FIGS, Inc.FIGS
FIGS, Inc. Income Taxes Disclosure
INCOME TAXES
Net income before provision for income taxes were as follows (in thousands):
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
United States | $ | 46,523 | $ | 14,340 | $ | 40,807 | |||||||||||
Foreign | 684 | — | — | ||||||||||||||
Net income before provision for income taxes | $ | 47,207 | $ | 14,340 | $ | 40,807 | |||||||||||
The components of the Company’s provision for income taxes were as follows (in thousands):
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 9,918 | $ | 4,369 | $ | 20,008 | |||||||||||
| State | 2,689 | 596 | 5,482 | ||||||||||||||
| Foreign | 894 | 7 | — | ||||||||||||||
| Total current provision | 13,501 | 4,972 | 25,490 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | (356) | 5,705 | (5,954) | ||||||||||||||
| State | 132 | 943 | (1,366) | ||||||||||||||
Foreign | (320) | — | — | ||||||||||||||
| Total deferred benefit | (544) | 6,648 | (7,320) | ||||||||||||||
| Provision for income taxes | $ | 12,957 | $ | 11,620 | $ | 18,170 | |||||||||||
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (“IRA”), which, among other things, implements a 15% alternative minimum tax on corporations with book income in excess of $1 billion, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. The effective date of these provisions was January 1, 2023. During 2025, the Company repurchased shares of its Class A common stock in the amount of $2.7 million. The Company has reviewed the provisions of the law and determined that they did not have a material impact on its consolidated financial statements.
On June 27, 2024, California Senate Bill 167 (“SB 167”) was signed into California law. The tax bill suspends the net operating loss (“NOL”) deduction for tax years beginning on or after January 1, 2024, and before January 1, 2027. The suspension applies to taxpayers with greater than $1 million in net income for the tax year. To the extent that an NOL
deduction is denied as a result of this suspension, the allowable carryforward period for the NOL is extended. The Company is not able to offset its net income with NOL in the year ended December 31, 2025.
The following is a reconciliation of the U.S. statutory federal income tax rate to the annual tax rate to our effective tax rate. The Company adopted ASU 2023-09 prospectively for the year ended December 31, 2025. Prior period disclosures have not been retrospectively adjusted and may not be comparable to the current period presentation under the new standard.
| Year ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
(in thousands) | |||||||||||
| Tax expense at U.S. statutory state | $ | 9,911 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect(1) | 2,465 | 5.2 | |||||||||
| Foreign tax effects | 96 | 0.2 | |||||||||
| Tax credits | (330) | (0.7) | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Inventory donation | (1,053) | (2.2) | |||||||||
| Stock-based compensation | 1,974 | 4.2 | |||||||||
| Other | 106 | 0.2 | |||||||||
Changes in unrecognized tax benefits | 99 | 0.2 | |||||||||
Other adjustments | (311) | (0.7) | |||||||||
Total | $ | 12,957 | 27.4 | % | |||||||
(1)State taxes in California, New York State and New York City, New Jersey, and Texas contributed to the majority (greater than 50%) of the tax effect in this category.
A reconciliation of the U.S. statutory federal income tax rate to the Company's annual tax rates for the years ended December 31, 2024 and 2023 were as follows:
| Year ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Tax expense at U.S. statutory rate | 21.0 | % | 21.0 | % | |||||||
| State tax expense, net of federal benefit | 4.7 | 4.4 | |||||||||
| Non-deductible expenses | (8.2) | (2.0) | |||||||||
| Stock-based compensation | 62.3 | 9.7 | |||||||||
| Excess compensation limitations | 5.5 | 10.7 | |||||||||
| R&D tax credit benefit | (0.4) | — | |||||||||
| Uncertain tax positions | (0.7) | — | |||||||||
| Income tax refund | (6.3) | — | |||||||||
| Provision to return true up | 0.6 | — | |||||||||
| Other | 2.5 | 0.7 | |||||||||
| Provision for income taxes | 81.0 | % | 44.5 | % | |||||||
The Company’s effective tax rate for the years ended December 31, 2025, 2024, and 2023 was 27.4%, 81.0%, and 44.5%, respectively. The Company’s effective tax rate in each of 2025, 2024, and 2023 is higher than the federal statutory tax rate mainly due to state tax expense and permanent disallowance of certain stock-based compensation for tax purposes.
A summary of cash paid for income taxes, net of refunds, was as follows (in thousands):
| Year ended December 31, 2025 | |||||
| Federal | $ | 7,132 | |||
| State | 1,256 | ||||
| Foreign | 29 | ||||
Total income taxes paid | $ | 8,417 | |||
Significant components of deferred tax balances were as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets | |||||||||||
| Net operating losses | $ | 276 | $ | 305 | |||||||
| Uniform capitalization adjustment to inventory | 5,885 | 6,939 | |||||||||
| Stock-based compensation | 1,834 | 3,307 | |||||||||
| Accrued compensation and benefits | 3,566 | 968 | |||||||||
| Lease liability | 14,812 | 13,151 | |||||||||
| Inventory reserve | 2,730 | 1,532 | |||||||||
| Returns reserve | 1,034 | 968 | |||||||||
| Sales tax accrual | 374 | 370 | |||||||||
| Other | 1,498 | 1,111 | |||||||||
| Total deferred tax assets | 32,009 | 28,651 | |||||||||
| Less: valuation allowance | — | — | |||||||||
| Total net deferred tax assets | 32,009 | 28,651 | |||||||||
| Deferred tax liabilities | |||||||||||
| Property and equipment | (5,699) | (4,394) | |||||||||
| Right-of-use asset | (14,123) | (12,614) | |||||||||
| Total deferred tax liabilities | (19,822) | (17,008) | |||||||||
| Net deferred tax assets | $ | 12,187 | $ | 11,643 | |||||||
As of December 31, 2025, the Company had available federal NOL carryforwards of approximately $1.0 million, which begin to expire in 2035. The Company also had available California NOL carryforwards of approximately $1.1 million as of December 31, 2025, which begin to expire in 2035. The usage of the Company’s federal and California NOL carryforwards is subject to the limitations imposed by Section 382 of the Internal Revenue Code. Further, the Company’s California NOL was suspended in 2021. The tax years ending December 31, 2022, through December 31, 2024 remain open and subject to audit by the Internal Revenue Service. The tax years ended December 31, 2021, through December 31, 2024, remain open and subject to audit by state tax authorities.
As of December 31, 2025 and 2024, the Company had $0.2 million and $0.1 million of uncertain tax positions, respectively, excluding interest and penalties. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions as income tax expense. During the years ended December 31, 2025, 2024, and 2023 interest and penalties were immaterial.
The following table summarizes the activity related to our uncertain tax positions during the years ended December 31, 2025 and 2024 (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Beginning balance of uncertain tax positions | $ | 78 | $ | 167 | |||||||
| Increases related to current year tax positions | 155 | 10 | |||||||||
| Increases related to prior year tax positions | — | 18 | |||||||||
| Changes due to lapse of statute of limitations | (50) | (117) | |||||||||
| Ending balance of uncertain tax positions | $ | 183 | $ | 78 | |||||||
Uncertain tax positions were not material in the year ended December 31, 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 10, 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.