DOCUSIGN, INC.DOCU
DOCUSIGN, INC. Income Taxes Disclosure
Income Taxes
The domestic and foreign components of pre-tax income were as follows:
| Year Ended January 31, | |||||||||||||||||
| (in thousands) | 2026 | 2025 | 2024 | ||||||||||||||
| U.S. | $ | 217,305 | $ | 179,128 | $ | 54,551 | |||||||||||
| International | 130,023 | 68,813 | 39,128 | ||||||||||||||
| Income before income taxes | $ | 347,328 | $ | 247,941 | $ | 93,679 | |||||||||||
The components of our income tax provision (benefit) were as follows:
| Year Ended January 31, | |||||||||||||||||
| (in thousands) | 2026 | 2025 | 2024 | ||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 786 | $ | 4,758 | $ | 6,390 | |||||||||||
| State | 3,375 | 7,936 | 2,018 | ||||||||||||||
| Foreign | 29,583 | 6,105 | 4,974 | ||||||||||||||
| Total current | 33,744 | 18,799 | 13,382 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 5,819 | (747,082) | 21 | ||||||||||||||
| State | 9,495 | (94,945) | 2 | ||||||||||||||
| Foreign | (10,815) | 3,284 | 6,294 | ||||||||||||||
| Total deferred | 4,499 | (838,743) | 6,317 | ||||||||||||||
| Provision for (benefit from) income taxes | $ | 38,243 | $ | (819,944) | $ | 19,699 | |||||||||||
Beginning in the year ended January 31, 2026, we adopted ASU 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" prospectively. 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 was as follows:
| Year Ended January 31, | |||||||||||
(in thousands, except percentages) | 2026 | ||||||||||
| U.S. federal statutory tax rate | $ | 72,939 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect (1) | 6,383 | 1.8 | |||||||||
| Foreign tax effects | |||||||||||
| Ireland | |||||||||||
| Foreign tax rate differential | (6,616) | (1.9) | |||||||||
| Changes in valuation allowance | (23,502) | (6.8) | |||||||||
| Other | 5,331 | 1.5 | |||||||||
| Other foreign jurisdictions | 8,331 | 2.4 | |||||||||
| Effect of cross-border tax laws | |||||||||||
| Dual jurisdiction deferred taxes | 6,702 | 1.9 | |||||||||
| Other | 2,713 | 0.8 | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Stock-based compensation | (17,530) | (5.0) | |||||||||
| Nondeductible compensation | 23,293 | 6.7 | |||||||||
| Permanent book/tax differences | 2,249 | 0.6 | |||||||||
| Tax credits | |||||||||||
| Research and development credits | (56,034) | (16.1) | |||||||||
| Change in valuation allowance | (9,185) | (2.6) | |||||||||
| Other adjustments | (3,259) | (0.9) | |||||||||
| Changes in unrecognized tax benefits | 26,428 | 7.6 | |||||||||
| Effective tax rate | $ | 38,243 | 11.0 | % | |||||||
(1) State taxes in California, Pennsylvania, New York and New York City made up the majority (greater than 50 percent) of the tax effect in this category.
The following table presents the required disclosures prior to our adoption of ASU 2023-09 and provides a reconciliation of the statutory federal income tax rate to our effective tax rate for the years ended January 31, 2025 and 2024:
| Year Ended January 31, | |||||||||||
| (in percentage) | 2025 | 2024 | |||||||||
| U.S. statutory rate | 21.0 | % | 21.0 | % | |||||||
| State taxes | 4.0 | 2.4 | |||||||||
| Foreign tax rate differential | 0.5 | 37.9 | |||||||||
| Foreign-derived intangible income deduction | (3.8) | (11.7) | |||||||||
| Stock-based compensation | 7.9 | 81.8 | |||||||||
| Change in valuation allowance | (331.7) | (102.5) | |||||||||
| Dual jurisdiction deferred taxes | (2.9) | 36.0 | |||||||||
| Research and development credits | (17.3) | (46.0) | |||||||||
| Other deferred adjustment | (10.7) | (1.2) | |||||||||
| Other | 2.3 | 3.3 | |||||||||
| Effective tax rate | (330.7) | % | 21.0 | % | |||||||
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 was as follows:
| Year Ended January 31, | |||||
(in thousands) | 2026 | ||||
| State and local jurisdictions | $ | 2,008 | |||
| Foreign | 10,938 | ||||
| Total cash taxes paid, net of refunds | $ | 12,946 | |||
The significant components of net deferred tax balances were as follows:
| January 31, | |||||||||||
| (in thousands) | 2026 | 2025 | |||||||||
| Deferred tax assets | |||||||||||
| Net operating loss carryforwards | $ | 482,506 | $ | 486,505 | |||||||
| Accruals and reserves | 18,521 | 16,772 | |||||||||
| Stock-based compensation | 37,114 | 42,949 | |||||||||
| Research and development credits | 231,718 | 179,275 | |||||||||
| Capitalized research and development expenses | 295,228 | 350,729 | |||||||||
| Other | 69,391 | 54,286 | |||||||||
| Total deferred tax assets | 1,134,478 | 1,130,516 | |||||||||
| Less: Valuation allowance | (88,918) | (112,847) | |||||||||
| Deferred tax assets, net of valuation allowance | 1,045,560 | 1,017,669 | |||||||||
| Deferred tax liabilities | |||||||||||
| Deferred contract acquisition costs | (125,660) | (121,678) | |||||||||
| Fixed assets and intangible assets | (65,237) | (54,137) | |||||||||
| Other | (40,925) | (21,980) | |||||||||
| Total deferred tax liabilities | (231,822) | (197,795) | |||||||||
| Net deferred tax assets / (liabilities) | $ | 813,738 | $ | 819,874 | |||||||
Our income tax provision was $38.2 million for the year ended January 31, 2026. The tax provision was driven by U.S. and foreign earnings, partially offset by benefits related to research and development tax credits. Our income tax benefit was $819.9 million for the year ended January 31, 2025. The tax benefit was driven by a $837.3 million release of a net valuation allowance related to our U.S. federal and state deferred tax assets.
We regularly assess the need for a valuation allowance on our deferred tax assets. In making this assessment, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all the deferred tax assets will not be realized. Based on all available positive and negative evidence, having demonstrated sustained profitability, which is objective and verifiable, and taking into account anticipated future earnings, we concluded it is more likely than not that our Ireland deferred tax assets will be realizable. Accordingly, we released the valuation allowance on Irish deferred tax assets of $23.5 million during the year ended January 31, 2026. As of January 31, 2026, we continue to maintain a valuation allowance against our California deferred tax assets. We will continue to monitor the need for a valuation allowance against our deferred tax assets on a quarterly basis.
As of January 31, 2025, based on all available positive and negative evidence, having demonstrated sustained U.S. profitability, which is objective and verifiable, and taking into account anticipated future earnings, we concluded it is more likely than not that our U.S. federal and states deferred tax assets will be realizable, with the exception of certain federal deferred tax assets subject to limitation on use and our California deferred tax assets. The year ended January 31, 2025 included a $837.3 million release of a net valuation allowance, recorded as a discrete tax benefit.
On July 4, 2025, the One Big Beautiful Bill Act was enacted in the United States. The legislation includes significant tax law changes, including the restoration of immediate expensing for domestic research and development costs. The legislation has multiple effective dates with certain provisions effective in 2025 and others implemented through 2027. The impact of changes effective during fiscal 2026 resulted in additional tax expense.
We intend to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which we would incur significant additional costs upon repatriation of such amounts.
Recognized tax benefits on total stock-based compensation expense, which are reflected in the "Provision for (benefit from) income taxes" in the consolidated statements of operations and comprehensive income, were $132.8 million, $143.0 million and $7.1 million in the years ended January 31, 2026, 2025 and 2024, respectively. Our tax provision includes $26.3 million of excess tax benefits, $16.0 million of excess tax benefits and $3.8 million of tax shortfalls from stock-based compensation for the years ended January 31, 2026, 2025 and 2024, respectively.
As of January 31, 2026, we had accumulated net operating loss carryforwards of $1.8 billion for federal and $1.3 billion for state. Of the federal net operating losses, $1.8 billion is carried forward indefinitely, but is limited to 80% of taxable income. The state net operating loss carryforwards will begin to expire in 2029. As of January 31, 2026, we also had total foreign net operating loss carryforwards of $53.8 million, which do not expire under local law.
As of January 31, 2026, we had accumulated U.S. research tax credits of $245.2 million for federal and $79.0 million of state, including $77.0 million for California. The U.S. federal research tax credits will begin to expire in 2039. The California research tax credits do not expire.
A reconciliation of the beginning and ending balance of total unrecognized tax benefits was as follows:
| Year Ended January 31, | |||||||||||||||||
| (in thousands) | 2026 | 2025 | 2024 | ||||||||||||||
| Unrecognized tax benefits, beginning balance | $ | 75,546 | $ | 60,744 | $ | 47,946 | |||||||||||
| Gross increase for tax positions of prior years | 2,675 | — | 4,368 | ||||||||||||||
| Gross decrease for tax positions of prior years | — | (307) | (156) | ||||||||||||||
| Gross increase for tax positions of current year | 24,167 | 15,109 | 8,586 | ||||||||||||||
| Unrecognized tax benefits, ending balance | $ | 102,388 | $ | 75,546 | $ | 60,744 | |||||||||||
As of January 31, 2026, we had $102.4 million of unrecognized tax benefits, of which $83.5 million could affect the Company’s effective tax rate, if recognized. We recognize interest and penalties related to uncertain tax positions in provision for income taxes. As of January 31, 2026, accrued interest and penalties was $3.7 million.
We are subject to taxation in the U.S. and various foreign jurisdictions. Our tax years from inception in 2003 through January 31, 2026 remain subject to examination by U.S. and California taxing authorities, as well as taxing authorities in various other state and foreign jurisdictions. We are not under examination in any material jurisdictions.
The following table represents the rollforward of our valuation allowance:
| Year Ended January 31, | |||||||||||||||||
| (in thousands) | 2026 | 2025 | 2024 | ||||||||||||||
| Beginning balance | $ | 112,847 | $ | 934,816 | $ | 1,032,016 | |||||||||||
| Valuation allowance charged to income tax provision | (23,929) | (821,969) | (97,200) | ||||||||||||||
| Ending balance | $ | 88,918 | $ | 112,847 | $ | 934,816 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 18, 2026 | Showing above |
| 2025 | Mar 18, 2025 | |
| 2024 | Mar 21, 2024 | |
| 2023 | Mar 27, 2023 | |
| 2022 | Mar 25, 2022 | |
| 2021 | Mar 31, 2021 | |
| 2020 | Mar 27, 2020 | |
| 2019 | Mar 26, 2019 | |
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.