Lyft, Inc.LYFT
Lyft, Inc. Income Taxes Disclosure
Income Taxes
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On July 4, 2025, the One Big Beautiful Bill Act, Public Law No. 119-21 and formally titled “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” (“OBBBA”) was enacted in the United States. The OBBBA includes a broad range of tax provisions, such as the permanent extension of certain provisions of the 2017 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 Company has evaluated the provisions of the OBBBA and determined that the most significant impact relates to capitalization of research and experimental expenditures under IRC Section 174. The effects of this provision have been reflected in the Company’s income tax provision.
U.S. and foreign components of consolidated (loss) income before income taxes for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | (35,120) | $ | 61,371 | $ | (348,050) | |||||||||||
| Foreign | (18,127) | (36,021) | 16,346 | ||||||||||||||
| (Loss) income before income taxes | $ | (53,247) | $ | 25,350 | $ | (331,704) | |||||||||||
The (benefit from) provision for income taxes for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Current (benefit) provision | |||||||||||||||||
| Federal | $ | 852 | $ | — | $ | — | |||||||||||
| State | (4,481) | 10,438 | 3,762 | ||||||||||||||
| Foreign | 1,493 | (5,996) | 7,239 | ||||||||||||||
| Total current | $ | (2,136) | $ | 4,442 | $ | 11,001 | |||||||||||
Deferred (benefit) provision | |||||||||||||||||
| Federal | (2,253,928) | 481 | 481 | ||||||||||||||
| State | (631,787) | 427 | (337) | ||||||||||||||
| Foreign | (9,404) | (2,784) | (2,529) | ||||||||||||||
| Total deferred | (2,895,119) | (1,876) | (2,385) | ||||||||||||||
| Total (benefit from) provision for income taxes | $ | (2,897,255) | $ | 2,566 | $ | 8,616 | |||||||||||
The reconciliation of the U.S. federal statutory income tax rates to the Company’s effective income tax rate is as follows (in thousands, except for percentages):
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| % | $ | ||||||||||
Provision for income taxes at U.S. federal statutory rate | 21.0 | % | $ | (11,182) | |||||||
State income taxes, net of federal effect(1) | 1,339.3 | % | (713,139) | ||||||||
Foreign tax effects | |||||||||||
| Canada | |||||||||||
Statutory tax rate difference between Canada and U.S. | (1.5) | % | 777 | ||||||||
Provincial tax impacts | 3.8 | % | (2,002) | ||||||||
Other adjustments | 2.5 | % | (1,339) | ||||||||
| Germany | |||||||||||
Statutory tax rate difference between Germany and U.S. | (1.8) | % | 961 | ||||||||
Trade tax | 5.1 | % | (2,728) | ||||||||
| Other adjustments | 0.2 | % | (108) | ||||||||
Other foreign jurisdictions | 0.5 | % | (262) | ||||||||
Change in valuation allowance | 3,808.0 | % | (2,027,633) | ||||||||
Nontaxable or nondeductible items | |||||||||||
Permanent tax adjustments | (4.9) | % | 2,597 | ||||||||
Nondeductible expenses | (16.9) | % | 8,984 | ||||||||
Stock-based compensation | 19.7 | % | (10,478) | ||||||||
Executive compensation | (26.0) | % | 13,864 | ||||||||
Nondeductible transaction costs | (6.7) | % | 3,593 | ||||||||
Tax credits | |||||||||||
Research and development | 646.6 | % | (344,315) | ||||||||
Changes in unrecognized tax benefits | (347.7) | % | 185,155 | ||||||||
| Provision for income taxes | 5441.2 | % | $ | (2,897,255) | |||||||
(1)State taxes in California, New York, New York City, and Illinois made up the majority (greater than 50%) of the tax effect in this category.
The following table is a reconciliation of the U.S. federal statutory income tax rates to the Company’s effective income tax rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Provision at federal statutory rate | 21.0 | % | 21.0 | % | |||||||
State, net of federal benefit | 29.2 | 9.7 | |||||||||
Permanent tax adjustments | 10.3 | (1.1) | |||||||||
Nondeductible expenses | 54.4 | (8.3) | |||||||||
Stock-based compensation | (65.6) | (15.1) | |||||||||
Executive compensation | 63.0 | (2.4) | |||||||||
Change in valuation allowance | (101.5) | (2.5) | |||||||||
Impact of foreign operations | (4.7) | (0.4) | |||||||||
Deferred adjustments | — | (3.2) | |||||||||
Other adjustments | 4.0 | (0.3) | |||||||||
Effective income tax rate | 10.1 | % | (2.6) | % | |||||||
The amounts of income taxes paid (net of refunds received) by the Company are as follows (in thousands):
| Year Ended December 31, | |||||
| 2025 | |||||
| Federal | $ | — | |||
State and local | 6,582 | ||||
| Foreign | 679 | ||||
Income taxes, net of refunds | $ | 7,261 | |||
Income taxes paid (net of refunds) exceeded 5% of total income taxes paid (net of refunds) in the following jurisdictions (in thousands):
| Year Ended December 31, | |||||
| 2025 | |||||
| State and Local | |||||
| California | $ | 1,000 | |||
| Illinois | 1,158 | ||||
Cincinnati | (523) | ||||
Philadelphia | 1,068 | ||||
| Texas | 2,043 | ||||
| Foreign | |||||
| Canada | (1,033) | ||||
| Mexico | 849 | ||||
Ireland | 773 | ||||
Spain | 518 | ||||
Switzerland | (913) | ||||
Deferred income taxes reflect the net tax effects of temporary differences between the 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 as of the periods indicated were as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 2,254,164 | $ | 1,975,436 | |||||||
| Insurance reserves and accruals | 425,547 | 382,532 | |||||||||
| Research tax credits | 406,978 | — | |||||||||
| Stock-based compensation | 17,851 | 16,837 | |||||||||
| Research capitalization | 202,235 | 288,464 | |||||||||
| Accrued legal settlement/fees | 150,765 | 92,975 | |||||||||
| Lease liability | 73,551 | 73,356 | |||||||||
| Accrued and other liabilities | 31,378 | 47,233 | |||||||||
| Capital losses | 7 | 64 | |||||||||
| Other assets | 22,874 | — | |||||||||
| Total deferred tax assets | 3,585,350 | 2,876,897 | |||||||||
| Less: Valuation allowance | (285,548) | (2,690,489) | |||||||||
| Deferred tax assets, net of valuation allowance | 3,299,802 | 186,408 | |||||||||
| Deferred tax liabilities: | |||||||||||
| State income taxes | (168,532) | (132,126) | |||||||||
| Operating lease right-of-use assets | (66,416) | (63,632) | |||||||||
| Prepaid expenses | (122,068) | — | |||||||||
| Other liabilities | (60,318) | (427) | |||||||||
| Total deferred tax liabilities | (417,334) | (196,185) | |||||||||
| Net deferred tax assets (liabilities) | $ | 2,882,468 | $ | (9,777) | |||||||
A reconciliation of the valuation allowance is as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 2,690,489 | $ | 2,715,841 | $ | 2,706,982 | |||||||||||
| Net changes in deferred tax assets and liabilities | (2,404,941) | (25,352) | 8,859 | ||||||||||||||
| Ending balance | $ | 285,548 | $ | 2,690,489 | $ | 2,715,841 | |||||||||||
The valuation allowance decreased by $2.4 billion for the year ended December 31, 2025, compared to the decrease of $25.4 million for the year ended December 31, 2024, primarily driven by the valuation allowance release with respect to our U.S. federal and certain state deferred tax assets in the fourth quarter of 2025. For the year ended December 31, 2025, the remaining valuation allowance is attributable to California R&D credits and certain foreign deferred tax assets.
For the year ended December 31, 2025, the Company recorded a $2.9 billion benefit from the release of the valuation allowance with respect to our U.S. federal and certain state deferred tax assets. This includes the benefit of approximately $226.8 million related to federal R&D credits attributable to prior years that were recognized in the current period upon completion of the Company's R&D credit study in tax year 2025. As of December 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 have concluded it is more-likely-than-not that we will realize our U.S. federal and state deferred tax assets, with the exception of California R&D credits. We continue to maintain a valuation allowance against these deferred tax assets as they have not met the “more-likely-than-not” realization criterion.
As of December 31, 2025, the Company had U.S. federal and state net operating loss carryforwards of approximately $7.9 billion and $6.4 billion, respectively. The federal net operating loss carryforwards generated through December 31, 2017 expire at various dates beginning in 2034 and will continue to expire through 2037, while U.S. federal net operating loss carryforwards generated in 2018 or later do not expire. The state net operating loss carryforward will begin to expire in 2026 and will continue to expire at various times depending upon individual state carryforward rules.
As of December 31, 2025, the Company had foreign net operating loss carryforwards of approximately $557.4 million. These net operating loss carryforwards will begin to expire in 2026 and will continue to expire at various times depending upon individual jurisdiction carryforward rules.
As of December 31, 2025, the Company had U.S. federal R&D tax credit carryforwards of $344.3 million that begin to expire in 2033. The Company had California R&D tax credit carryforwards of $251.9 million that have an unlimited carryforward period.
Utilization of the net operating loss and tax credit carryforwards are subject to various limitations including the ownership change limitations provided by U.S. Internal Revenue Code of 1986 (“IRC”) Section 382 and similar state provisions.
The Company has not provided foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2025, 2024, and 2023, because it intends to permanently reinvest such earnings outside of the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability will be immaterial, due to the participation exemption put in place by the Tax Cuts and Jobs Act of 2017, Pub L. No. 115-97 (the “2017 Tax Act”), enacted in the U.S.
The following table reflects changes in gross unrecognized tax benefits (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | — | $ | — | $ | — | |||||||||||
| Gross increases - current year tax positions | 8,036 | — | — | ||||||||||||||
| Gross increases - prior year tax positions | 181,201 | — | — | ||||||||||||||
| Ending balance | $ | 189,237 | $ | — | $ | — | |||||||||||
As of December 31, 2025, approximately $108.3 million of unrecognized tax benefits, if recognized, would impact the effective tax rate. The remaining $80.9 million of the unrecognized tax benefits would not impact the effective tax rate due to the valuation allowance against certain deferred tax assets.
The Company’s policy is to recognize interest and penalties associated with uncertain tax benefits as part of the income tax provision and include accrued interest and penalties with the related income tax liability on the Company’s consolidated balance sheets. To date, the Company has not recognized any interest and penalties in its consolidated statements of operations, nor has it accrued for or made payments for interest and penalties.
The Company is subject to routine examination by U.S. federal, state and foreign tax authorities. To the extent we have tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the federal, state or foreign tax authorities to the extent utilized in a future period. Management believes that the Company’s tax filings are materially complete and accurate, and that all positions taken are supportable under applicable tax laws.
As of December 31, 2025, the open tax years for our major tax jurisdictions are as follows:
| Jurisdiction | Tax Years | ||||
| U.S. Federal | 2010-2025 | ||||
U.S. States | 2010-2025 | ||||
| Canada | 2021-2025 | ||||
| Germany | 2018-2025 | ||||
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.