FTI CONSULTING, INCFCN
FTI CONSULTING, INC Income Taxes Disclosure
Income Taxes
The table below summarizes significant components of deferred tax assets and liabilities:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets | |||||||||||
| Allowance for expected credit losses | $ | 15,196 | $ | 13,446 | |||||||
| Accrued vacation and bonus | 47,793 | 51,045 | |||||||||
| Share-based compensation | 16,305 | 15,081 | |||||||||
| Notes receivable from employees | 25,309 | 16,046 | |||||||||
| Foreign net operating and capital loss carryforward | 31,762 | 20,411 | |||||||||
| Foreign tax credit carryforward | 33,863 | 25,963 | |||||||||
| Deferred compensation | 3,728 | 3,636 | |||||||||
| Operating lease assets | 64,515 | 58,982 | |||||||||
| Other, net | 7,243 | 6,773 | |||||||||
| Total deferred tax assets | 245,714 | 211,383 | |||||||||
| Deferred tax liabilities | |||||||||||
| Revenue recognition | (3,461) | (2,833) | |||||||||
| Operating lease liabilities | (49,134) | (47,923) | |||||||||
| Property and equipment, net | (13,478) | (9,831) | |||||||||
| Goodwill and intangible assets | (218,610) | (212,595) | |||||||||
| Total deferred tax liabilities | (284,683) | (273,182) | |||||||||
| Foreign withholding tax | (1,363) | (1,538) | |||||||||
| Valuation allowance | (24,481) | (9,612) | |||||||||
| Net deferred tax liabilities | $ | (64,813) | $ | (72,949) | |||||||
As of December 31, 2025, the Company had foreign tax credit carryforwards of $33.9 million, all of which will expire between 2031 and 2035. As of December 31, 2025, the Company had foreign net operating loss and capital loss carryforwards of $154.2 million, of which $22.9 million expires over the next 15 years and $131.3 million can be carried forward indefinitely.
The valuation allowance for foreign deferred tax assets was $24.5 million and $9.6 million as of December 31, 2025 and 2024, respectively. The historical profitability of each foreign entity is a factor in determining whether to establish or release a valuation allowance. Pre-tax operating losses on a three-year cumulative basis or lack of sustainable profitability are considered objectively verifiable evidence and will generally outweigh a projection of future taxable income. Certain foreign subsidiaries have experienced cumulative operating losses over a three-year period and, as a result, have recorded a valuation allowance against all or a portion of their deferred tax assets. Based on all available evidence, we have determined that it is more likely than not (defined as a likelihood of greater than 50%) that the deferred tax assets held by these entities will not be realized and, consequently, have recorded valuation allowances on these deferred tax assets.
Changes in the valuation allowance for deferred tax assets for the years ended December 31, 2025, 2024 and 2023 was as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning Balance | $ | (9,612) | $ | (6,773) | $ | (6,457) | |||||||||||
| (Charged) credited to provision for income taxes | (14,362) | (3,301) | (540) | ||||||||||||||
| (Charged) credited to other comprehensive income and other | (507) | 462 | 224 | ||||||||||||||
| Ending Balance | $ | (24,481) | $ | (9,612) | $ | (6,773) | |||||||||||
The table below summarizes the components of income before income tax provision from continuing operations:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 308,824 | $ | 238,241 | $ | 247,381 | |||||||||||
| Foreign | 62,187 | 112,530 | 110,982 | ||||||||||||||
| Total | $ | 371,011 | $ | 350,771 | $ | 358,363 | |||||||||||
The table below summarizes the components of income tax provision from continuing operations:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 24,600 | $ | 30,689 | $ | 28,463 | |||||||||||
| State | 22,933 | 18,242 | 18,878 | ||||||||||||||
| Foreign | 28,862 | 38,357 | 38,029 | ||||||||||||||
| 76,395 | 87,288 | 85,370 | |||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 19,714 | (8,238) | 6,363 | ||||||||||||||
| State | (3,235) | (3,666) | (3,514) | ||||||||||||||
| Foreign | 7,266 | (4,701) | (4,748) | ||||||||||||||
| 23,745 | (16,605) | (1,899) | |||||||||||||||
| Income tax provision | |||||||||||||||||
| Federal | 44,314 | 22,451 | 34,826 | ||||||||||||||
| State | 19,698 | 14,576 | 15,364 | ||||||||||||||
| Foreign | 36,128 | 33,656 | 33,281 | ||||||||||||||
| $ | 100,140 | $ | 70,683 | $ | 83,471 | ||||||||||||
The table below summarizes the components of cash paid for income taxes and tax credits, net of refunds for the year ended December 31, 2025, pursuant to the disclosure requirements of ASU 2023-09:
Year Ended December 31, 2025 | |||||
| Federal | $ | 67,960 | |||
| State and Local | 21,477 | ||||
| Foreign | |||||
| Canada | 8,680 | ||||
| Germany | |||||
| Germany - Federal | 11,024 | ||||
| Germany - Other | 11,679 | ||||
| United Kingdom | 9,701 | ||||
| Other | 13,836 | ||||
| 54,920 | |||||
| Total | $ | 144,357 | |||
Our income tax provision from continuing operations resulted in effective tax rates that varied from the federal statutory income tax rate for the year ended December 31, 2025 as summarized below, pursuant to the disclosure requirements of ASU 2023-09:
Year Ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| Income tax expense at federal statutory rate | $ | 77,912 | 21.0 | % | |||||||
| Domestic federal | |||||||||||
| Tax credits | (3,428) | (0.9) | % | ||||||||
| Nontaxable and nondeductible items | 5,899 | 1.6 | % | ||||||||
| Cross-border tax laws | |||||||||||
| Foreign tax credits | (9,071) | (2.4) | % | ||||||||
| Other | (5,594) | (1.5) | % | ||||||||
| Changes in valuation allowances | 136 | — | % | ||||||||
| Excess net tax benefits on share-based payments | (4,754) | (1.3) | % | ||||||||
| Other | 386 | 0.1 | % | ||||||||
| Domestic state and local tax effects, net of federal | 15,511 | 4.1 | % | ||||||||
| Foreign tax effects | |||||||||||
| Germany | |||||||||||
| Trade taxes | 4,743 | 1.3 | % | ||||||||
| Other | (1,142) | (0.3) | % | ||||||||
| France | |||||||||||
| Changes in valuation allowance | 7,304 | 2.0 | % | ||||||||
| Other | (308) | (0.1) | % | ||||||||
| Other foreign jurisdictions | 12,523 | 3.4 | % | ||||||||
| Worldwide changes in unrecognized tax benefits | 23 | — | % | ||||||||
| Total | $ | 100,140 | 27.0 | % | |||||||
In 2025, state and local tax in California, New York State, New York City and New Jersey make up the majority of the domestic state and local income taxes, net of federal category.
Our income tax provision from continuing operations resulted in effective tax rates that varied from the federal statutory income tax rate for the years ended December 31, 2024 and 2023 as summarized below:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Income tax expense at federal statutory rate | $ | 73,662 | $ | 75,256 | |||||||
| State income taxes, net of federal benefit | 13,508 | 12,562 | |||||||||
| Detriment from foreign tax rates | 6,616 | 9,418 | |||||||||
| Other expenses not deductible for tax purposes | 6,927 | 5,793 | |||||||||
| Adjustment to reserve for uncertain tax positions | 348 | (797) | |||||||||
| Share-based compensation | (17,079) | (5,422) | |||||||||
| U.S. foreign tax credits | (12,315) | (9,464) | |||||||||
| Other adjustments, net | (984) | (3,875) | |||||||||
| Income tax provision | $ | 70,683 | $ | 83,471 | |||||||
The income tax provision for the years ended December 31, 2025 and 2024 was $100.1 million and $70.7 million, respectively. The increase in the income tax provision was primarily due to a less favorable tax benefit related to share-based compensation, resulting from fewer non-qualified stock option exercises and an increase in valuation allowances against certain foreign deferred tax assets as compared to the prior year.
We file numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and in many city, state and foreign jurisdictions. We are no longer subject to U.S. federal income tax examinations for years prior to 2022. We are also no longer subject to state and local or foreign tax examinations by tax authorities for years prior to 2019.
Our liability for uncertain tax positions was $0.5 million and $0.7 million as of December 31, 2025 and 2024, respectively. As of December 31, 2025, our accrual for the payment of tax-related interest and penalties was not significant.
Recent Legislation
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA is expected to have immaterial impacts on the current and future year cash flows and effective tax rate.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 25, 2016 | |
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.