AMERICAN EAGLE OUTFITTERS INC

13. Income Taxes

On December 22, 2017, the U.S. government enacted comprehensive tax legislation in the form of the Tax Cuts and Jobs Act of 2017 (the "Tax Act"). The Tax Act significantly changed U.S. international tax laws for tax years beginning after December 31, 2017 and included a provision designed to currently tax global intangible low-taxed income ("GILTI") earned by non-U.S. corporate subsidiaries of large U.S. shareholders. The Company has elected to treat GILTI as a period expense, and the effect of the GILTI inclusion for Fiscal 2025 is not material.

On July 4, 2025, the U.S. government enacted tax legislation in H.R.1 Reconciliation Act, commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”). The OBBBA includes significant provisions including modifications to U.S. taxation on foreign earnings, the reinstating of one hundred percent bonus depreciation and the repeal of capitalization of U.S. research and development expenditures, reinstating full expensing. The legislation has multiple effective dates, with certain provisions effective in 2025 and others effective in subsequent years.

The Company has accounted for the estimated tax implications of the OBBBA in Fiscal 2025. The impact to our effective tax rate for Fiscal 2025 is immaterial. As our assessment is based on current estimates, we will continue to refine our calculations and evaluate the full impact of the OBBBA on our consolidated financial statements. Our estimates may be adjusted as more guidance is released on the OBBBA and as additional information becomes available.

The components of income (loss) before income taxes are:

The significant components of the Company’s deferred tax assets and liabilities are as follows:

The change in net deferred tax assets was primarily due to an increase in the net deferred tax asset of Operating lease ROU assets, Operating lease liabilities and, a decrease in net deferred tax liability of Property and equipment partially offset by a decrease in Capitalized research and development expenses.

As of January 31, 2026, the Company had deferred tax assets related to federal, state and foreign net operating loss carryovers of $0.6 million, $5.1 million and $5.0 million, respectively, that could be utilized to reduce future years’ tax liabilities. A portion of these net operating loss carryovers expire in future years, and some have an indefinite carryforward period. Management believes it is more likely than not that a portion of state net operating loss and foreign net operating loss carryovers will not reduce future years’ tax liabilities in certain jurisdictions. As such, valuation allowances of $2.1 million and $2.9 million have been recorded on the deferred tax assets related to a portion of the state net operating loss carryovers as of January 31, 2026 and February 1, 2025, respectively. Further, valuation allowances of $4.4 million and $1.3 million have been recorded on the deferred tax assets related to the cumulative foreign net operating loss carryovers as of January 31, 2026 and February 1, 2025, respectively. We also provided for valuation allowances of $1.6 million as of January 31, 2026 and a nominal amount as of February 1, 2025, related to other foreign deferred tax assets.

The Company had foreign tax credit carryovers in the amount of $1.0 million as of both January 31, 2026 and February 1, 2025. The foreign tax credit carryovers begin to expire in Fiscal 2028 to the extent not utilized. Management believes it is more likely than not that a certain category of foreign tax credit carryover will not reduce future years’ tax liabilities. As such, valuation allowances of $1.0 million have been recorded on the deferred tax assets related to the foreign tax credit carryovers as of both January 31, 2026 and February 1, 2025.

The Company had state income tax credit carryforwards of $6.2 million and $6.8 million (net of federal tax) as of January 31, 2026 and February 1, 2025, respectively. These income tax credits can be utilized to offset future state income taxes, with the majority having a carryforward period of 16 years. They have started to expire in Fiscal 2024 and the deferred tax asset has been adjusted accordingly. Management believes it is more likely than not that a portion of the state income tax credit carryovers will not reduce future years’ tax liabilities in certain jurisdictions. As such, valuation allowances of $0.3 million and $1.0 million have been recorded on the deferred tax assets related to the cumulative state income tax credit carryovers as of January 31, 2026 and February 1, 2025, respectively.

The Company had U.S. federal and state impairments of investments of $4.0 million and $4.7 million as of January 31, 2026 and February 1, 2025, respectively. Management believes that it is more likely than not that these impairments of investments will not reduce future years’ tax liabilities. As such, valuation allowances of $4.0 million and $4.7 million have been recorded as of January 31, 2026 and February 1, 2025, respectively, on the deferred tax asset attributable to these impairments of investments. The Company recorded deferred tax assets of $8.1 million as of both January 31, 2026 and February 1, 2025, for other long-term assets related to the acquisition of Quiet Logistics, Inc. and certain other strategic investments. Management believes that it is more likely than not that these other long-term assets will not reduce future years’ tax liabilities. As such, valuation allowances of $8.1 million were recorded as of both January 31, 2026 and February 1, 2025, for the deferred tax asset attributable tothese assets. The Company had U.S. federal and state capital loss carryforwards of $0.5 million as of January 31, 2026. Management believes that it is more likely than not that these capital losses will not reduce future years’ tax liabilities. The Company has recorded a valuation allowance of $0.5 million on the deferred tax asset attributable to these capital losses as of January 31, 2026.

Significant components of the provision (benefit) for income taxes are as follows:

As of January 31, 2026, the Company intends to permanently reinvest a portion of its earnings outside of the U.S. for the foreseeable future. On the remaining earnings, the Company hasnot recognized deferred tax expense because it expects any potential distribution to be made from previously taxed earnings, or qualify for the 100% dividends received deduction, along with negligible foreign withholding taxes.

The following table summarizes the activity related to our unrecognized tax benefits:

As of January 31, 2026, the gross amount of unrecognized tax benefits was $7.9 million, of which $7.4 million would affect the effective income tax rate if recognized. The gross amount of unrecognized tax benefits as of February 1, 2025 was $9.8 million, of which $9.0 million would affect the effective income tax rate if recognized. Unrecognized tax benefits decreased $1.9 million during Fiscal 2025 and increased $5.9 million during Fiscal 2024.

The Company records accrued interest and penalties related to unrecognized tax benefits in income tax expense. Accrued interest and penalties related to unrecognized tax benefits included in the Consolidated Balance Sheets were $1.5 million and $1.4 million as of January 31, 2026 and February 1, 2025, , respectively. The amount of interest and penalties related to unrecognized tax benefits recognized in the provision for income taxes were $0.9 million for Fiscal 2025 and $7.3 million for Fiscal 2024. An immaterial amount was recognized for Fiscal 2023.

The Company and its subsidiaries file income tax returns in the U.S. and various state and foreign jurisdictions. The U.S. federal income tax statutes of limitations for tax years through January 30, 2021 have expired. With respect to state and local jurisdictions and countries outside of the U.S., with limited exceptions, generally, the Company and its subsidiaries are no longer subject to income tax audits for tax years before Fiscal 2018 (ended February 2, 2019). Although the outcome of tax audits is always uncertain, the Company believes that adequate amounts of tax, interest, and penalties have been provided for any adjustments that are expected to result from these years.

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to the income before income taxes after the adoption of ASU 2023-09 is as follows:

*State taxes in New York, California, New Jersey, Massachusetts made up the majority (greater than 50 percent) of the tax effect in this category.

A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to the income before income taxes prior to the adoption of ASU 2023-09 is as follows:

The Company recorded income tax expense of $112.9 million (an effective tax rate of 25.7%) in Fiscal 2024, and income tax expense of $69.8 million (an effective tax rate of 29.2%) in Fiscal 2023.

The amounts of cash income taxes paid by the Company were as follows: