Skillz Inc.SKLZ
Skillz Inc. Income Taxes Disclosure
Income Taxes
The Company has historically generated net operating losses in each of the tax jurisdictions in which it operates and has provided a valuation allowance against net deferred tax assets due to uncertainties regarding the Company’s ability to realize these assets.
The loss before income taxes consisted of the following:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| U.S. | $ | (70,875) | $ | (46,711) | |||||||
| Non-U.S. | 575 | (13) | |||||||||
| Total loss before income taxes | $ | (70,300) | $ | (46,724) | |||||||
The provision for income taxes consisted of the following:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Current: | |||||||||||
| U.S. Federal | $ | (25) | $ | (41) | |||||||
| U.S. State | (17) | 50 | |||||||||
| Non-U.S. Foreign | 150 | 57 | |||||||||
| Total current | 108 | 66 | |||||||||
| Deferred: | |||||||||||
| U.S. Federal | — | — | |||||||||
| U.S. State | — | — | |||||||||
| Total deferred | — | — | |||||||||
| Provision for income taxes | $ | 108 | $ | 66 | |||||||
Income taxes paid, net of refunds received consisted of the following:
| Year Ended December 31, | |||||
| 2025 | |||||
| U.S. Federal | $ | — | |||
U.S. State(1) | 128 | ||||
Non-U.S. Foreign(2) | 23 | ||||
| Total income taxes paid, net of refunds received | $ | 151 | |||
(1)State taxes paid primarily related to Texas.
(2)Foreign taxes paid primarily related to India.
A reconciliation of the Company’s effective tax rate is as follows for the year ended December 31, 2025:
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| Income tax rate reconciliation | $ | % | |||||||||
| At statutory rate | $ | (14,763) | 21.0 | % | |||||||
State taxes (net of federal benefit)(1) | (1) | — | % | ||||||||
| Valuation allowance | 11,116 | (15.8) | % | ||||||||
| Stock-based compensation | 3,720 | (5.3) | % | ||||||||
| Other non-deductible items | (155) | 0.2 | % | ||||||||
| Cross-border tax laws | 191 | (0.3) | % | ||||||||
| Worldwide changes in uncertain tax benefits | (61) | 0.1 | % | ||||||||
| Foreign tax effects | 61 | (0.1) | % | ||||||||
| Effective income tax rate | $ | 108 | (0.2) | % | |||||||
(1)State taxes, net of federal benefit, were primarily comprised of income taxes in California for the year ended December 31, 2025.
A reconciliation of the Company’s effective tax rate is as follows for the year ended December 31, 2024:
| Year Ended December 31, | |||||
| 2024 | |||||
| Income tax rate reconciliation | % | ||||
| At statutory rate | 21.0 | % | |||
| State taxes | (0.1) | % | |||
| Valuation allowance | (7.8) | % | |||
| Stock-based compensation | (12.7) | % | |||
| Permanent differences related to fair value adjustments | (0.5) | % | |||
| Effective income tax rate | (0.1) | % | |||
Deferred Tax Assets and Liabilities
Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities for federal and state income taxes are as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 170,229 | $ | 151,015 | |||||||
| Stock-based compensation | 863 | 952 | |||||||||
| Reserves and accruals | 4,768 | 5,394 | |||||||||
| Property and equipment | 351 | 604 | |||||||||
| Lease liabilities | 31 | 2,542 | |||||||||
| Capitalized research and development | 9,693 | 12,961 | |||||||||
| Sec. 163(j) interest carryforwards | 8,015 | 6,445 | |||||||||
| Other | 29 | 36 | |||||||||
| Total deferred tax assets | 193,979 | 179,949 | |||||||||
| Less: valuation allowance | (193,949) | (179,877) | |||||||||
| Deferred tax assets, net of valuation allowance | 30 | 72 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right-of-use assets | (30) | (72) | |||||||||
| Total deferred tax liabilities | (30) | (72) | |||||||||
| Net deferred tax assets (liabilities) | $ | — | $ | — | |||||||
A valuation allowance is required to be established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain. A full review of all positive and negative evidence needs to be considered. As of December 31, 2025 and 2024, the Company has provided a full valuation allowance on its net deferred tax assets.
Changes to the valuation allowance were related to the following:
| Year Ended December 31, | |||||
| 2025 | |||||
| Valuation allowance | |||||
| Beginning balance | $ | 179,877 | |||
| Change related to continuing operations | 14,072 | ||||
| Change related to acquisitions | — | ||||
| Change related to other comprehensive income | — | ||||
| Valuation allowance ending balance | $ | 193,949 | |||
As of December 31, 2025, the Company had net operating loss carryforwards for U.S. Federal and state income tax purposes of approximately $701.6 million and $280.0 million. The U.S. Federal and state net operating loss carryforwards, if not utilized, will expire beginning in 2033 and 2032, respectively. Approximately $665.6 million of our U.S. Federal net operating loss carryforwards are not subject to expiration. Utilization of some of the U.S. Federal and state net operating loss and credit carryforwards may be subject to annual limitations due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state provisions. The annual limitations may result in the expiration of net operating losses and credits before utilization. The Company has performed a Section 382 study as of December 31, 2024 and does not expect any net operating losses to expire unused due to Section 382 limitations.
The Company files tax returns in the U.S. and various local, state and foreign jurisdictions. The Company is not currently under examination in any of these jurisdictions and all its tax years remain open to examination due to net operating loss carryforwards. The Company does not have any material reserves for uncertain tax positions.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 31, 2026 | Showing above |
| 2024 | Nov 6, 2025 | |
| 2023 | Aug 29, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 12, 2021 | |
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.