Archer Aviation Inc.ACHR
Archer Aviation Inc. Income Taxes Disclosure
Income Taxes
The Company's loss before income taxes consisted of the following (in millions):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
United States | $ | (619.0) | $ | (537.6) | $ | (458.7) | |||||||||||
International | 1.1 | 1.0 | 1.3 | ||||||||||||||
Total | $ | (617.9) | $ | (536.6) | $ | (457.4) | |||||||||||
The Company recognized foreign current income tax provision of $0.3 million, $0.2 million, and $0.5 million during the years ended December 31, 2025, 2024 and 2023, respectively. The Company did not record any deferred income tax provision for the years ended December 31, 2025, 2024 and 2023. The related increase in the deferred tax assets was offset by the increase in valuation allowance.
As further described in Note 2, Summary of Significant Accounting Policies, the Company has elected to prospectively adopt the guidance in ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes Disclosures (“ASU 2023-09”). In accordance with the guidance in ASU No. 2023-09 the effective income tax rate for the year ended December 31, 2025, differs from the statutory federal income tax rate as follows (in millions, except percentages):
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
Federal income tax at statutory tax rate | $ | (129.8) | 21.0 | % | |||||||
| Tax credits | |||||||||||
Research and development tax credit | (22.8) | 3.7 | |||||||||
| Change in valuation allowance | 163.2 | (26.5) | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Warrant expense | (12.2) | 2.0 | |||||||||
| Nondeductible officers’ compensation | 12.3 | (2.0) | |||||||||
| Stock-based compensation expense | (12.2) | 2.0 | |||||||||
| Other | 1.8 | (0.2) | |||||||||
Provision for income taxes and Effective tax rate | $ | 0.3 | — | % | |||||||
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Federal income tax (benefit) at statutory tax rate | 21.0 | % | 21.0 | % | |||||||
| State and local income taxes (net of federal benefit) | 0.8 | % | (2.7) | % | |||||||
| Nondeductible expenses | (1.0) | % | (0.1) | % | |||||||
| Warrant expense | (1.9) | % | (1.6) | % | |||||||
| Nondeductible officers’ compensation | (0.7) | % | 0.1 | % | |||||||
| Credits | 5.4 | % | 4.4 | % | |||||||
| Change in valuation allowance | (23.6) | % | (21.2) | % | |||||||
| Effective tax rate | 0.0 | % | (0.1) | % | |||||||
Differences between the state statutory rate and state effective tax rate for the years ended December 31, 2025 and 2024 primarily relate to the limitations imposed on certain share-based compensation under Section 162(m), research and development expenses tax credits and an increase in the valuation allowance.
The Company’s significant components of its deferred tax assets and liabilities are as follows (in millions):
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 296.3 | $ | 133.0 | |||||||
| Accrued expenses | 5.8 | 4.3 | |||||||||
| Operating lease liabilities | 9.3 | 3.3 | |||||||||
| Stock-based compensation expense | 5.4 | 2.1 | |||||||||
| Warrants | 8.6 | 7.8 | |||||||||
Capitalized research and development expenses | 116.4 | 132.3 | |||||||||
| Credits | 107.1 | 71.5 | |||||||||
Depreciation and amortization | 1.3 | 3.7 | |||||||||
| Other | 0.7 | 0.3 | |||||||||
| Gross deferred tax assets | 550.9 | 358.3 | |||||||||
| Less: valuation allowance | (541.8) | (353.3) | |||||||||
| Deferred tax assets, net of valuation allowance | 9.1 | 5.0 | |||||||||
Deferred tax liabilities: | |||||||||||
| Depreciation and amortization | — | (3.2) | |||||||||
| Right-of-use assets | (9.1) | (1.8) | |||||||||
| Total deferred tax liabilities | (9.1) | (5.0) | |||||||||
| Total net deferred tax assets | $ | — | $ | — | |||||||
In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the period in which those temporary differences become deductible. Based upon the analysis of federal and state deferred tax balances and future tax projections and the Company’s lack of taxable income in the carryback period, the Company recorded a valuation allowance of $541.8 million against the federal and state deferred tax assets. The valuation allowance increased by $188.5 million, $127.0 million, and $96.6 million during the years ended December 31, 2025, 2024 and 2023, respectively.
As of December 31, 2025 and 2024, the Company has U.S. federal net operating loss (“NOL”) carryforwards of $1,372.4 million and $616.5 million, respectively, which can be carried forward indefinitely. As of December 31, 2025 and 2024, the
Company has state NOL carryforwards of $146.8 million and $58.2 million, respectively, which will both begin to expire in 2038.
In the ordinary course of its business, the Company incurs costs that, for tax purposes, are determined to be qualified R&D expenditures within the meaning of Section 41 of the Internal Revenue Code of 1986, as amended (the “Code”) and are, therefore, eligible for the Increasing Research Activities credit under Section 41 of the Code. The U.S. federal R&D tax credit carryforward is $77.2 million and $53.2 million for December 31, 2025 and 2024, respectively. The U.S. federal R&D tax credit carryforward begins to expire in 2039. The state R&D tax credit carryforward is $45.0 million and $27.9 million for December 31, 2025 and 2024, respectively, which can be carried forward indefinitely.
The following table shows the changes in the gross amount of unrecognized tax benefits (in millions):
Balance as of December 31, 2022 | $ | 1.5 | |||
Increases related to prior year tax positions | 0.5 | ||||
Balance as of December 31, 2023 | 2.0 | ||||
| Increases related to current year tax positions | 2.0 | ||||
Balance as of December 31, 2024 | 4.0 | ||||
| Increases related to current year tax positions | 3.0 | ||||
Balance as of December 31, 2025 | $ | 7.0 | |||
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate as of December 31, 2025 and 2024 is zero due to the valuation allowance that would otherwise be recorded on the deferred tax asset associated with the recognized position. During the years ended December 31, 2025, 2024 and 2023, the Company recognized no interest and penalties related to uncertain tax positions.
In accordance with Section 382 and Section 383 of the Code, a corporation that undergoes an “ownership change” (generally defined as a cumulative change of more than 50.0% in the equity ownership of certain stockholders over a rolling three-year period) is subject to limitations on its ability to utilize its pre-change NOLs and R&D tax credits to offset post-change taxable income and post-change tax liabilities, respectively. The Company’s existing NOLs and R&D credits may be subject to limitations arising from previous ownership changes, and the ability to utilize NOLs could be further limited by Section 382 and Section 383 of the Code. In addition, future changes in the Company’s stock ownership, some of which may be outside of the Company’s control, could result in an ownership change under Section 382 and Section 383 of the Code. The amount of such limitations, if any, has not been determined.
The Company is subject to taxation and files income tax returns with the U.S. federal government and various state jurisdictions. As a result of the Company’s net operating loss and credit carryforwards all of its years are subject to federal and state examination. The Company is not under audit by any tax jurisdictions at this time. During the year ended December 31, 2025, the Company did not have any significant income tax payments made or refunds received from any jurisdiction.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 15, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 8, 2021 | |
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.