TILLY'S, INC.TLYS
TILLY'S, INC. Income Taxes Disclosure
Income Taxes
For the year ended January 31, 2026 the pre-tax loss from operations was entirely from domestic operations. The components of income tax (benefit) expense for fiscal years 2025, 2024 and 2023 were as follows (in thousands):
| Fiscal Year Ended | |||||||||||||||||
| January 31, 2026 | February 1, 2025 | February 3, 2024 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (203) | $ | — | $ | 83 | |||||||||||
| State | 66 | 217 | 245 | ||||||||||||||
| (137) | 217 | 328 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | — | — | 4,882 | ||||||||||||||
| State | — | — | 3,499 | ||||||||||||||
| — | — | 8,381 | |||||||||||||||
| Total income tax (benefit) expense | $ | (137) | $ | 217 | $ | 8,709 | |||||||||||
A reconciliation of income tax benefit to the amount computed at the federal statutory rate for fiscal year 2025 is as follows (in thousands):
| Fiscal Year Ended | |||||||||||
| January 31, 2026 | |||||||||||
| Amount | Percent | ||||||||||
| Income tax (benefit) at statutory federal rate | $ | (3,693) | 21.0 | % | |||||||
| State and local income tax, net of federal benefits (1) | 52 | (0.3) | % | ||||||||
| Tax credits | |||||||||||
| Work opportunity tax credit | (138) | 0.8 | % | ||||||||
| Changes in valuation allowance | 3,257 | (18.5) | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Nondeductible executive compensation | 55 | (0.3) | % | ||||||||
| Enhanced contribution deduction | (34) | 0.2 | % | ||||||||
| Share-based compensation | 212 | (1.2) | % | ||||||||
| Permanent items - other | 80 | (0.5) | % | ||||||||
| Other | |||||||||||
| Return to provision and true-ups | 72 | (0.4) | % | ||||||||
| Total income tax benefit | $ | (137) | 0.8 | % | |||||||
(1)The states that contribute to the majority (greater than 50%) of the tax effect in this category include California and Texas for fiscal year 2025.
A reconciliation of income tax expense to the amount computed at the federal statutory rate for fiscal years 2024 and 2023 is as follows (in thousands):
| Fiscal Year Ended | |||||||||||
| February 1, 2025 | February 3, 2024 | ||||||||||
| Federal taxes at statutory rate | $ | (9,663) | $ | (5,414) | |||||||
| State and local income taxes, net of federal benefit | (2,270) | (1,309) | |||||||||
| Nondeductible executive compensation | (210) | 103 | |||||||||
| Enhanced contribution deduction | (202) | (177) | |||||||||
| Tax credits | (132) | (185) | |||||||||
Share-based compensation discrete items (1) | 434 | 54 | |||||||||
| Return to provision adjustments | 51 | 9 | |||||||||
| Other | 137 | 233 | |||||||||
| Change in valuation allowance | 12,072 | 15,395 | |||||||||
| Total income tax expense | $ | 217 | $ | 8,709 | |||||||
(1)This amount includes the impact of discrete items related to the expiration of stock options, exercises of stock options and the settlement of restricted stock that are recorded to income tax expense which represents share-based compensation cost previously recognized by us that was greater than the deduction allowed for income tax purposes based on the price of our common stock on the date of expiration, exercise or vesting.
The amount of cash taxes paid (refunded) are shown below (in thousands). Jurisdictions whose income taxes paid (net of refunds) exceeded 5% of total income taxes paid (net of refunds) are separately disclosed.
| Fiscal Year Ended | |||||
| January 31, 2026 | |||||
| State: | |||||
| Arizona | $ | (112) | |||
| New York | (101) | ||||
| Pennsylvania | (68) | ||||
| Massachusetts | (50) | ||||
| Utah | (31) | ||||
| Indiana | (27) | ||||
| Virginia | (25) | ||||
| Oklahoma | (24) | ||||
| Texas | 70 | ||||
| California | 2 | ||||
| All other states | (9) | ||||
| Income taxes refunded | $ | (375) | |||
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. This new legislation has multiple effective dates, with certain provisions becoming effective in 2025 and others implemented through 2027. The net effect of OBBBA did not have a material impact on the Company’s effective tax rate for the period due to the full valuation allowance the Company maintains. The Company continues to evaluate the impact of OBBBA on its consolidated financial statements, as the legislation has various future effective dates, and will update its estimates as additional guidance becomes available.
Deferred income taxes reflect the net tax effects of: (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes; and (b) operating loss and tax credit carry-forwards. We record net deferred tax assets to the extent we believe these assets will more likely than not be realized. In making such determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.
Significant components of deferred tax assets and liabilities as of January 31, 2026 and February 1, 2025 were as follows (in thousands):
| January 31, 2026 | February 1, 2025 | ||||||||||
| Deferred tax assets: | |||||||||||
| Operating lease liabilities | $ | 44,399 | $ | 50,661 | |||||||
| Net operating loss carryforwards | 18,181 | 13,932 | |||||||||
| Inventories | 2,399 | 3,461 | |||||||||
| Share-based compensation | 1,577 | 1,434 | |||||||||
| Deferred revenue | 1,250 | 1,336 | |||||||||
| Accrued expenses | 1,030 | 1,381 | |||||||||
| Compensation and benefits | 618 | 601 | |||||||||
| Other | 2,318 | 2,278 | |||||||||
| Total deferred tax assets | 71,772 | 75,084 | |||||||||
| Less: valuation allowance | (31,431) | (27,528) | |||||||||
| Deferred tax assets, net of valuation allowance | 40,341 | 47,556 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Operating lease assets | (36,260) | (42,033) | |||||||||
| Property and equipment | (2,531) | (3,885) | |||||||||
| Prepaid expenses | (1,550) | (1,585) | |||||||||
| Marketable securities | — | (53) | |||||||||
| Total deferred tax liabilities | (40,341) | (47,556) | |||||||||
| Net deferred tax asset | $ | — | $ | — | |||||||
Management assesses the available evidence to estimate whether sufficient future taxable income will be generated to permit use of its existing deferred tax assets. Based on management's current estimates, management believes that our projected future taxable income will not be sufficient to substantiate that our net deferred tax assets are realizable at a more-likely-than-not level.
On the basis of this evaluation, as of January 31, 2026 and February 1, 2025, a valuation allowance of $31.4 million and $27.5 million, respectively, has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized. The amount of deferred tax asset considered realizable, however, could be adjusted if additional objectively verifiable positive evidence materializes in future reporting periods, such as a demonstrated operating profitability.
As of January 31, 2026 we had federal and state net operating loss ("NOL") carryforwards of $68.6 million and $63.2 million respectively. Federal NOL carryforwards totaling $68.6 million generated after 2017 may be carried forward indefinitely but can only be utilized to offset 80% of future taxable income. State NOL carryforwards totaling $63.2 million begin to expire in 2028, unless previously utilized.
Utilization of the Company's NOL carryforwards may be subject to substantial annual limitations in the event a cumulative ownership change has occurred, or that could occur in the future, as required by Section 382 of the Code. In general, an "ownership change," as defined by Section 382 of the Code, results from a transaction, or series of transactions over a three-year period, resulting in an ownership change of more than 50% of the outstanding common stock of a company by certain stockholders or public groups. Such an ownership change may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax, respectively. If ownership changes have occurred or occur in the future, the amount of remaining tax attribute carryforwards available to offset taxable income and income tax expense in future years may be restricted or eliminated. If eliminated, the related asset would be removed from deferred tax assets with a corresponding offset to valuation allowance. The Company has not completed an IRC Section 382/383 analysis regarding the limitation of net operating loss carryforwards and does not expect this analysis to be completed within the next twelve months.
Uncertain Tax Positions
As of January 31, 2026 and February 1, 2025, there were no material unrecognized tax positions. Any interest and penalties related to uncertain tax positions are recorded in income tax expense. We did not recognize any interest or penalties related to unrecognized tax positions during fiscal years 2025, 2024 and 2023.
We file income tax returns in the United States federal jurisdiction and in various state and local jurisdictions. In the normal course of business, we are subject to examination by taxing authorities. Fiscal years 2022 through 2024 remain subject to examination for federal tax purposes and fiscal years 2021 through 2024 remain subject to examination in significant state tax jurisdictions.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Apr 9, 2026 | Showing above |
| 2025 | Apr 10, 2025 | |
| 2024 | Apr 11, 2024 | |
| 2023 | Apr 13, 2023 | |
| 2022 | Apr 14, 2022 | |
| 2021 | Apr 1, 2021 | |
| 2020 | Apr 1, 2020 | |
| 2019 | Mar 29, 2019 | |
| 2018 | Mar 30, 2018 | |
| 2017 | Mar 20, 2017 | |
| 2016 | Mar 30, 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.