Torrid Holdings Inc.CURV
Torrid Holdings Inc. Income Taxes Disclosure
Note 12. Income Taxes
(Loss) Income Before (Benefit from) Provision for Income Taxes
The domestic and foreign (loss) income before (benefit from) provision for income taxes during fiscal years 2025, 2024 and 2023 is as follows (in thousands):
| Fiscal Year Ended | |||||||||||||||||
| January 31, 2026 | February 1, 2025 | February 3, 2024 | |||||||||||||||
| Domestic | $ | (15,513) | $ | 17,424 | $ | 17,604 | |||||||||||
| Foreign | 5,953 | 4,179 | 431 | ||||||||||||||
| (Loss) income before (benefit from) provision for income taxes | $ | (9,560) | $ | 21,603 | $ | 18,035 | |||||||||||
(Benefit from) Provision for Income Taxes
The composition of the (benefit from) provision for income taxes during fiscal years 2025, 2024 and 2023 is as follows (in thousands):
| Fiscal Year Ended | |||||||||||||||||
| January 31, 2026 | February 1, 2025 | February 3, 2024 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (56) | $ | 11,565 | $ | 9,108 | |||||||||||
| State | (980) | 1,620 | 2,795 | ||||||||||||||
| Foreign | 958 | 21 | 186 | ||||||||||||||
| $ | (78) | $ | 13,206 | $ | 12,089 | ||||||||||||
| Deferred: | |||||||||||||||||
| Federal | $ | (1,558) | $ | (7,387) | $ | (5,193) | |||||||||||
| State | (746) | (777) | (513) | ||||||||||||||
| Foreign | (144) | 243 | 33 | ||||||||||||||
| (2,448) | (7,921) | (5,673) | |||||||||||||||
| Total (benefit from) provision for income taxes | $ | (2,526) | $ | 5,285 | $ | 6,416 | |||||||||||
Significant components of our deferred tax assets and liabilities are as follows (in thousands):
| January 31, 2026 | February 1, 2025 | ||||||||||
| Deferred tax assets (liabilities): | |||||||||||
| Inventory | $ | 1,648 | $ | 1,483 | |||||||
| Loyalty reserve | 2,493 | 2,874 | |||||||||
| Accrued bonus | 278 | 2,032 | |||||||||
| Lease liability | 28,118 | 38,729 | |||||||||
| Share-based compensation | 1,407 | 2,324 | |||||||||
| Interest expense limitation | 10,797 | 5,658 | |||||||||
| Net operating losses | 1,847 | — | |||||||||
| Other deferred tax assets | 6,839 | 7,335 | |||||||||
| ROU assets | (25,291) | (33,182) | |||||||||
| Intangible assets | (2,066) | (2,065) | |||||||||
| Depreciation | (4,636) | (6,531) | |||||||||
| Other deferred tax liabilities | (2,369) | (2,037) | |||||||||
| Total net deferred tax assets | $ | 19,065 | $ | 16,620 | |||||||
A reconciliation of the benefit from income taxes to the amount computed by applying the statutory U.S. federal income tax rate to loss before income taxes subsequent to the adoption of ASU 2023-09 is as follows (dollars in thousands):
| Fiscal Year Ended | |||||||||||
| January 31, 2026 | Percent | ||||||||||
| U.S. federal statutory rate | $ | (2,016) | 21.0 | % | |||||||
State and local taxes, net of federal benefit(A) | (444) | 4.6 | |||||||||
| Foreign tax effects: | |||||||||||
| Canada | |||||||||||
| Statutory rate difference (national) | (203) | 2.1 | |||||||||
| Statutory rate difference (provincial) | 376 | (3.9) | |||||||||
| Others | (49) | 0.5 | |||||||||
| Effects of changes in tax laws or rates enacted in the current period | — | — | |||||||||
| Effects of cross-border tax laws | (91) | 1.0 | |||||||||
| Tax credits: | |||||||||||
| Work opportunity tax credit | (176) | 1.8 | |||||||||
| Changes in valuation allowance | — | — | |||||||||
| Nontaxable/nondeductible items: | |||||||||||
| Share-based compensation | 377 | (3.9) | |||||||||
| Section 162(m) limitations | 713 | (7.4) | |||||||||
| Others | 89 | (0.9) | |||||||||
| Changes in unrecognized tax benefits | (1,148) | 12.0 | |||||||||
| Other | 46 | (0.5) | |||||||||
| Effective tax rate | $ | (2,526) | 26.4 | % | |||||||
(A)California, Illinois, Oregon and Texas make up the majority (greater than 50%) of the effect of the state and local income tax category.
A reconciliation of the provision for income taxes to the amount computed by applying the statutory U.S. federal income tax rate to income before income taxes for fiscal years prior to the adoption of ASU 2023-09 is as follows:
| Fiscal Year Ended | |||||||||||
| February 1, 2025 | February 3, 2024 | ||||||||||
| U.S. federal statutory rate | 21.0 | % | 21.0 | % | |||||||
| State and local taxes, net of federal benefit | 3.6 | 10.9 | |||||||||
| Share-based compensation | 0.1 | 5.1 | |||||||||
| Liability for uncertain tax positions | (0.6) | (1.5) | |||||||||
| Limitation on Section 162(m) officers | 0.9 | 0.5 | |||||||||
| Foreign derived intangible income | (0.2) | (0.3) | |||||||||
| Other differences, net | (0.3) | (0.1) | |||||||||
| Effective income tax rate | 24.5 | % | 35.6 | % | |||||||
The amount of income taxes paid, net of refunds received, for fiscal year 2025 is as follows (in thousands):
| Federal | $ | 6,954 | |||
| State and local | 1,978 | ||||
| Foreign | — | ||||
| Total income taxes paid, net of refunds received | $ | 8,932 | |||
Cash paid for income taxes, before refunds received, for fiscal years 2024 and 2023 was $17.8 million and $11.2 million, respectively.
As of the end of fiscal year 2025, we had accumulated undistributed earnings and profits of our foreign subsidiary of approximately $11.9 million. We continue to treat undistributed earnings of our foreign subsidiary as indefinitely reinvested according to our current operating plans and no deferred tax liability has been recorded for potential future taxes related to such earnings. According to current tax law, any future dividends paid from our foreign subsidiary will not be subject to income tax in the United States, except for withholding taxes and state taxes, which are not material. We have made a determination on our accounting policy choice to treat taxes related to GILTI as a period cost.
As of the end of fiscal year 2025, we had state net operating loss carryforwards of $28.1 million, which will begin to expire in fiscal year 2030.
Uncertain Tax Positions
The amount of income taxes we pay is subject to ongoing audits by taxing authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to our assessment of the relevant risks, facts and circumstances existing at the time. We believe that we have adequately provided for reasonably foreseeable outcomes related to these matters. However, our future results may include favorable or unfavorable adjustments to our estimated tax liabilities in the period the assessments are made or resolved, which may impact our effective tax rate. As of the end of fiscal year 2025, the total liability for income taxes associated with unrecognized tax benefits, including interest and penalties, was $1.0 million ($0.8 million, net of federal benefit). As of the end of fiscal year 2024, the total liability for income taxes associated with unrecognized tax benefits, including interest and penalties, was $2.4 million ($2.0 million, net of federal benefit). Our effective tax rate will be affected by any portion of this liability we may recognize.
The following table reconciles the amount recorded for the liability for income taxes associated with unrecognized tax benefits as of the end of fiscal years 2025, 2024 and 2023 (in thousands):
| Fiscal Year Ended | |||||||||||||||||
| January 31, 2026 | February 1, 2025 | February 3, 2024 | |||||||||||||||
| Unrecognized tax benefits at the beginning of the fiscal year | $ | 1,820 | $ | 1,925 | $ | 2,996 | |||||||||||
| (Reductions) additions: | |||||||||||||||||
| Tax positions related to the current period | — | 3 | — | ||||||||||||||
| Tax positions related to the prior period | 140 | 154 | 104 | ||||||||||||||
| Tax positions settled or statute of limitations lapsed | (1,246) | (262) | (1,175) | ||||||||||||||
| Unrecognized tax benefits at the end of the fiscal year | $ | 714 | $ | 1,820 | $ | 1,925 | |||||||||||
In fiscal years 2025, 2024 and 2023, income tax expense related to interest and penalties was $0.2 million, $0.5 million and $0.6 million, respectively.
We operate stores throughout the United States, Puerto Rico and Canada, and as a result, we file income tax returns in the United States federal jurisdiction and various state, local and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities. The federal statute of limitations period is three years and most states follow this limitations period with few exceptions. Consequently, tax years between 2022 and 2024 are open for examination.
One Big Beautiful Bill Act
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (the “OBBBA”). The legislation includes several changes to federal tax law that generally allow for more favorable deductibility of certain business expenses, the earliest of which are effective January 1, 2025, including the restoration of immediate expensing of domestic research and development expenditures, reinstatement of 100% bonus depreciation, and more favorable rules for determining the limitation on business interest expense. These changes have been reflected within the income tax provision for fiscal year 2025, as enactment occurred during the second quarter of fiscal year 2025.
The OBBBA also includes certain changes to the U.S. taxation of foreign activity, including changes to foreign tax credits, Global Intangible Low-Taxed Income, Foreign-Derived Intangible Income, and the Base Erosion and Anti-Abuse Tax, among other changes. These changes are generally effective for tax years beginning after December 31, 2025. The OBBBA did not have a significant impact on our total tax provision as of the end of fiscal year 2025, and we do not expect the elective provisions of the law to have a material impact on our future effective tax rate.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 31, 2026 | Showing above |
| 2025 | Apr 1, 2025 | |
| 2024 | Apr 2, 2024 | |
| 2023 | Mar 28, 2023 | |
| 2022 | Mar 30, 2022 | |
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.