Chime Financial, Inc.CHYM
Chime Financial, Inc. Income Taxes Disclosure
INCOME TAXES
__________________
For the years ended December 31, 2025, 2024, and 2023, the geographical breakdown of our income (loss) before income taxes is as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Domestic | $ | (1,010,956) | $ | (23,727) | $ | (204,199) | |||||||||||
Foreign | 1,851 | 993 | 1,231 | ||||||||||||||
| Income (loss) before income taxes | $ | (1,009,105) | $ | (22,734) | $ | (202,968) | |||||||||||
Income tax expense (benefit) was composed of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 3 | $ | 1,004 | $ | — | |||||||||||
| State | 828 | 1,606 | 234 | ||||||||||||||
| Foreign | — | — | — | ||||||||||||||
Deferred | — | — | — | ||||||||||||||
| Federal | — | — | — | ||||||||||||||
State | — | — | — | ||||||||||||||
Foreign | — | — | — | ||||||||||||||
| Total | $ | 831 | $ | 2,610 | $ | 234 | |||||||||||
Income tax expense for the year ended December 31, 2025 differed from the amount computed by applying the Federal statutory income tax rate of 21% to pretax loss as a result of the following:
| Year Ended December 31, | |||||||||||
2025 | |||||||||||
Tax at federal statutory rate | $ | (211,912) | 21.0 | % | |||||||
State tax, net of federal benefit(1) | 654 | (0.1) | % | ||||||||
| Foreign tax effects | |||||||||||
| Canada | (225) | — | % | ||||||||
Tax credits | (31,197) | 3.1 | % | ||||||||
Change in valuation allowance | 233,924 | (23.1) | % | ||||||||
Nontaxable or nondeductible items: | |||||||||||
Stock-based compensation | (18,293) | 1.8 | % | ||||||||
Non-deductible compensation | 27,210 | (2.7) | % | ||||||||
Other adjustments | 761 | (0.1) | % | ||||||||
Other | (91) | — | % | ||||||||
Effective income tax rate | $ | 831 | (0.1) | % | |||||||
(1)State taxes in New York, Tennessee, and Texas made up the majority (greater than 50%) of the tax effect in this category.
Income tax expense for the year ended December 31, 2024 and 2023 differed from the amount computed by applying the Federal statutory income tax rate of 21% to pretax loss as a result of the following:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Tax at federal statutory rate | 21.0 | % | 21.0 | % | |||||||
| State tax, net of federal benefit | (5.8) | % | (0.1) | % | |||||||
| Tax credits | 23.7 | % | 3.5 | % | |||||||
| Change in valuation allowance | (51.4) | % | (24.6) | % | |||||||
| Stock-based compensation | 1.1 | % | (0.2) | % | |||||||
| Other | (0.1) | % | 0.3 | % | |||||||
| Effective income tax rate | (11.5) | % | (0.1) | % | |||||||
The difference in the Company’s effective tax rate and the U.S. federal statutory tax rate is primarily due to recording a full valuation allowance on the Company’s U.S. deferred tax assets.
The components of deferred tax assets and liabilities as of December 31, 2025 and 2024, were as follows:
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred tax assets | |||||||||||
| Net operating loss carryforwards | $ | 288,139 | $ | 231,116 | |||||||
| Credit carryforwards | 86,633 | 42,676 | |||||||||
Loss reserves | 58,833 | 39,188 | |||||||||
| Accrued expense | 13,246 | 2,064 | |||||||||
| Lease liability | 33,642 | 24,141 | |||||||||
| Stock compensation | 56,128 | 18,417 | |||||||||
| Internal-use software | 202,751 | 87,894 | |||||||||
| Other | 8,918 | 3,716 | |||||||||
| Total deferred tax assets | $ | 748,290 | $ | 449,212 | |||||||
| Deferred tax liabilities | |||||||||||
| Right of use asset | 23,665 | 12,367 | |||||||||
| Fixed assets | 4,691 | 5,260 | |||||||||
| Other | 2,350 | 2,045 | |||||||||
| Total deferred tax liabilities | $ | 30,706 | $ | 19,672 | |||||||
| Valuation allowance | $ | (717,584) | $ | (429,540) | |||||||
| Net deferred tax assets | $ | — | $ | — | |||||||
Management believes that, based on available evidence, both positive and negative, it is more likely than not that the deferred tax assets will not be utilized, and as such the Company maintains a full valuation allowance at December 31, 2025. The valuation allowance increased by $288.0 million for the year ended December 31, 2025 primarily as a result of the current year capitalized internally developed software.
As of December 31, 2025, the Company had approximately $1,123.4 million and $994.7 million of federal and state (post-apportioned) net operating losses (NOL) carryforwards. The Federal NOL will carry forward indefinitely and the state NOLs will begin to expire in 2028. The Company also has United States federal, state, and Canadian research and development tax credit carryforwards of approximately $98.6 million, $56.9 million, and $4.0 million, respectively. The federal and Canadian research credits will begin to expire in 2040, while the state research credits will begin to expire in 2030. The Internal Revenue Code (“IRC”) limits the amount of net operating loss carryforwards that a company may use in a given year in the event of certain cumulative changes in ownership over a three-year period as described in Section 382 of the IRC. The Company has performed a detailed analysis to determine whether an ownership change has occurred and noted three ownership changes. These changes are limited under Section 382, however, none of the net operating losses are projected to expire unutilized as of December 31, 2025.
A reconciliation of the beginning and ending balances of gross unrecognized tax benefits is as follows:
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at beginning of year | $ | 33,206 | $ | 26,968 | $ | 18,596 | |||||||||||
| Tax positions related to prior years | 1,424 | (980) | 603 | ||||||||||||||
| Tax positions related to the current year | 31,128 | 7,218 | 7,769 | ||||||||||||||
| Settlement with taxing authorities | — | — | — | ||||||||||||||
| Expirations of status of limitations | — | — | — | ||||||||||||||
| Balance at end of year | $ | 65,758 | $ | 33,206 | $ | 26,968 | |||||||||||
If recognized, all of the unrecognized tax benefits would not impact the effective tax rate due to the valuation allowance against certain deferred tax assets. As of December 31, 2025, the Company had $65.8 million unrecognized income tax benefits and there were increases of $32.6 million to the Company’s unrecognized tax benefits during the year. The Company’s policy is to classify interest and penalties associated with unrecognized tax benefits as income tax expense. There were no interest and penalties related to unrecognized tax benefits recorded on the consolidated statements of operations for the years ended December 31, 2025, 2024, and 2023 or the consolidated balance sheets as of December 31, 2025 and 2024.
The Company files income tax returns in the U.S. Federal and various state jurisdictions. In addition, the Company files income tax returns in Canada. The Company is not currently under examination by income tax authorities in any of the jurisdictions. All tax returns will remain open for examination by the federal and most state taxing authorities for three years and four years, respectively, from the date of utilization of any net operating loss carryforwards or research and development credits.
For the year ended December 31, 2025, income taxes paid (net of refunds received) were $1.1 million. The breakout by jurisdiction was as follows:
Year Ended December 31, | |||||
| 2025 | |||||
| United States - Federal | $ | 250 | |||
| United States - State and local | |||||
Texas | 202 | ||||
Oregon | 120 | ||||
South Carolina | 85 | ||||
New York | 77 | ||||
All other state and local | 392 | ||||
| Canada | — | ||||
Total | $ | 1,126 | |||
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.