FACTSET RESEARCH SYSTEMS INCFDS

FACTSET RESEARCH SYSTEMS INC Income Taxes Disclosure

10-KFiled Oct 22, 20257 min read
INCOME TAXES
We are subject to taxation in the U.S. and various state, local and foreign jurisdictions in which we conduct our business. Income tax expense is based on taxable income determined in accordance with current enacted laws and tax rates. Deferred income taxes are recorded for the temporary differences between the financial statement carrying amounts and the tax basis of our assets and liabilities using currently enacted tax rates.
Provision for Income Taxes and Effective Tax Rate
The provision for income taxes and the effective tax rate are as follows:
(in thousands)Years ended August 31,
202520242023
U.S. operations$479,288 $416,093 $382,702 
Non-U.S. operations241,670 235,410 201,252 
Income before income taxes$720,958 $651,503 $583,954 
U.S. operations$45,591 $55,219 $54,337 
Non-U.S. operations78,327 59,158 61,444 
Provision for income taxes
$123,918 $114,377 $115,781 
Effective tax rate17.2 %17.6 %19.8 %
The components of the provision for income taxes consist of the following:
(in thousands)Years ended August 31,
202520242023
Current
U.S. federal$16,255 $46,903 $38,625 
U.S. state and local27,594 40,926 38,600 
Non-U.S.83,614 58,568 69,675 
Total current taxes$127,463 $146,397 $146,900 
Deferred
U.S. federal$(1,132)$(26,962)$(17,235)
U.S. state and local2,875 (5,648)(5,652)
Non-U.S.(5,288)590 (8,232)
Total deferred taxes$(3,545)$(32,020)$(31,119)
Provision for income taxes
$123,918 $114,377 $115,781 
Our effective tax rate will vary based on, among other factors, changes in levels of foreign income, as well as other non-recurring events.
The following table presents a reconciliation between the U.S. corporate income tax rate and our effective tax rate:
 Years ended August 31,
(expressed as a percentage of income before income taxes)202520242023
Tax at U.S. Federal statutory tax rate21.0 %21.0 %21.0 %
Increase (decrease) in taxes resulting from:
State and local taxes, net of U.S. federal income tax benefit3.1 2.2 3.1 
Foreign income at other than U.S. rates1.7 1.5 (0.1)
Foreign derived intangible income ("FDII") tax deduction(2.0)(2.3)(1.6)
Income tax benefits from research and development ("R&D") tax credits(3.1)(2.8)(3.8)
Stock-based payments(1.4)(2.1)(2.2)
U.S. impact of foreign income(3.1)(2.5)(0.6)
Uncertain tax positions1.4 2.3 0.5 
One-time adjustment(1)
— — 3.8 
Other, net(0.4)0.3 (0.3)
Effective tax rate17.2 %17.6 %19.8 %
(1) During fiscal 2023, we recorded an out-of-period adjustment related to a review and analysis of certain tax positions, resulting in a one-time net charge. The adjustment related to the accounting of tax balance sheet accounts. All local, federal and foreign taxes payable have been paid in a timely manner, subject to normal audits of open years.
Deferred Tax Assets and Liabilities
We recognize deferred income taxes to reflect the temporary differences between the financial statement carrying amounts of assets and liabilities and their corresponding tax basis. The tax effects of these differences are as follows:
(in thousands)As of August 31,
20252024
Deferred tax assets:
Lease liabilities$35,352 $41,373 
Stock-based compensation36,675 35,615 
Capitalization of R&D costs143,829 109,664 
Sales Tax Dispute— 14,058 
Other39,793 28,154 
Total deferred tax assets$255,649 $228,864 
Deferred tax liabilities:
Depreciation on PPE$(41,432)$(35,666)
Purchased intangible assets, including acquired technology(141,566)(106,131)
Lease ROU assets(18,184)(24,429)
Other(5,393)(9,753)
Total deferred tax liabilities$(206,575)$(175,979)
Deferred tax assets (liabilities), net$49,074 $52,885 
Valuation allowance
(2,750)— 
Total deferred tax assets (liabilities), net$46,324 $52,885 
Total deferred tax assets and liabilities recorded within the Consolidated Balance Sheets were as follows:
(in thousands)As of August 31,
20252024
Deferred tax assets$61,226 $61,337 
Deferred tax liabilities(14,902)(8,452)
Total deferred tax assets (liabilities), net$46,324 $52,885 
As of August 31, 2025, our pre-tax foreign, federal and state NOLs were approximately $12.8 million, $18.9 million and $11.1 million, respectively. These carryforwards may be used to offset future taxable income. Our foreign NOLs expire on August 31, 2045, while our federal NOLs have various expiration dates, beginning August 31, 2036, with some federal NOLs having an unlimited carryforward. Our state NOLs have various expiration dates, beginning August 31, 2026. Utilization of the NOLs may be subject to an annual limitation due to the ownership limitations provided by the Internal Revenue Code of 1986, as amended (the "Code"), and similar state provisions. Any annual limitation may result in the expiration of NOLs before utilization.
Unrecognized Tax Benefits
The determination of liabilities related to uncertain tax positions, and associated interest and penalties, requires significant estimates and assumptions; as such, there can be no assurance that we will accurately predict the outcomes of these audits. We have no reason to believe that such audits will result in the payment of additional taxes and/or penalties that would have a material adverse effect on our results of operations or financial position, beyond current estimates. 
The following table summarizes the changes in the balance of gross unrecognized tax benefits:
(in thousands)
Unrecognized tax benefits as of August 31, 2022
$20,171 
Additions based on tax positions related to the current year4,372
Release for tax positions of prior years(3,490)
Unrecognized tax benefits as of August 31, 2023
$21,053 
Additions based on tax positions related to the current year6,068 
     Additions for tax positions related to prior years(1)
11,726 
Release for tax positions of prior years(3,557)
Unrecognized tax benefits as of August 31, 2024
$35,290 
Additions based on tax positions related to the current year5,344 
Additions for tax positions related to prior years(1)
2,368 
Release for tax positions of prior years(3,568)
Unrecognized tax benefits as of August 31, 2025
$39,434 
(1) Additions for tax positions related to prior years was presented separately in fiscal 2025. Comparative figures for fiscal 2024 have been conformed. There were no such amounts in fiscal 2023.
We do not currently anticipate that the total amount of unrecognized tax benefits will significantly change within the next 12 months. We recognize accrued interest related to unrecognized tax benefits in our Provision for income taxes in the Consolidated Statements of Income. Our accrued interest related to unrecognized tax benefits was $5.7 million, $3.9 million and $1.6 million as of August 31, 2025, 2024 and 2023, respectively. As of fiscal 2025, 2024 and 2023, there were $38.5 million, $29.1 million and $19.1 million of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate.
In the normal course of business, our tax filings are subject to audit by federal, state and foreign tax authorities. As of August 31, 2025, we remained subject to examination in the following significant tax jurisdictions for the fiscal years as indicated below:
Significant Tax JurisdictionOpen Tax Fiscal Years
U.S.
Federal2019through2024
State (various)2019through2024
Non-U.S.
United Kingdom2021through2024
India
2022
through
2024
Undistributed Foreign Earnings
As of August 31, 2025, we had $486.9 million of undistributed foreign earnings of which $69.1 million are permanently reinvested. It is our intent to permanently reinvest all foreign undistributed earnings, except in jurisdictions where earnings can be repatriated substantially free of tax. It is not practicable to determine the deferred tax liability that would be payable if these permanently reinvested earnings were repatriated to the U.S. With respect to outside basis differences other than unremitted earnings, we continue to be permanently reinvested and have no plans to liquidate or sell any foreign subsidiaries. In addition, we have not provided for deferred taxes on any outside basis differences of our domestic subsidiaries as we have the ability and intent to recover these basis differences in a tax-free manner. It is not practicable to determine the amount of unrecognized deferred tax related to these basis differences.
Base Erosion and Profit Shifting Pillar Two
The Organization for Economic Co-operation and Development released Base Erosion and Profit Shifting Pillar Two rules (“Pillar Two”) to introduce a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds. Certain aspects of Pillar Two are effective for tax years beginning on or after January 1, 2024. Although the U.S. has not yet enacted legislation to adopt Pillar Two, certain countries in which we operate have already adopted, or are in the process of adopting, legislation to implement Pillar Two. We have determined that Pillar Two would not have a material impact to our Consolidated Financial Statements, related disclosures, or effective tax rate. However, the Pillar Two rules continue to evolve and their application may alter our tax obligations in certain countries in which we operate for fiscal 2026, and beyond, as we continue to assess the impact of tax legislation in these jurisdictions.
One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was signed into law. The legislation includes a broad range of tax reform provisions affecting businesses including, but not limited to, the expansion of bonus depreciation, immediate expensing of domestic R&D costs, and revisions to the U.S. taxation of profits derived from international operations. The legislation has multiple effective dates, with certain provisions effective in fiscal year 2025 and others implemented through fiscal year 2027. The Act did not have a material impact on the Company financial position and results of operations as of and for the fiscal year ended August 31, 2025.
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Historical Timeline

Fiscal YearFiled
2025Oct 22, 2025Showing above
2024Oct 29, 2024
2023Oct 27, 2023
2022Oct 21, 2022
2021Oct 22, 2021
2020Oct 29, 2020
2019Oct 30, 2019
2018Oct 30, 2018
2017Oct 30, 2017
2016Oct 31, 2016
2015Nov 2, 2015

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.

Other Available Disclosures

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