 Years Ended December 31,
 202520242023
Current:  
Federal$— $— $— 
State137 28 15 
Foreign— — — 
Total Current Income Tax Expense137 28 15 
Deferred:  
Federal47 47 47 
State(16)41 16 
Foreign— — — 
Total Deferred Income Tax Expense31 88 63 
Total Income Tax Expense$168 $116 $78 
The Company adopted ASU No. 2023-09 on a prospective basis beginning with the year ended December 31, 2025. The following table presents required disclosures pursuant to ASU 2023-09 and reconciles the U.S. federal statutory income tax rate of 21% to the Company’s Net Loss Before Income Taxes for the year ended December 31, 2025 (dollar amounts in thousands):
 Year Ended December 31, 2025
 Amount ($)Percent (%)
U.S. federal statutory tax rate$(7,462)21 %
State and local income taxes, net of federal income tax effect (1)
92 — %
Tax credits
Research and development tax credits35 — %
Changes in valuation allowances(2,545)7 %
Nontaxable or nondeductible items
Share-based payment awards866 (2)%
Convertible Preferred Stock Warrants8,842 (25)%
Other295 (1)%
Changes in unrecognized tax benefits(9)— %
Other U.S. federal adjustments
Other54 — %
Effective income tax rate$168 — %
(a) State taxes in Indiana, Massachusetts and Pennsylvania made up the majority (greater than 50%) of the tax effect in this category.
The following table reconciles the U.S. federal statutory income tax rate of 21% to the Company’s Net Loss Before Income Taxes for the following periods prior to the year ended December 31, 2025:
 Years Ended December 31,
 20242023
U.S. federal tax at statutory rate21 %21 %
State and local income taxes, net of federal income tax effect8 %8 %
Share-based payment awards(1)%(1)%
Convertible Preferred Stock Warrants(25)%(12)%
Changes in valuation allowances5 %(18)%
Return-to-provision(3)%(1)%
State tax rate changes(4)%2 %
Other(1)%1 %
Income Tax Expense— %— %
Temporary items that give rise to significant portions of deferred tax assets and liabilities are as follows for the periods presented (in thousands):
 December 31,
 20252024
Net operating loss carry forwards$97,359 $100,301 
Research and other credits2,711 2,779 
Stock compensation594 1,550 
Accrued liabilities9,422 7,168 
Lease liabilities2,269 3,507 
Property and equipment4,992 3,998 
Section 174 R&D capitalization5,499 9,480 
Total deferred tax assets122,846 128,783 
Net servicing rights(1,184)(509)
Intangible assets(5,924)(2,826)
Right-of-use assets(1,661)(2,559)
Total deferred tax liabilities(8,769)(5,894)
Total net deferred tax asset114,077 122,889 
Less: Valuation allowance(114,916)(123,697)
Net deferred tax liability$(839)$(808)
Under ASC 740, Accounting for Income Taxes, a valuation allowance must be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The amount of valuation allowance is based upon management’s best estimate of Prosper’s ability to realize the net deferred tax assets. A valuation allowance can subsequently be reduced when management believes that the assets are realizable on a more-likely-than-not basis. As of December 31, 2025, the Company continues to record a valuation allowance against its net deferred taxes. The valuation allowance as of December 31, 2025, decreased by $8.8 million to $114.9 million from the prior year.
The Internal Revenue Code imposes substantial restrictions on the utilization of net operating losses and tax credits in the event of an “ownership change” of a corporation. Accordingly, Prosper’s ability to utilize net operating losses and credit carryforwards may be limited in the future as the result of such an “ownership change.”
Prosper files federal and various state income tax returns, and has net operating loss carryforwards available to reduce future taxable income, if any, for both federal and state income tax purposes of approximately $359.1 million and $420.6 million, respectively, as of December 31, 2025, before any potential limitations for “ownership changes.” The state net operating loss carryforwards are primarily related to California. The federal and state net operating loss carryforwards will begin to expire in 2028 and 2027, respectively. All net operating loss carryforwards are subject to a full valuation allowance. Prosper has federal and California research and development tax credits of approximately $2.8 million and $1.6 million, respectively. The federal research credits will begin to expire in 2026 and the California research credits have no expiration date.
ASU 2023-09 requires entities to provide additional disclosures about income taxes paid by jurisdiction. Applying these updated requirements on a prospective basis, cash payments made for income taxes, net of refunds, are as follows (in thousands):
 Year Ended December 31, 2025
California$291 
Massachusetts80 
Pennsylvania47 
Other91 
Total Income Taxes Paid, Net of Refunds Received$509 
The following table summarizes the Company’s activity related to its unrecognized tax benefits (in thousands):
Balance at December 31, 2022$1,291 
Change related to 2023 tax year position— 
Balance at December 31, 2023$1,291 
Change related to 2024 tax year position— 
Balance at December 31, 2024$1,291 
Change related to 2025 tax year position— 
Change related to positions of prior tax years(112)
Balance at December 31, 2025$1,179 
None of the unrecognized tax benefits would affect the Company’s effective tax rate if these amounts are recognized due to the full valuation allowance.
Prosper’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of Income Tax Expense. As of December 31, 2025, the Company has not incurred significant interest or penalties.
All tax returns will remain open for examination by federal and most state taxing authorities for three and four years, respectively, from the date of utilization of any net operating loss carryforwards or research and development credits.
Prosper Funding LLC  
Entity Information [Line Items]  
INCOME TAXES INCOME TAXES
PFL incurred no income tax provision for the year ended December 31, 2025 and 2024. PFL is a U.S. disregarded entity and its income and loss are included in the income tax reporting of its parent, PMI. Since PMI is in a taxable loss position, is not currently subject to income taxes, and has fully reserved against its deferred tax asset, the net effective tax rate for PFL is 0%.