v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Loss before income taxes consisted of (in thousands):
Year Ended December 31,
202520242023
Domestic$(80,825)$(25,933)$(46,847)
Foreign16,886 15,427 14,906 
Loss before income taxes$(63,939)$(10,506)$(31,941)
Income Tax Expense
Funko, Inc. is taxed as a corporation and pays corporate federal, state and local taxes on income allocated to it from FAH, LLC based upon Funko, Inc.’s economic interest held in FAH, LLC. FAH, LLC is treated as a pass-through partnership for income tax reporting purposes. FAH, LLC’s members, including the Company, are liable for federal, state and local income taxes based on their share of FAH, LLC’s pass-through taxable income and loss.
The components of the Company’s income tax expense consisted of the following (in thousands):
Year Ended December 31,
202520242023
Current income taxes:
Federal
$— $— $5,574 
State and local
170 94 71 
Foreign
4,186 4,771 3,728 
Current income taxes
4,356 4,865 9,373 
Deferred income taxes:
Federal
— (57)105,236 
State and local
— — 17,888 
Foreign
— (244)— 
Deferred income taxes
— (301)123,124 
Total income taxes:
Federal
— (57)110,810 
State and local
170 94 17,959 
Foreign
4,186 4,527 3,728 
Income tax expense $4,356 $4,564 $132,497 
The following table presents required disclosures pursuant to ASU 2023-09 and reconciles the provision computed at the U.S. federal statutory income tax rate to the provision for income taxes for 2025:
Year Ended
December 31, 2025
Amount
(in thousands)		Percent
Expected U.S. federal income taxes at statutory rate$(13,427)21.0 %
State and local income taxes, net of federal income tax effect (1)
170 (0.3)
Foreign tax effects
  United Kingdom3,518 (5.5)
  Other foreign jurisdictions525 (0.8)
Effect of cross-border tax laws124 (0.2)
Changes in valuation allowance12,283 (19.2)
Nontaxable or nondeductible Items966 (1.4)
Other adjustments197 (0.4)
Effective tax rate$4,356 (6.8)%
(1) In 2025, state and local taxes in Texas comprise the majority of the state and local taxes, net of federal effect category.
The following table presents the required disclosures prior to the adoption of ASU 2023-09 and reconciles the provision computed at the U.S. federal statutory income tax rate to the provision for income taxes for 2024 and 2023:
Year Ended December 31,
20242023
Expected U.S. federal income taxes at statutory rate21.0 %21.0 %
State and local income taxes, net of federal benefit(3.5)(56.2)
Foreign taxes
(34.2)(9.3)
Non-deductible expenses
(4.7)(0.9)
Change in valuation allowance(3.9)(340.5)
Non-controlling interest
(0.7)(6.8)
Share-based compensation(11.0)(1.6)
Return to provision1.0 (23.8)
Other, net
(7.4)3.3 
Income tax expense(43.4)%(414.8)%
The Company's annual effective tax rate in 2025 is different than the statutory rate of 21% due to the valuation allowance and foreign taxes. The Company’s annual effective tax rate in 2024 is different than the statutory rate of 21% due to the valuation allowance and foreign taxes. The Company's annual effective tax rate for 2023 is different than the statutory rate of 21%, due to the valuation allowance.
Deferred Income Taxes
The significant items comprising deferred tax assets and liabilities is as follows (in thousands):
December 31,
20252024
Deferred tax assets:
Investment in partnership
$68,334 $82,486 
Tax receivable agreement liability29 — 
Stock-based compensation
8,019 7,266 
Foreign tax credit62 62 
Section 163(j) interest15,281 9,149 
Other carryforwards238 218 
Net operating loss carryforward56,066 33,424 
Gross deferred tax assets
148,029 132,605 
Valuation allowance
(148,029)(132,605)
Deferred tax assets, net of valuation allowance
— — 
Deferred tax liabilities:
Property and equipment
(584)(542)
Gross deferred tax liabilities
(584)(542)
Net deferred tax assets$(584)$(542)
The Company's federal net operating loss carryforward of $48.2 million at December 31, 2025 is indefinite. The Company's state net operating loss carryforward of $7.9 million at December 31, 2025, have various expiration dates based on jurisdiction, ranging from tax years ending 2033 to 2044. The Company's other carryforwards, primarily related to charitable contributions at December 31, 2025, expire in the tax years ending 2028 to 2030.
The Company evaluates its ability to realize deferred tax assets on a quarterly basis and establishes a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset may not be realized. Based on the Company's assessment as of December 31, 2025 and 2024, the Company determined that based on all the available evidence, including the Company’s three-year cumulative pre-tax loss position, it is not more likely than not that the results of operations will generate sufficient taxable income to realize its deferred tax assets and retained a full valuation allowance. During the year ended December 31, 2023, the Company established a full valuation allowance of $123.2 million against its deferred tax assets and recognized a corresponding increase to tax expense in the consolidated statements of operations and comprehensive loss in the year ended December 31, 2023.
As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the "change in valuation allowance" line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance for the year ended December 31, 2025 (in thousands):
Beginning balance$(132,605)
Change charged to income tax expense(14,333)
Changes charged to additional paid-in-capital(1,091)
Ending balance$(148,029)
Uncertain Tax Positions
The Company regularly evaluates the likelihood of realizing the benefit from income tax positions that the Company has taken in various federal, state and foreign filings by considering all relevant facts, circumstances and information available. If the Company determines it is more likely than not that the position will be sustained, a benefit will be recognized at the largest amount that the Company believes is cumulatively greater than 50% likely to be realized.
There are no unrecognized tax benefits for uncertain tax positions for the three years ended December 31, 2025, 2024 and 2023.
Interest and penalties related to income tax matters are classified as a component of income tax expense (benefit). As of December 31, 2025, and 2024, the Company has not recorded any interest or penalties as the amounts were not material. Unrecognized tax benefits are recorded in other long-term liabilities on the consolidated balance sheets.
Income Taxes Paid
Year Ended December 31, 2025
(in thousands)
U.S. federal$— 
U.S. state182 
Foreign
  United Kingdom4,124 
  Spain1,049 
Total Foreign$5,173 
Total income taxes$5,355 
Income taxes paid, net, for the periods ended December 31, 2024 and 2023 were $3.9 million and $1.1 million, respectively.
Other Matters
The Company files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The Company is subject to U.S. federal, state, and local income tax examinations for tax years 2022 and forward and subject to examination for all foreign income tax returns for fiscal 2025 and 2024. There were no open tax examinations at December 31, 2025.
Tax Receivable Agreement
The Company is party to the Tax Receivable Agreement with FAH, LLC and each of the Continuing Equity Owners and certain transferees of the Continuing Equity Owners that have been joined as parties to the Tax Receivable Agreement (such parties, "TRA Parties") that provides for the payment by the Company to the Continuing Equity Owners under certain circumstances. See Note 13, "Liabilities under Tax Receivable Agreement."