MEDIFAST INCMED
MEDIFAST INC Income Taxes Disclosure
INCOME TAXES
Pretax income (loss) for the years ended December 31, 2025, 2024, and 2023 consisted of the following (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| US | $ | (5,639) | $ | 3,664 | $ | 125,230 | |||||||||||
| Foreign | — | 123 | 3,567 | ||||||||||||||
| Total | $ | (5,639) | $ | 3,787 | $ | 128,797 | |||||||||||
Income tax expense for the years ended December 31, 2025, 2024, and 2023 consisted of the following (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
Current tax expense (benefit) | |||||||||||||||||
US Federal | $ | 195 | $ | 7,059 | $ | 25,170 | |||||||||||
US State | 1,378 | 2,040 | 3,001 | ||||||||||||||
Foreign | — | — | — | ||||||||||||||
Total current tax expense | 1,573 | 9,099 | 28,171 | ||||||||||||||
Deferred tax expense (benefit) | |||||||||||||||||
US Federal | 7,973 | (6,325) | 1,523 | ||||||||||||||
US State | 3,487 | (1,078) | (312) | ||||||||||||||
| Foreign | — | — | — | ||||||||||||||
Total deferred tax expense (benefit) | 11,460 | (7,403) | 1,211 | ||||||||||||||
Total provision for income taxes | $ | 13,033 | $ | 1,696 | $ | 29,382 | |||||||||||
The total provision for income taxes for the years ended December 31, 2025, 2024, and 2023 was $13.1 million, $1.6 million, and $29.5 million, respectively. Those amounts have been allocated to the following financial statement items (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
Provision for income taxes | $ | 13,033 | $ | 1,696 | $ | 29,382 | |||||||||||
| Stockholders' equity, unrealized (losses) gains on investment securities & foreign currency | 17 | (52) | 112 | ||||||||||||||
| Total provision for income taxes | $ | 13,050 | $ | 1,644 | $ | 29,494 | |||||||||||
The total income tax paid or refunded for the tax years ended December 31, 2025, 2024, and 2023 was a $10.5 million payment, a $1.6 million refund, and a $34.3 million payment, respectively (in thousands):
*Jurisdiction below the threshold for the period presented
| 2025 | 2024 | 2023 | |||||||||||||||
| Income tax paid (refunded), net | |||||||||||||||||
| US Federal | $ | 2,704 | $ | (2,946) | $ | 30,750 | |||||||||||
| US state and local | |||||||||||||||||
| Texas | * | 565 | * | ||||||||||||||
| California | 7,350 | * | * | ||||||||||||||
| Other | 411 | 764 | 3,505 | ||||||||||||||
| Total US state and local | 7,761 | 1,329 | 3,505 | ||||||||||||||
| Foreign | — | — | — | ||||||||||||||
| Total income tax paid (refunded), net | $ | 10,465 | $ | (1,617) | $ | 34,255 | |||||||||||
The reconciliation of the United States federal statutory tax provision to the Company’s provision for income taxes for the years ended December 31, 2025, 2024, and 2023 (in thousands, except percentages):
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Statutory federal tax | $ | (1,184) | 21.0 | % | $ | 795 | 21.0 | % | $ | 27,048 | 21.0 | % | |||||||||||||||||||||||
| State income taxes, net of federal benefit | 3,284 | (58.3) | % | 486 | 12.8 | % | 1,693 | 1.3 | % | ||||||||||||||||||||||||||
| Foreign tax effects | |||||||||||||||||||||||||||||||||||
| Hong Kong | — | — | % | (22) | (0.6) | % | 296 | 0.2 | % | ||||||||||||||||||||||||||
| Singapore | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Valuation allowance | — | — | % | (3) | (0.1) | % | (846) | (0.7) | % | ||||||||||||||||||||||||||
Other | — | — | % | (1) | — | % | (199) | (0.1) | % | ||||||||||||||||||||||||||
| Research and development and jobs credits | (602) | 10.7 | % | (589) | (15.5) | % | (1,170) | (0.9) | % | ||||||||||||||||||||||||||
| Changes to valuation allowances, federal only | 9,383 | (166.4) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Unrecognized tax benefit | 590 | (10.4) | % | 269 | 7.1 | % | 440 | 0.3 | % | ||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Executive compensation | 543 | (9.7) | % | 52 | 1.4 | % | 1,895 | 1.5 | % | ||||||||||||||||||||||||||
| Charitable donations | — | — | % | (236) | (6.2) | % | (1,094) | (0.8) | % | ||||||||||||||||||||||||||
| Intercompany loan restructuring | — | — | % | — | — | % | 1,167 | 0.9 | % | ||||||||||||||||||||||||||
| Share-based compensation | 626 | (11.1) | % | 889 | 23.4 | % | 143 | 0.1 | % | ||||||||||||||||||||||||||
| Meals and entertainment | 210 | (3.7) | % | 314 | 8.3 | % | 255 | 0.2 | % | ||||||||||||||||||||||||||
| Other adjustments | 183 | (3.2) | % | (258) | (6.8) | % | (246) | (0.2) | % | ||||||||||||||||||||||||||
| Provision for income taxes | $ | 13,033 | (231.1) | % | $ | 1,696 | 44.8 | % | $ | 29,382 | 22.8 | % | |||||||||||||||||||||||
The makeup of the majority of the state income tax expense is comprised of state income taxes in Maryland, California, New York, Pennsylvania, Illinois, and Texas for the year ended December 31, 2025; Texas for the year ended December 31, 2024; and Texas, Pennsylvania, and Maryland for the year ended December 31, 2023.
Significant components of the Company’s deferred tax assets (liabilities) consisted of the following (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Reserves on inventory and sales | $ | 1,124 | $ | 472 | |||||||
| Credit and loss carryforwards | 6,406 | 2,730 | |||||||||
| Stock compensation | 2,699 | 2,055 | |||||||||
| Accrued expenses and deferred costs | 1,294 | 2,235 | |||||||||
| Inventory capitalization | 309 | 708 | |||||||||
| Lease obligations | 2,685 | 4,047 | |||||||||
| Capitalized research costs | 6,832 | 7,028 | |||||||||
| Charitable donations | 77 | 83 | |||||||||
| State taxes | 1,093 | 1,594 | |||||||||
Unrealized loss on investment | 44 | 967 | |||||||||
| Other | 166 | 183 | |||||||||
| Valuation allowance | (13,690) | (1,624) | |||||||||
| Total deferred tax assets | 9,039 | 20,478 | |||||||||
| Right-of-use assets | (1,816) | (2,800) | |||||||||
| Prepaid expenses | (1,569) | (1,590) | |||||||||
| Depreciation | (5,654) | (4,628) | |||||||||
| Total deferred tax liabilities | (9,039) | (9,018) | |||||||||
| Net deferred tax assets | $ | — | $ | 11,460 | |||||||
On July 4, 2025, tax legislation entitled an Act to provide for reconciliation pursuant to title II of H. Con. Res. 14 (“the “Act”) and commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The primary provisions of the Act do not impact the Company’s effective tax rate but do impact the timing of tax deductions related to research and development costs and fixed asset expenditures after January 19, 2025.
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to utilize our existing deferred tax assets. A significant piece of objective negative evidence evaluated is our current year loss, declining financial performance in recent years, and our projections of short-term future losses. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future growth. We have determined that the reversal of future taxable temporary differences corresponding to our deferred tax liabilities will provide a sufficient source of income for realization of a portion of our deferred tax assets. In 2025, we recorded an additional valuation allowance of $12.1 million.
We file income tax returns in the United States and various states and foreign jurisdictions. The Company has separate federal, state, and foreign net operating loss ("NOL") carry forwards totaling $49.2 million with $13.3 million of the state NOLs that start expiring in 2029. The federal NOLs do not have an expiration as do a significant portion of the state NOLs. The Company has recorded a valuation allowance for the net operating loss carry forwards which are not expected to be realized.
As of December 31, 2025, the Company had $5.6 million of gross unrecognized tax benefits, which would have a net $4.5 million impact on the effective tax rate, if recognized. As of December 31, 2024, the Company had $7.4 million of gross unrecognized tax benefits, which would have a net $6.2 million impact on the effective tax rate, if recognized. The change for 2025 primarily relates to a settlement of tax examination and for 2024 primarily relates to additional gross unrecognized benefits for current tax positions and reductions of gross unrecognized benefits for prior year tax positions and lapses in statute of limitations. The amounts of unrecognized tax benefits were as follows (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
Unrecognized tax benefit at the beginning of the period | $ | 7,433 | $ | 7,502 | |||||||
Increase for current year tax positions | 60 | 71 | |||||||||
(Decrease) increase for prior period tax positions | 298 | (5) | |||||||||
Settlement with tax authorities | (2,029) | — | |||||||||
| Reduction due to lapse in statute of limitations | (126) | (135) | |||||||||
Unrecognized tax benefit at the end of the period | $ | 5,636 | $ | 7,433 | |||||||
The Company recognizes interest and penalty expenses related to unrecognized tax positions as a component of the income tax provision. As of December 31, 2025, and 2024, interest and penalties accrued were $1.3 million and $1.7 million, respectively. For 2025 and 2024, the Company recorded expenses related to interest and penalties of $0.6 million and $0.4 million, respectively. As of December 31, 2025, the current year reduction primarily relates to the settlement of a tax examination. Our tax returns are subject to examination by various federal, state, and local tax authorities. The Company believes that it has adequately provided for all tax positions; however, amounts asserted by taxing authorities could be greater than our accrued position. Pending the resolution of two examinations, and specific to jurisdictions where the Company has filed tax returns and examination of such returns is constrained by a statute of limitations, we are no longer subject to United States federal, state, and local income tax examinations by tax authorities for years prior to 2022.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Mar 16, 2018 | |
| 2016 | Mar 16, 2017 | |
| 2015 | Mar 15, 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.