GameStop Corp.

14. Income Taxes

The following table presents the provision for income taxes from continuing operations:

The following table presents the components of income/(loss) from continuing operations before income taxes:

The following is a reconciliation of income tax expense (benefit) from continuing operations computed at the U.S. Federal statutory tax rate to income tax (benefit) expense reported in our Consolidated Statements of Operations:

(1) Other is comprised of numerous items, none of which is individually or in the aggregate greater than 5% of income tax expense calculated at the statutory rate.

Differences between financial accounting principles and tax laws cause differences between the bases of certain assets and liabilities for financial reporting purposes and tax purposes. The tax effects of these differences, to the extent they are temporary, are recorded as deferred tax assets and liabilities which are presented in the table below.

During fiscal 2024, we decreased our valuation allowances by $63.9 million in various jurisdictions where it was determined that it was more likely than not that some of the existing gross and/or net deferred tax assets will be recognized, primarily due to income being generated in jurisdictions with cumulative losses. As of February 1, 2025, we maintain full valuation allowances on our deferred tax assets in all jurisdictions except for Australia. We will continue to assess the realizability of our gross and net deferred tax assets in all tax jurisdictions in which we do business in future periods.

With respect to state and local jurisdictions and countries outside of the United States, we and our subsidiaries are typically subject to examination for 3 to 6 years after the income tax returns have been filed. Although the outcome of tax audits is always uncertain, we believe that adequate amounts of tax, interest and penalties have been provided for in the accompanying consolidated financial statements for any adjustments that might be incurred due to state, local or foreign audits.

As of February 1, 2025, we have approximately $465.5 million of U.S. federal net operating loss carryforwards, of which $416.0 million have no expiration date and $29.4 million, acquired through the ThinkGeek acquisition, will expire in years 2031 through 2035. We also have $324.3 million of state net operating loss carryforwards, of which $275.7 million will expire in years 2025 to 2044, $39.1 million have no expiration date, and $9.4 million, acquired through the ThinkGeek acquisition, will expire in years 2028 through 2035. Section 382 under the Internal Revenue Code imposes limits on the amount of tax attributes that can be utilized where there has been an ownership change. The federal and state net operating loss carryovers acquired through the ThinkGeek acquisition experienced an ownership change on July 17, 2015, and we have determined that these net operating loss carryforwards will be subject to future limitation.

We have approximately $3.6 million of foreign tax credit carryforwards that expire in years 2024 through 2027.

We have approximately $26.1 million of net operating loss carryforwards in Canada that expire in years 2043 through 2045, as well as $370.4 million of foreign net operating loss carryforwards in various jurisdictions that have no expiration date.

As of February 1, 2025, the gross amount of unrecognized tax benefits was approximately $7.5 million. If we were to prevail on all uncertain tax positions, the net effect would be a benefit to our effective tax rate of approximately $7.5 million, exclusive of any benefits related to interest and penalties.

The following table presents a reconciliation of the changes in the gross balances of unrecognized tax benefits:

We recognize accrued interest and penalties related to unrecognized tax benefits in income tax expense in our Consolidated Statement of Operations. As of February 1, 2025, February 3, 2024, and January 28, 2023, we had approximately $2.2 million, $1.6 million and $3.7 million, respectively, in interest and penalties related to unrecognized tax benefit accrued, of which approximately $0.6 million of expense, $2.1 million of benefit and $0.1 million of benefit were recognized through income tax expense in fiscal 2024, 2023 and 2022, respectively. If we were to prevail on all uncertain tax positions, the reversal of these accruals related to interest and penalties would also be a benefit to our effective tax rate.

It is reasonably possible that the amount of the unrecognized benefit with respect to certain of our unrecognized tax positions could significantly increase or decrease within the next 12 months as a result of settling ongoing audits. However, as audit outcomes and the timing of audit resolutions are subject to significant uncertainty and given the nature and complexity of the issues involved, we are unable to reasonably estimate the possible amount of change in the unrecognized tax benefits, if any, that may occur within the next 12 months as a result of ongoing examinations. Nevertheless, we believe we are adequately reserved for our uncertain tax positions as of February 1, 2025.

We do not assert indefinite reinvestment on the undistributed earnings of our foreign subsidiaries. Income tax and/or withholding tax associated with any amounts available for distribution as of February 1, 2025 is not expected to be material to our financial statements.

The Organization for Economic Co-operation and Development ("OECD"), supported by 140 of their member countries, have agreed to implement a minimum 15% tax rate on certain multinational enterprises and have released model guidance. This global minimum tax, known as the Pillar Two framework, became effective across various countries in 2024, as each country works to enact legislation influenced by the OECD Pillar Two rules. In 2024, the Company had no impact on its effective tax rate after the adoption of the Pillar Two framework. The Company will continue to evaluate additional guidance released by the OECD, along with the pending and adopted legislation in each of the countries in which we operate.

15. Commitments and Contingencies

Commitments

As of February 1, 2025, we had approximately$7.3 million of outstanding Stand-By Letters of Credit and other bank guarantees supported by cash collateral that are included in restricted cash.

As of February 1, 2025, we have purchase obligations of$136.4 million with payment dates through fiscal 2025 that represent outstanding purchase orders for merchandise from vendors. These purchase orders are generally cancellable until shipment of the products.

See Note 10, "Leases," for information regarding commitments related to our non-cancelable operating leases.

In the ordinary course of business, we are, from time to time, subject to various legal proceedings, including matters involving wage and hour employee class actions, stockholder actions, consumer class actions, violent acts, and other conflicts. We may enter into discussions regarding settlement of these and other types of lawsuits, and may enter into settlement agreements, if we believe settlement is in the best interest of our stockholders. We do not believe that any such existing legal proceedings or settlements, individually or in the aggregate, will have a material effect on our financial condition, results of operations or liquidity.