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, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| United States | $ | — | $ | — | $ | — | |||||||||||
| State | 121 | 318 | 45 | ||||||||||||||
| Foreign | 4,295 | 3,239 | 4,009 | ||||||||||||||
| Total current | $ | 4,416 | $ | 3,557 | $ | 4,054 | |||||||||||
| Deferred: | |||||||||||||||||
| United States | $ | — | $ | — | $ | — | |||||||||||
| State | — | — | — | ||||||||||||||
| Foreign | 349 | 148 | 821 | ||||||||||||||
| Total deferred | 349 | 148 | 821 | ||||||||||||||
| Total provision for income taxes | $ | 4,765 | $ | 3,705 | $ | 4,875 | |||||||||||
The components of income (loss) before income taxes were as follows (in thousands):
| Year Ended January 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | (261,057) | $ | (262,894) | $ | (413,505) | |||||||||||
| Foreign | 10,286 | 9,569 | 10,612 | ||||||||||||||
| Total | $ | (250,771) | $ | (253,325) | $ | (402,893) | |||||||||||
The reconciliation between the statutory federal income tax and the Company’s effective tax rates as a percentage of loss before income taxes were as follows:
| Year Ended January 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| Stock-based compensation expense | (3.3) | (3.6) | (2.4) | ||||||||||||||
| Change in valuation allowance | (21.2) | (21.4) | (23.1) | ||||||||||||||
| Transaction costs | — | — | (0.1) | ||||||||||||||
| Research and development credits | 7.4 | 3.5 | 4.9 | ||||||||||||||
| U.S. taxation of foreign income and payments | (3.9) | — | — | ||||||||||||||
| Other | (1.9) | (1.0) | (1.5) | ||||||||||||||
| Effective income tax rate | (1.9) | % | (1.5) | % | (1.2) | % | |||||||||||
The major components of deferred tax assets (liabilities) were as follows (in thousands):
As of January 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 284,870 | $ | 285,152 | |||||||
| Research and development tax credits | 123,900 | 96,548 | |||||||||
| Stock-based compensation | 12,090 | 14,552 | |||||||||
| Reserves and accrued expenses | 6,815 | 7,860 | |||||||||
| Operating lease liabilities | 52,849 | 56,532 | |||||||||
| R&D expense capitalization under Sec. 174 | 169,447 | 125,080 | |||||||||
| Other | 34 | — | |||||||||
| Total deferred tax assets | 650,005 | 585,724 | |||||||||
| Valuation allowance | (601,313) | (532,423) | |||||||||
| Total deferred tax assets, net of valuation allowance | 48,692 | 53,301 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right of use asset | (39,286) | (43,320) | |||||||||
| Deferred commissions | (8,634) | (8,588) | |||||||||
| Depreciation and amortization | (2,354) | (2,704) | |||||||||
| Total deferred tax liabilities | (50,274) | (54,612) | |||||||||
| Net deferred tax liabilities | $ | (1,582) | $ | (1,311) | |||||||
Deferred tax assets and liabilities are presented in the accompanying consolidated balance sheet within other assets and other liabilities. The valuation allowance increased by $68.9 million, $61.9 million, and $113.6 million during the years ended January 31, 2025, 2024, and 2023, respectively. The increase in the valuation allowance during the years ended January 31, 2025, 2024, and 2023 were primarily driven by research and development expense capitalization under Sec. 174, loss carryforwards, and tax credits generated in the United States. As of January 31, 2025, 2024, and 2023, 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, 2025, the Company had federal and state net operating loss carryforwards of $1,145.5 million and $723.6 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, 2025, the Company has federal and California research and development tax credit carryforwards of $109.7 million and $69.7 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”), 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 due to the use of existing U.S. federal net operating loss carryforwards. 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. Finally, the TCJA included the Base Erosion and Anti-Abuse Tax (“BEAT”). The Company expects to make certain elections to be excluded from the definition of applicable taxpayer under BEAT, and the impact is reflected in the ETR as a part of “U.S. taxation of foreign income and payments.”
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, 2025 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, | |||||||||||
| 2025 | 2024 | ||||||||||
| Balance at the beginning of the year | $ | 34,960 | $ | 31,738 | |||||||
| Increases - current period tax positions | 7,387 | 5,444 | |||||||||
| Increases - prior period tax positions | 2,499 | — | |||||||||
| Decreases - prior period tax positions | — | (2,222) | |||||||||
| Balance at the end of the year | $ | 44,846 | $ | 34,960 | |||||||
The Company had no accrued interest and penalties related to unrecognized tax benefits as of January 31, 2025 or January 31, 2024. As of January 31, 2025, 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 2019 and forward remain open in various foreign jurisdictions.
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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.