Asana, Inc.ASAN
Asana, Inc. Income Taxes Disclosure
Income Taxes
The components of the provision for income taxes were as follows (in thousands):
| Year Ended January 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Current: | |||||||||||||||||
Federal | $ | — | $ | — | $ | — | |||||||||||
| State | 203 | 121 | 318 | ||||||||||||||
| Foreign | 4,247 | 4,295 | 3,239 | ||||||||||||||
| Total current | $ | 4,450 | $ | 4,416 | $ | 3,557 | |||||||||||
| Deferred: | |||||||||||||||||
Federal | $ | — | $ | — | $ | — | |||||||||||
| State | — | — | — | ||||||||||||||
| Foreign | 407 | 349 | 148 | ||||||||||||||
| Total deferred | 407 | 349 | 148 | ||||||||||||||
| Total provision for income taxes | $ | 4,857 | $ | 4,765 | $ | 3,705 | |||||||||||
The components of income (loss) before provision for income taxes were as follows (in thousands):
| Year Ended January 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| United States | $ | (195,803) | $ | (261,057) | $ | (262,894) | |||||||||||
| Foreign | 11,636 | 10,286 | 9,569 | ||||||||||||||
| Total | $ | (184,167) | $ | (250,771) | $ | (253,325) | |||||||||||
Beginning in the fiscal year ended January 31, 2026 annual reporting, the Company adopted ASU 2023-09 prospectively. See Note 2. Basis of Presentation and Summary of Significant Accounting Policies for additional details on the adoption of ASU 2023-09. A reconciliation of the U.S. federal statutory income tax rate to our
effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended January 31, 2026 is as follows (in thousands, except percentages):
| Year Ended January 31, | |||||||||||
| 2026 | |||||||||||
Pretax book loss (consolidated) | $ | (184,167) | |||||||||
| US federal statutory income tax rate | (38,675) | 21.0 | % | ||||||||
State and local income tax, net of federal income tax effect (1) | 154 | (0.1) | |||||||||
Foreign tax effects | |||||||||||
| Canada | 1,980 | (1.1) | |||||||||
Other foreign jurisdictions | 232 | (0.1) | |||||||||
Effect of cross-border tax laws | |||||||||||
Net CFC tested income (previously GILTI) | 2,019 | (1.1) | |||||||||
Tax credits | |||||||||||
Research and development credits | (18,381) | 10.0 | |||||||||
Changes in valuation allowances | 42,848 | (23.3) | |||||||||
Non-taxable or non-deductible items | |||||||||||
Stock based compensation expense | 10,031 | (5.4) | |||||||||
Other non-deductible items | 4,504 | (2.4) | |||||||||
| Other | 145 | (0.1) | |||||||||
| Total income tax expense | $ | 4,857 | (2.6) | % | |||||||
__________________
(1)State taxes in Texas, Oregon, and DC make up a majority (greater than 50 percent) of the tax effect in this category.
The reconciliation between the statutory federal income tax and the Company’s effective tax rates as a percentage of loss before provision for income taxes for the years ended January 31, 2025 and 2024 were as follows:
| Year Ended January 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Federal tax rate | 21.0 | % | 21.0 | % | |||||||
| Stock-based compensation expense | (3.3) | (3.6) | |||||||||
| Change in valuation allowance | (21.2) | (21.4) | |||||||||
| Research and development credits | 7.4 | 3.5 | |||||||||
| U.S. taxation of foreign income and payments | (3.9) | — | |||||||||
| Other | (1.9) | (1.0) | |||||||||
| Effective income tax rate | (1.9) | % | (1.5) | % | |||||||
Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended January 31, 2026 is as follows (in thousands):
| Year Ended January 31, | |||||
| 2026 | |||||
US federal | $ | — | |||
US state and local | 204 | ||||
Foreign | |||||
Canada | 3,254 | ||||
Other | 1,567 | ||||
Total | $ | 5,025 | |||
The major components of deferred tax assets (liabilities) were as follows (in thousands):
As of January 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 384,696 | $ | 284,870 | |||||||
| Tax credit carryforwards | 149,433 | 123,900 | |||||||||
| Stock-based compensation | 8,623 | 12,090 | |||||||||
| Reserves and accrued expenses | 7,877 | 6,815 | |||||||||
| Operating lease liabilities | 48,065 | 52,849 | |||||||||
| R&D expense capitalization under Sec. 174 | 94,996 | 169,447 | |||||||||
| Other | 23 | 34 | |||||||||
| Total deferred tax assets | 693,713 | 650,005 | |||||||||
| Valuation allowance | (654,220) | (601,313) | |||||||||
| Total deferred tax assets, net of valuation allowance | 39,493 | 48,692 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right of use asset | (30,481) | (39,286) | |||||||||
| Deferred commissions | (9,253) | (8,634) | |||||||||
| Depreciation and amortization | (1,749) | (2,354) | |||||||||
| Total deferred tax liabilities | (41,483) | (50,274) | |||||||||
| Net deferred tax liabilities | $ | (1,990) | $ | (1,582) | |||||||
Deferred tax assets and liabilities are presented in the accompanying consolidated balance sheet within other assets and other liabilities. The valuation allowance increased by $52.9 million, $68.9 million, and $61.9 million during the years ended January 31, 2026, 2025, and 2024, respectively. The increase in the valuation allowance during the years ended January 31, 2026, 2025, and 2024 were primarily driven by tax credits and Sec. 174 deferred tax assets generated in the United States. As of January 31, 2026, 2025, and 2024, the Company believes it is not more likely than not that the deferred tax assets will be fully realizable and continues to maintain a full valuation allowance against its net deferred tax assets.
As of January 31, 2026, the Company had aggregate federal and state net operating loss carryforwards of $1,588.0 million and $819.0 million, respectively. The federal and state net operating losses, if not used, will begin to expire in 2029. Federal net operating losses generated after January 31, 2018 will carry forward indefinitely.
As of January 31, 2026, the Company has federal and California research and development tax credit carryforwards of $133.4 million and $82.8 million, respectively. The federal research and development tax credits, if not used, will begin to expire in 2030, while the state tax credit carryforwards may be carried forward indefinitely.
The Tax Reform Act of 1986 limits the use of net operating loss and tax credit carryforwards in certain situations where changes occur in the stock ownership of a company. Under Section 382 of the Internal Revenue Code of 1986, as amended, the Company’s ability to utilize net operating loss carryforwards or other tax attributes in any taxable year may be limited if the Company has experienced an “ownership change.” Generally, a Section 382 “ownership change” occurs if one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period. Similar rules may apply under state tax laws. The Company has completed a Section 382 study of transactions in its stock through January 31, 2020. The study concluded that the Company has experienced ownership changes since inception and that its utilization of net operating loss carryforwards will be subject to annual limitations. However, it is not expected that the annual limitations will result in the expiration of tax attribute carryforwards prior to utilization.
Under the Tax Cuts and Jobs Act of 2017 (“TCJA”), foreign research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective January 1, 2022. This tax law change did not result in any U.S. federal tax liability. It did result in incremental state tax liability and expense due to limitations on the use of existing state net operating loss carryforwards. The TCJA also included a tax on global intangible low-taxed income (“GILTI”) earned by foreign subsidiaries. We elected to account for the income tax effects of GILTI as a period cost in the year the tax is incurred.
On July 4, 2025, the United States enacted federal tax legislation commonly referred to as the One Big Beautiful Bill Act (the “OBBB Act”). Included in this legislation are provisions that allow for the immediate expensing of domestic research and development expenses, permanent extensions and modifications of certain provisions of the 2017 Tax Cuts and Jobs Act, and modifications to the U.S. international tax system. The Company evaluated the impact of the OBBB Act on its tax provision, valuation allowance, and uncertain tax positions. The OBBB Act did not have a material impact on the Company's financial statements. The Company maintains a full valuation allowance, and any change in net deferred tax assets from the OBBB Act would be accompanied by a corresponding adjustment to the valuation allowance.
The Pillar Two Global Anti-Base Erosion rules issued by the Organization for Economic Co-operation and Development (“OECD”), a global policy forum, introduced a global minimum tax of 15%. Nearly all OECD member jurisdictions have agreed in principle to adopt the OECD’s Pillar Two provisions, though implementation timelines vary. Numerous jurisdictions, including some jurisdictions where the Company operates, have enacted these rules, with many taking effect as of January 1, 2024. The Company is not currently subject to these rules but is continuing to evaluate the Pillar Two Framework and its potential impact on future periods.
Foreign withholding taxes have not been provided for the cumulative undistributed earnings of the Company’s foreign subsidiaries as of January 31, 2026 due to the Company’s intention to permanently reinvest such earnings.
No liability related to uncertain tax positions is recorded in the financial statements due to the fact the liabilities have been netted against deferred attribute carryovers.
A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits was as follows (in thousands):
As of January 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Balance at the beginning of the year | $ | 44,846 | $ | 34,960 | |||||||
| Increases - current period tax positions | 8,294 | 7,387 | |||||||||
| Increases - prior period tax positions | 907 | 2,499 | |||||||||
| Balance at the end of the year | $ | 54,047 | $ | 44,846 | |||||||
The Company had no accrued interest and penalties related to unrecognized tax benefits as of January 31, 2026 or January 31, 2025. As of January 31, 2026, there are no unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate. The Company does not expect that its uncertain tax positions will materially change in the next 12 months.
The Company files federal and state tax returns in the United States and in various foreign jurisdictions. The Company’s tax years since inception are open to examination by federal and state taxing authorities, and the tax years 2020 and forward remain open in various foreign jurisdictions.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 13, 2026 | Showing above |
| 2025 | Mar 18, 2025 | |
| 2024 | Mar 14, 2024 | |
| 2023 | Mar 24, 2023 | |
| 2022 | Mar 24, 2022 | |
| 2021 | Mar 30, 2021 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.