Oportun Financial CorpOPRT

Oportun Financial Corp Income Taxes Disclosure

10-KFiled Feb 27, 20265 min read
13.Income Taxes

The following are the domestic and foreign components of the Company’s income (loss) before taxes:
Year Ended December 31,
(in thousands)20252024
Domestic$32,505 $(119,475)
Foreign11,571 4,298 
Income (loss) before taxes$44,076 $(115,177)
The provision for income tax expense (benefit) consisted of the following:
Year Ended December 31,
(in thousands)20252024
Current
Federal$61 $(3,385)
State2,841 1,509 
Foreign1,604 (307)
Total current$4,506 $(2,183)
Deferred
Federal10,012 (26,087)
State4,485 (8,355)
Foreign(173)130 
Total deferred$14,324 $(34,312)
Total provision for income taxes$18,830 $(36,495)

Income tax expense (benefit) was $18.8 million and $(36.5) million for the years ended December 31, 2025 and 2024, which represents an effective tax rate of 42.7% and 31.7%, respectively.

A reconciliation of income tax expense (benefit) with the amount computed by applying the statutory U.S. federal income tax rates to income before provision for income taxes is as follows:

Year Ended December 31,
(in thousands)20252024
$%$%
Income tax (benefit) expense computed at U.S. federal statutory rate$9,256 21.0 %$(24,187)21.0 %
Tax credits
Research & development tax credits(840)(1.9)%(4,284)3.7 %
Return to provision adjustment3,108 7.1 %(2,304)2.0 %
Nontaxable and nondeductible items
Share based compensation expense(314)(0.7)%1,795 (1.6)%
Other401 0.9 %251 (0.2)%
Effect of cross-border tax laws
U.S. Global Intangible Low-Taxed Income (GILTI)2,175 4.9 %717 (0.6)%
Other
103 0.2 %71 (0.1)%
Change in unrecognized tax benefit reserves
(153)(0.3)%1,793 (1.6)%
State taxes (net of federal benefit)(1)
6,093 13.8 %(9,269)8.1 %
Foreign rate differential(999)(2.3)%(1,078)0.9 %
Income tax expense$18,830 $(36,495)
Effective tax rate42.7 %31.7 %
(1) State taxes in California comprise the majority (>50%) of the tax effect.
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, and operating losses and tax credit carryforwards.

The primary components of the Company’s net deferred tax assets and liabilities are composed of the following:
December 31,
(in thousands)20252024
Deferred tax assets:
Net operating loss & credit carryforward$62,067 $70,534 
System development costs
18,732 25,665 
Share-based compensation5,981 6,276 
Accrued expenses and reserves5,859 3,371 
Leases2,986 4,772 
Other2,972 2,613 
Total deferred tax assets$98,597 $113,231 
Valuation allowance$— $— 
Deferred tax liabilities:
Fair value adjustment - Loans Receivable$(24,601)$(16,135)
Right of use assets(2,458)(2,563)
Depreciation and amortization(2,258)(2,636)
Fair value adjustment - Bonds Payable(1,169)(5,851)
Derivative instrument
— (3,611)
Total deferred tax liabilities$(30,486)$(30,796)
Net deferred taxes$68,111 $82,435 

As provided for in the Tax Cuts and Jobs Act of 2017, our historical earnings were subject to the one-time transition tax and can now be repatriated to the U.S. with a de minimis tax cost due to the participation exemption put in place by the 2017 Tax Act. The Company continues to assert that both its historical and current earnings in its foreign subsidiaries are permanently reinvested and therefore no deferred taxes have been provided.

As of December 31, 2025, the Company had federal net operating loss carryforwards of $150.9 million, all of which carries forward indefinitely. Additionally, the Company had state net operating loss carryforwards of $136.8 million which are set to begin expiring in 2031. As of December 31, 2025, the Company had federal and California research and development tax credit carryforwards of $19.6 million and $8.4 million, respectively. The federal research and development tax credit expires beginning in 2041, and the California research and development tax credits are not subject to expiration.

The income taxes paid, net of refunds consist of the following:
Year Ended December 31,
(in thousands)20252024
U.S. Federal
$(33)$766 
U.S. State
Texas751 (310)
California
32 — 
New Jersey4 (210)
Illinois— (519)
Arizona— (109)
Virginia— (76)
Other(13)(34)
Florida
(204)— 
Total U.S. State
$570 $(1,258)
Foreign
Mexico1,399 1,241 
India912 294 
Total Foreign$2,311 1,535 
Total income taxes paid, net of refunds$2,848 $1,043 
The following table summarizes the activity related to the unrecognized tax benefits:
Year Ended December 31,
(in thousands)20252024
Balance as of January 1,$12,439 $8,648 
Increases related to current year tax positions818 1,927 
Increases related to prior year tax positions— 4,654 
Decreases related to prior year tax positions(1,042)(2,790)
Balance as of December 31,$12,215 $12,439 

Interest and penalties related to the Company’s unrecognized tax benefits accrued as of December 31, 2025 and 2024 were $0.3 million and $0.2 million, respectively. The Company’s policy is to recognize interest and penalties associated with income taxes in income tax expense and the Company recognized $0.3 million for both years ended December 31, 2025 and 2024. The total amount of unrecognized tax benefits that would impact the effective tax rate, if recognized, is $10.5 million.

Due to the net operating loss carryforwards, the Company’s United States federal and significant state returns are open to examination by the Internal Revenue Service and state jurisdictions for years ended December 31, 2021 and 2014, respectively, and forward. For Mexico, all tax years ended December 31, 2020 and forward remain open for examination by the Mexico taxing authorities. For India, all tax years ended March 31, 2023 and forward remain open for examination by the India taxing authorities.

In December 2021, the Organization for Economic Co-operation and Development Inclusive Framework on Base Erosion Profit Shifting released Model Global Anti-Base Erosion rules (“Model Rules”) under Pillar Two. The Model Rules set forth the “common approach” for a Global Minimum Tax at 15 percent for multinational enterprises with a turnover of more than 750 million euros. Rules under Pillar Two were effective from January 1, 2024. Pillar Two rules did not have a material impact on the Company's consolidated financial position or result of operations.

Historical Timeline

Fiscal YearFiled
2025Feb 27, 2026Showing above
2024Feb 20, 2025
2023Mar 15, 2024
2022Mar 14, 2023
2021Mar 1, 2022
2020Feb 23, 2021
2019Feb 28, 2020

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.

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