Figma, Inc.FIG
Figma, Inc. Income Taxes Disclosure
Income Taxes
For the years ended December 31, 2025, 2024, and 2023 the Company’s income (loss) before provision for income taxes was as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | (1,235,143) | $ | (801,821) | $ | 942,722 | |||||||||||
| Foreign | 9,501 | 8,750 | 3,197 | ||||||||||||||
| Income (loss) before income taxes | $ | (1,225,642) | $ | (793,071) | $ | 945,919 | |||||||||||
For the years ended December 31, 2025, 2024, and 2023, the provision for (benefit from) income taxes consisted of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 819 | $ | (57,990) | $ | 186,475 | |||||||||||
| State | 1,553 | (4,322) | 20,759 | ||||||||||||||
| Foreign | 24,592 | 2,531 | 844 | ||||||||||||||
| Total | $ | 26,964 | $ | (59,781) | $ | 208,078 | |||||||||||
| Deferred: | |||||||||||||||||
| Federal | $ | (1,647) | $ | — | $ | — | |||||||||||
| State | (257) | — | — | ||||||||||||||
| Foreign | (239) | (1,170) | — | ||||||||||||||
| Total | (2,143) | (1,170) | — | ||||||||||||||
| Provision for (benefit from) income taxes | $ | 24,821 | $ | (60,951) | $ | 208,078 | |||||||||||
The Company’s income tax expense for the year ended December 31, 2025 was primarily due to the impact of a non-recurring intragroup transfer of certain intellectual property (“IP”) rights to the United States as a result of the Company’s acquisition of Weavy. As a result, the Israeli subsidiary of the Company recognized a taxable gain for local statutory purposes of approximately $24.5 million. The Company evaluated the tax consequences of the intercompany transfer, including the valuation of the IP and the application of relevant Israeli and U.S. tax laws, and believes the transaction was completed in accordance with applicable transfer pricing and tax regulations. No material reserves for uncertain tax positions were recorded in connection with the transfer as of December 31, 2025.
The table below provides the updated requirements of ASU 2023-09 for the Company’s effective tax rate for the year ended December 31, 2025. See Note 1 “Description of the Business and Summary of Significant Accounting Policies” for additional details on the adoption of ASU 2023-09.
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| Provision at federal statutory rate | $ | (257,385) | 21.0 | % | |||||||
State and local income tax, net of federal income tax effect(1) | (13) | — | % | ||||||||
| Foreign tax effects | |||||||||||
| Israel | |||||||||||
| Transfer of intellectual property | 23,091 | (1.9) | % | ||||||||
| Other foreign jurisdictions | 241 | — | % | ||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | % | ||||||||
| Effect of cross-border tax laws | — | — | % | ||||||||
| Tax credits | |||||||||||
| Research credits | (96,193) | 7.8 | % | ||||||||
| Changes in valuation allowance | 389,932 | (31.8) | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Stock-based compensation | (118,966) | 9.8 | % | ||||||||
| Officer compensation | 71,802 | (5.9) | % | ||||||||
| Other | 1,054 | (0.1) | % | ||||||||
| Changes in unrecognized tax benefits | 29,900 | (2.4) | % | ||||||||
| Other | |||||||||||
| IP onshore | (20,979) | 1.7 | % | ||||||||
| Other | 2,338 | (0.2) | % | ||||||||
| Provision for (benefit from) income taxes | $ | 24,821 | (2.0) | % | |||||||
__________________
(1)State taxes in Massachusetts and Texas made up the majority (greater than 50 percent) of the tax effect in this category.
The Company’s effective tax rate of (2.0)% for the year ended December 31, 2025 was primarily due to the impact of the Israel IP transfer.
As previously disclosed, for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the Company’s effective income tax rate differed from the statutory federal income tax rate as follows:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Expected tax provision at statutory income tax rate | 21.0 | % | 21.0 | % | |||||||
| Research & development credits | 7.4 | % | (1.3) | % | |||||||
| Stock-based compensation | (0.1) | % | — | % | |||||||
| State taxes | 6.0 | % | 2.1 | % | |||||||
| Foreign rate differential | 0.1 | % | — | % | |||||||
| Transaction costs | — | % | (0.2) | % | |||||||
| US taxation on foreign operations | — | % | (0.6) | % | |||||||
| Other | (0.3) | % | 0.1 | % | |||||||
| Change in valuation allowance | (26.4) | % | 0.9 | % | |||||||
| Provision for income taxes | 7.7 | % | 22.0 | % | |||||||
Deferred income taxes reflect the net tax effects of temporary differences between carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes at the enacted rates. The significant components of the Company’s deferred tax assets and liabilities were as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Operating lease liabilities | $ | 13,230 | $ | 6,129 | |||||||
| Stock based compensation | 121,627 | 16,264 | |||||||||
| Net operating loss carryforwards | 144,998 | 49,484 | |||||||||
| Research and development tax credits | 116,462 | 17,354 | |||||||||
| Capitalized research expenditures | 317,753 | 179,787 | |||||||||
| Accrued Bonus | 12,488 | — | |||||||||
| Intangibles | 25,576 | 1,279 | |||||||||
| Other timing differences | 1,418 | 1,007 | |||||||||
| Gross deferred tax assets | 753,552 | 271,304 | |||||||||
| Valuation allowance | (726,188) | (251,172) | |||||||||
| Total deferred tax assets, net of valuation allowance | 27,364 | 20,132 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Operating lease right-of-use assets | (13,004) | (6,095) | |||||||||
| Capitalized expenses | (8,626) | (6,962) | |||||||||
| Other | (5,734) | (5,904) | |||||||||
| Total deferred tax liability | (27,364) | (18,961) | |||||||||
| Net deferred tax assets | $ | — | $ | 1,171 | |||||||
Based on the evaluation of positive and negative evidence as of the balance sheet date, the Company applied a full valuation allowance against all of its worldwide net deferred taxes.
The Company considers its non-U.S. earnings to be indefinitely reinvested outside of the United States to the extent these earnings are not subject to the U.S. income tax under an anti-deferral tax regime. Given the Company’s intent to reinvest these earnings for an indefinite period of time, the Company has not accrued a deferred tax liability on these earnings. A determination of an unrecognized deferred tax liability related to these earnings is not practicable.
As of December 31, 2025, the Company had gross federal, state, and foreign net operating loss (“NOL”) carryforwards of approximately $508.9 million, $427.5 million and $15.5 million, respectively. The federal and foreign NOLs do not expire and the state NOLs begin to expire in 2029.
As of December 31, 2025, the Company also had federal research and development credit carryforwards of approximately $96.3 million which begin to expire in 2041 and state research and development credit carryforwards of approximately $68.9 million which begin to expire in 2029.
Federal and state tax laws impose restrictions on utilization of NOL and tax credit carryforwards in the event of an ownership change, as defined in Section 382 of the Code. The Company’s ability to utilize its NOL and tax credit carryforwards are subject to limitation under these provisions.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows for both periods presented:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at beginning of year | $ | 45,195 | $ | 12,401 | $ | 11,909 | |||||||||||
| Additions based on tax positions related to the current year | 40,795 | 32,804 | 5,052 | ||||||||||||||
| Additions (reductions) for tax positions of prior years | 2,287 | (10) | (4,560) | ||||||||||||||
| Balance at end of year | $ | 88,277 | $ | 45,195 | $ | 12,401 | |||||||||||
The Company recognizes the effect of uncertain income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition are reflected in the period in which the change in judgment occurs. Included in the balance of uncertain income tax positions are tax benefits of $38.6 million and $37.5 million as of December 31, 2025 and 2024, respectively, that, if recognized, would affect the effective tax rate.
The Company recognizes interest and penalties related to its uncertain tax positions as a component of its provision for income taxes. As of and for the years ended December 31, 2025, 2024, and 2023, accrued interest and penalties related to unrecognized tax benefits were not material.
The Company’s primary tax jurisdiction is the United States. The Company is subject to U.S. federal, state, and foreign income tax. Generally, in the U.S. federal and state jurisdictions, tax periods in which certain loss and credit carryforwards are generated remain open for audit until such time as the limitation period ends for the year in which such losses or credits are utilized. All tax periods remain open to examination by major taxing jurisdictions to which the Company is subject. The Company is not currently under examination by income tax authorities for federal or state purposes.
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.