Arbutus Biopharma CorpABUS
Arbutus Biopharma Corp Income Taxes Disclosure
Income taxes
The Company is subject to taxation and files income tax returns in Canadian federal and provincial, and United States federal and several state jurisdictions. As described in Note 2, the Company implemented ASU 2023-09 for the year ended December 31, 2025 on a prospective basis.
Income tax expense varies from the amounts that would be computed by applying the combined Canadian federal tax rate of 25% to the loss before income taxes as shown in the following tables. The change in the rate from 27% in 2024 to 25% in 2025 is due to the adoption of the new standard, which requires the rate reconciliation to begin with the federal rate in the country of domicile. In 2024, a combined rate of 27% was used (federal of 15% and provincial of 12%).
The domestic and foreign components of loss before income taxes were as follows:
| Year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Domestic | $ | 11,952 | $ | (1,671) | |||||||
| Foreign | $ | (45,453) | $ | (68,249) | |||||||
| Loss before income taxes | $ | (33,501) | $ | (69,920) | |||||||
There is no provision for federal, state or foreign income taxes.
A reconciliation of the Canadian federal statutory income tax rate to the effective tax rate for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09 is as follows:
| Year Ended December 31, 2025 | |||||||||||
| (in thousands, except percentages) | |||||||||||
| Computed taxes (benefits) at Canadian federal rates | $ | (8,374) | 25 | % | |||||||
| Domestic tax effects: | |||||||||||
| Change in valuation allowance | (2,540) | 8 | % | ||||||||
| Other | (449) | 1 | % | ||||||||
| Domestic provincial tax effects: | |||||||||||
| Tax abatement | (1,195) | 4 | % | ||||||||
| Provincial tax | 1,435 | (4) | % | ||||||||
| Change in valuation allowance | (203) | 1 | % | ||||||||
| Other | (36) | — | % | ||||||||
| Foreign tax effects: | |||||||||||
| United States | |||||||||||
| Foreign tax rate differential | 1,818 | (5) | % | ||||||||
| Non-taxable and non-deductible items: stock options | 879 | (3) | % | ||||||||
| Tax credits: research and development credits | (403) | 1 | % | ||||||||
| Changes in valuation allowance | 8,706 | (26) | % | ||||||||
| Other adjustments: | |||||||||||
| Stock option adjustment | 304 | (1) | % | ||||||||
| Other | 58 | — | % | ||||||||
| Effective tax rate | $ | — | — | % | |||||||
The reconciliation of the combined Canadian federal and provincial income tax rate to the effective income tax rate for the year ended December 31, 2024 is as follows:
| Year Ended December 31, 2024 | |||||
| (in thousands) | |||||
| Computed taxes (benefits) at Canadian federal and provincial tax rates | $ | (18,888) | |||
| Permanent and other differences | 515 | ||||
| Federal R&D credit | (1,122) | ||||
| Change in valuation allowance | 11,748 | ||||
| Difference due to income taxed at foreign rates | 4,101 | ||||
| Stock-based compensation | 1,327 | ||||
| Other | 2,319 | ||||
| Income tax expense | $ | — | |||
The Company had investment tax credits available to reduce Canadian federal income taxes of $7.1 million as of both December 31, 2025 and 2024, which expire between 2031 and 2037, and provincial income taxes of $2.0 million as of both December 31, 2025 and 2024, which expire between 2024 and 2027. The investment tax credits are accounted for under a flow-through method. In addition, the Company had research and development credits of $8.7 million as of December 31, 2025 and $8.3 million as of December 31, 2024, which expire between 2031 and 2038 and which can be used to reduce future taxable income in the United States.
The Company had scientific research and experimental development expenditures of $61.8 million available for indefinite carry-forward as of both December 31, 2025 and 2024. The Company also had net operating losses of $152.7 million and $150.8 million as of December 31, 2025 and 2024, respectively, which are due to expire between 2035 and 2038 and which can be used to offset future taxable income in Canada.
As of December 31, 2025 and 2024, the Company had $11.7 million of net operating losses due to expire in 2035 which can be used to offset future taxable income in the United States. United States net operating loss carryforwards arising in 2019 and future periods have an indefinite carryforward period. As of December 31, 2025 and 2024, the Company had $329.9 million and $260.0 million of net operating losses subject to an indefinite carryforward period which can be used to offset future taxable income in the United States.
As a result of ownership changes occurring on October 1, 2014 and March 4, 2015, the Company’s ability to use these losses may be limited under Internal Revenue Code Section 382. Losses incurred to date may be further limited if a subsequent change in control occurs.
The Company generated $12.0 million of pre-tax domestic income and $45.5 million in pre-tax foreign losses, respectively, for the year ended December 31, 2025. The Company generated $1.7 million of pre-tax domestic losses and $68.2 million in pre-tax foreign losses, respectively, for the year ended December 31, 2024. The Company used accumulated domestic net operating losses to offset the taxable income in both years.
As required by the 2017 Tax Cuts and Jobs Act and effective in 2022, the deferred tax asset as of December 31, 2025 and 2024 included $27.2 million and $33.7 million, respectively, related to the mandatory capitalization and amortization of research and development expenses.
Significant components of the Company’s deferred tax assets and liabilities are shown below:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets (liabilities): | |||||||||||
| Operating loss carryforwards | $ | 111,292 | $ | 96,075 | |||||||
| Canadian research and development deductions | 16,673 | 16,700 | |||||||||
| Book amortization in excess of tax | 308 | (232) | |||||||||
| Revenue recognized for tax purposes in excess of revenue recognized for accounting purposes | 929 | 1,296 | |||||||||
| Tax value in excess of accounting value in lease inducements | 157 | 51 | |||||||||
| Deferred revenue | — | 2,817 | |||||||||
| Canadian Federal investment tax credits | 5,147 | 5,147 | |||||||||
| Canadian Provincial investment tax credits | 1,953 | 1,953 | |||||||||
| Equity method investment | 3,375 | 3,375 | |||||||||
| U.S. Federal research and development credits | 8,677 | 8,310 | |||||||||
| Deductible stock options | 3,559 | 4,037 | |||||||||
| U.S. research and experimental expenditures capitalization | 27,188 | 33,707 | |||||||||
| Accrued interest payable | 1,869 | 1,796 | |||||||||
| Amortization | 191 | 256 | |||||||||
| Other | 72 | 138 | |||||||||
| Total deferred tax assets | $ | 181,390 | $ | 175,426 | |||||||
| Valuation allowance | (181,390) | (175,426) | |||||||||
| Net deferred tax assets (liabilities) | $ | — | $ | — | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 23, 2026 | Showing above |
| 2024 | Mar 27, 2025 | |
| 2023 | Mar 5, 2024 | |
| 2022 | Mar 2, 2023 | |
| 2021 | Mar 3, 2022 | |
| 2020 | Mar 4, 2021 | |
| 2019 | Mar 5, 2020 | |
| 2018 | Mar 7, 2019 | |
| 2017 | Mar 16, 2018 | |
| 2016 | Mar 22, 2017 | |
| 2015 | Mar 9, 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.