Snap IncSNAP
Snap Inc Income Taxes Disclosure
Income Taxes
The domestic and foreign components of pre-tax loss were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
Domestic (1) | $ | (238,993) | $ | (280,877) | $ | (285,330) | |||||||||||
Foreign (1) | (212,143) | (391,349) | (1,009,093) | ||||||||||||||
| Loss before income taxes | $ | (451,136) | $ | (672,226) | $ | (1,294,423) | |||||||||||
(1)Includes the impact of intercompany charges to foreign affiliates for financing, management fees, and research and development cost sharing, inclusive of stock-based compensation.
The components of our income tax (benefit) expense were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | — | $ | 5,216 | $ | — | |||||||||||
| State | 4,631 | 6,811 | 8,585 | ||||||||||||||
| Foreign | 1,930 | 13,273 | 26,727 | ||||||||||||||
| Total current income tax expense (benefit) | 6,561 | 25,300 | 35,312 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 1,542 | 1,595 | 1,267 | ||||||||||||||
| State | 1,061 | 1,027 | 1,061 | ||||||||||||||
| Foreign | 189 | (2,292) | (9,578) | ||||||||||||||
| Total deferred income tax expense (benefit) | 2,792 | 330 | (7,250) | ||||||||||||||
| Income tax expense (benefit) | $ | 9,353 | $ | 25,630 | $ | 28,062 | |||||||||||
The following is a reconciliation of the U.S. statutory federal income tax rate to our effective tax rate. We adopted ASU 2023-09 prospectively for the fiscal year 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 | ||||||||||
| (dollars in thousands) | |||||||||||
| U.S. federal statutory tax rate | $ | (94,739) | 21.0 | % | |||||||
Total state and local income taxes (1) | 2,506 | (0.6) | |||||||||
| Foreign tax effects | |||||||||||
| United Kingdom | |||||||||||
| Statutory tax rate difference between United Kingdom and United States | (1,991) | 0.4 | |||||||||
| Changes in valuation allowances | (57,537) | 12.8 | |||||||||
| Other | (1,534) | 0.3 | |||||||||
| Singapore | |||||||||||
| Statutory tax rate difference between Singapore and United States | 8,588 | (1.9) | |||||||||
| Changes in valuation allowances | 37,952 | (8.4) | |||||||||
| Other | 2,240 | (0.5) | |||||||||
| Other foreign jurisdictions | 2,305 | (0.5) | |||||||||
| Tax credits | |||||||||||
| Research and development tax credits | (92,642) | 20.6 | |||||||||
| Changes in valuation allowances | 110,612 | (24.5) | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Stock-based payment awards | 52,357 | (11.6) | |||||||||
| Other | 8,869 | (2.0) | |||||||||
| Changes in unrecognized tax benefits | 32,367 | (7.2) | |||||||||
| Total income tax expense (benefit) | $ | 9,353 | (2.1) | % | |||||||
(1)State taxes in California contributed to the majority of the tax effect in this category.
The following is a reconciliation of the statutory federal income tax rate to our effective tax rate for the years ended December 31, 2024 and 2023:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Tax benefit (expense) computed at the federal statutory rate | 21.0 | % | 21.0 | % | |||||||
State tax benefit (expense), net of federal benefit (1) | 3.9 | 2.2 | |||||||||
| Change in valuation allowance | (31.0) | (31.5) | |||||||||
| Differences between U.S. and foreign tax rates on foreign income | (0.3) | 3.3 | |||||||||
| Stock-based compensation | (6.4) | (7.0) | |||||||||
| U.S. federal research & development credit benefit | 11.0 | 8.6 | |||||||||
| Acquisitions and divestitures | (1.0) | 1.8 | |||||||||
| Other benefits (expenses) | (1.0) | (0.6) | |||||||||
| Total income tax benefit (expense) | (3.8) | % | (2.2) | % | |||||||
(1) Inclusive of state research and development credits.
As a result of our prospective adoption of ASU 2023-09 as of January 1, 2025, the following table presents income taxes paid, net of refunds, disaggregated by jurisdiction in accordance with the new disclosure requirement for the year ended December 31, 2025:
Year Ended | |||||
| December 31, 2025 | |||||
| (in thousands) | |||||
| U.S. federal | $ | 1,500 | |||
| U.S. states and local | 2,660 | ||||
| Foreign | |||||
| Canada | 1,395 | ||||
| France | 5,437 | ||||
| Germany | 6,191 | ||||
| Israel | 2,950 | ||||
| Netherlands | 1,453 | ||||
| Other | 5,130 | ||||
| Total foreign | 22,556 | ||||
| Total income taxes paid | $ | 26,716 | |||
The significant components of net deferred tax balances were as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Accruals and reserves | $ | 23,230 | $ | 16,413 | |||||||
| Intangible assets | 199,140 | 139,612 | |||||||||
| IRC 174 capitalized R&D | 440,540 | 598,669 | |||||||||
| Stock-based compensation | 23,686 | 58,171 | |||||||||
| Loss carryforwards | 2,865,653 | 2,757,814 | |||||||||
| Tax credit carryforwards | 1,169,703 | 1,060,486 | |||||||||
Operating lease liabilities | 134,620 | 128,072 | |||||||||
| Other | 97,987 | 67,958 | |||||||||
| Total deferred tax assets | 4,954,559 | 4,827,195 | |||||||||
| Deferred tax liabilities: | |||||||||||
Operating lease right-of-use assets | (113,448) | (112,907) | |||||||||
Unrealized gains in securities and investments | (13,544) | (18,333) | |||||||||
| Other | (20,784) | (18,445) | |||||||||
| Total deferred tax liabilities | (147,776) | (149,685) | |||||||||
| Total net deferred tax assets before valuation allowance | 4,806,783 | 4,677,510 | |||||||||
| Valuation allowance | (4,808,739) | (4,677,088) | |||||||||
| Net deferred taxes | $ | (1,956) | $ | 422 | |||||||
During the year ended December 31, 2025, we completed an intra-group transaction, which resulted in the recognition of U.S. deferred tax assets and the reversal of U.K. deferred tax assets. Both are subject to a full valuation allowance and, accordingly, the transaction did not result in a net income tax benefit or expense or a net impact to the consolidated balance sheet.
Income tax expense was $9.4 million for the year ended December 31, 2025, compared to $25.6 million for the same period in 2024. The decrease of $16.3 million was primarily attributable to a reduction in unrecognized tax benefits due to statute expirations and a reduction in U.S. federal and certain state tax liabilities due to the enactment of the One Big Beautiful Bill Act, which repealed the mandatory capitalization of domestic research and experimental expenditures for tax years beginning after December 31, 2024.
As of December 31, 2025, we had an immaterial amount of unremitted earnings related to certain foreign subsidiaries. We intend to continue to reinvest these foreign earnings indefinitely and do not expect to incur any significant taxes related to such amounts.
As of December 31, 2025, we had accumulated U.S. federal and state net operating loss carryforwards of $6.5 billion and $4.4 billion, respectively. Because they were generated after December 31, 2017, these U.S. federal net operating loss carryforwards can be carried forward indefinitely, but the ability to utilize such net operating loss carryforwards to offset taxable income in a tax year may not exceed 80% of the taxable income in such year. Certain significant state net operating loss carryforwards will begin to expire in 2031. As of December 31, 2025, we had $4.9 billion of U.K. net operating loss carryforwards that can be carried forward indefinitely; however, use of such carryforwards in a given year is generally limited to 50% of such year’s taxable income. As of December 31, 2025, we had accumulated $420.0 million of Singapore net operating loss carryforwards, which can be carried forward indefinitely and are not subject to any taxable income limitation. As of December 31, 2025, we had accumulated U.S. federal and state research tax credits of $1.0 billion and $574.8 million, respectively. The U.S. federal research tax credits will begin to expire in 2035. The U.S. state research tax credits do not expire.
We recognize valuation allowances on deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. We had valuation allowances against net deferred tax assets of $4.8 billion and $4.7 billion as of December 31, 2025 and 2024, respectively. In 2025, the increase in the valuation allowance was primarily attributable to a net increase in our deferred tax assets resulting from the loss from operations.
Uncertain Tax Positions
The following table summarizes the activity related to our gross unrecognized tax benefits for the years ended December 31, 2025, 2024, and 2023:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in thousands) | |||||||||||||||||
| Beginning balance of unrecognized tax benefits | $ | 562,808 | $ | 513,404 | $ | 510,669 | |||||||||||
| Additions for current year tax positions | 119,255 | 49,536 | 46,188 | ||||||||||||||
| Additions for prior year tax positions | 421 | 1,163 | 10,171 | ||||||||||||||
| Reductions for prior year tax positions | (3,935) | (622) | (16,736) | ||||||||||||||
| Changes due to lapse of statute of limitations | (10,855) | (99) | (31,786) | ||||||||||||||
| Reductions for settlements with taxing authorities | — | — | (4,927) | ||||||||||||||
| Changes due to foreign currency translation adjustments | 1,858 | (574) | (175) | ||||||||||||||
| Ending balance of unrecognized tax benefits (excluding interest and penalties) | 669,552 | 562,808 | 513,404 | ||||||||||||||
| Interest and penalties associated with unrecognized tax benefits | 1,791 | 1,918 | 967 | ||||||||||||||
| Ending balance of unrecognized tax benefits (including interest and penalties) | $ | 671,343 | $ | 564,726 | $ | 514,371 | |||||||||||
Substantially all of the unrecognized tax benefit was recorded as a reduction in our gross deferred tax assets, offset by a corresponding reduction in our valuation allowance. In addition, we record separate deferred tax assets related to potential competent authority relief under applicable income tax treaties, which are fully offset by a valuation allowance. We have net unrecognized tax benefits of $27.8 million and $35.8 million included in other liabilities on our consolidated balance sheet as of December 31, 2025 and 2024, respectively, which, if recognized, would result in a tax benefit.
Our policy is to recognize interest and penalties associated with tax matters as part of the income tax provision and include accrued interest and penalties with the related income tax liability on our consolidated balance sheets. For the year ended December 31, 2025, interest expense recorded related to uncertain tax positions was not material.
The income taxes we pay are subject to potential review by taxing jurisdictions globally. Our estimate of the potential outcome of any uncertain tax position is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. We believe that our estimate has adequately provided for these matters. However, our future results may include adjustments to estimates in the period the audits are resolved, which may impact our effective tax rate.
The material tax jurisdictions in which we are subject to potential examination include the United States for tax years ending on or after December 31, 2012, and the United Kingdom for tax years ending on or after December 31, 2020. We are currently under examination by the U.S. Internal Revenue Service for tax year 2022, U.K. tax authorities for tax years 2020 through 2023, and also in various other jurisdictions covering multiple tax years.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 5, 2026 | Showing above |
| 2024 | Feb 5, 2025 | |
| 2023 | Feb 7, 2024 | |
| 2022 | Feb 1, 2023 | |
| 2021 | Feb 4, 2022 | |
| 2020 | Feb 5, 2021 | |
| 2019 | Feb 5, 2020 | |
| 2018 | Feb 6, 2019 | |
| 2017 | Feb 22, 2018 | |
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.