Note 10 — Income Taxes

As of March 31, 2026, the Company had federal and state R&D tax credit carryforwards of $157.3 million and $217.6 million, respectively, which begin to expire in fiscal year 2040 and fiscal year 2027, respectively. As of March 31, 2026, the Company had federal and state net operating loss carryforwards of $1,296.2 million and $673.0 million, respectively, which begin to expire in fiscal year 2029 and fiscal year 2027, respectively. However, the majority of the federal net operating loss carryforwards do not expire.

As of March 31, 2026, the Company's deferred tax assets for net operating loss carryforwards included $64.2 million of UK capital loss carryforwards, which can only be offset against future UK capital gains. A full valuation allowance has been established against the capital loss carryforwards, as no capital gains are expected. With limited exceptions, the Company's foreign net operating loss and interest carryforwards do not expire. However, certain transactions or material changes to the Company's global financing arrangements could limit the Company's right to use its foreign deferred tax assets and make netting against deferred tax liabilities inappropriate, resulting in an increase to the valuation allowance and income tax expense.

In accordance with ASC 740, net deferred tax assets are reduced by a valuation allowance if, based on all the available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Future realization of existing deferred tax assets ultimately depends on future profitability and the existence of sufficient taxable income of appropriate character (for example, ordinary income versus capital gains) within the carryforward period available under tax law. In the event that the Company’s estimate of taxable income is less than that required to utilize the full amount of any deferred tax asset, a valuation allowance is established, which would cause a decrease to income in the period such determination is made. A valuation allowance of $435.0 million at March 31, 2026 and $430.5 million at March 31, 2025 has been established relating to carryforwards of federal, state and foreign net operating losses, federal and state R&D tax credits, and foreign tax credits, and to other federal and state net deferred tax assets for cumulative timing differences that, based on management’s estimate of future taxable income attributable to such jurisdictions and generation of additional research credits, are considered more likely than not to expire unused.

In July 2025, the One Big Beautiful Bill Act (OBBBA) was enacted in the U.S. The OBBBA includes a broad range of material business tax reforms, such as 100% bonus depreciation, expensing of U.S.-based research and development, modification of the interest expense limitation, and modification of various U.S. international tax provisions. For fiscal year 2026, the tax law changes resulted in approximately $10.7 million of incremental non-cash tax expense to increase the Company’s U.S. valuation allowance due to material changes in the Company’s mix of gross deferred tax assets and liabilities. Additionally, the tax law changes decreased cash paid for income taxes in fiscal year 2026 associated with the Company's majority-owned subsidiary primarily due to the accelerated amortization of research and development expenses that were previously capitalized for tax purposes.

During the fourth quarter of fiscal year 2025, the Company released $10.3 million of valuation allowance previously recorded against U.S. deferred tax assets. The Company evaluated both the positive and negative evidence and released valuation allowance equal to the expected benefit from the deferred tax liabilities recorded for legacy Inmarsat U.S. entities in connection with a tax planning strategy to file a consolidated U.S. federal tax return.

During the second quarter of fiscal year 2024, in evaluating the Company’s ability to realize its U.S. net deferred tax assets, the Company considered all available positive and negative evidence, including but not limited to operating results, forecasted ranges of future taxable income, and its recent satellite anomalies. ASC 740 places more weight on the objectively verifiable evidence of current pre-tax losses and recent events than forecasts of future profitability. Therefore, the Company determined it is more likely than not that its U.S. net deferred tax assets will not be realized, excluding its deferred tax assets and liabilities related to the separate U.S. tax return filings of TrellisWare and the legacy Inmarsat entities. As a result, the Company’s tax benefit for fiscal year 2024 was reduced by a valuation allowance recorded against such U.S. deferred tax assets.

Of the total unrecognized tax benefits at March 31, 2026, $13.6 million would reduce the Company’s annual effective tax rate if recognized, based on the Company's valuation allowance position at March 31, 2026.

The Company’s policy is to recognize interest and penalties related to income tax matters as a component of income tax expense. As of March 31, 2026 and 2025, the Company had accrued interest expense and penalties of approximately $9.0 million and $14.4 million, respectively. The Company recognized a tax benefit of $5.5 million for fiscal year 2026 and an insignificant amount for each of fiscal years 2025 and 2024 for reductions of interest expense and penalties in income tax expense. In addition, as of March 31, 2026 and 2025, the Company had accrued interest income of approximately $7.1 million and an insignificant amount, respectively. The Company recognized a tax benefit of $4.6 million for fiscal year 2026 and an insignificant amount for each of fiscal years 2025 and 2024 for interest income in income tax expense.

The Company is subject to periodic audits by domestic and foreign tax authorities. By statute, the Company’s U.S. federal and state income tax returns are subject to examination by the tax authorities for fiscal years 2023 and thereafter. Additionally, net operating loss and R&D tax credit carryovers that were generated in prior years may also be subject to examination. The Company’s U.S. federal income tax return for fiscal year 2024 is currently under examination by the Internal Revenue Service. Calendar years 2014 and thereafter remain open in Norway for certain entities currently under examination. Calendar years 2018 and thereafter remain open in Canada for certain entities currently under examination. With few exceptions, fiscal years 2022 and thereafter remain open by statute to examination by other foreign tax authorities. The Company believes that it has appropriate support for the income tax positions taken on its tax returns and its accruals for tax liabilities are adequate based on an assessment of many factors, including experience and interpretations.