Allogene Therapeutics, Inc.ALLO
Allogene Therapeutics, Inc. Income Taxes Disclosure
Income Taxes
The Company has incurred net operating losses for all the periods presented. The Company has not recorded any benefit of such net operating loss carryforwards in the accompanying consolidated financial statements.
Income (loss) before provision for income taxes for each of the fiscal periods presented is summarized as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Domestic | $ | (190,886) | $ | (257,147) | |||||||
| Foreign | — | — | |||||||||
| Loss before provision for income taxes | $ | (190,886) | $ | (257,147) | |||||||
The Company's income tax expense consists of the following:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Current: | |||||||||||
| Federal | $ | — | $ | — | |||||||
| State | — | — | |||||||||
| — | — | ||||||||||
| Deferred: | |||||||||||
| Federal | — | 443 | |||||||||
| State | — | — | |||||||||
| — | 443 | ||||||||||
| Provision (benefit) for income taxes | $ | — | $ | 443 | |||||||
Reconciliation of the benefit for income taxes, upon retrospective adoption of ASU 2023-09, calculated at the statutory rate to the Company's benefit for income taxes is as follows:
| Year Ended December 31, | |||||||||||||||||||||||
| (in thousands) | 2025 | 2024 | |||||||||||||||||||||
| Amount | Percentage | Amount | Percentage | ||||||||||||||||||||
| Tax benefit at federal statutory rate | $ | (40,086) | 21.00 | % | $ | (54,001) | 21.00 | % | |||||||||||||||
| Research tax credits | (1,783) | 0.93 | % | (2,793) | 1.08 | % | |||||||||||||||||
| Change in valuation allowance | 35,414 | (18.55) | % | 47,172 | (18.34) | % | |||||||||||||||||
| Nontaxable or nondeductible items: | |||||||||||||||||||||||
| Stock-based compensation | 6,280 | (3.29) | % | 9,413 | (3.66) | % | |||||||||||||||||
| Other | 175 | (0.09) | % | 209 | (0.08) | % | |||||||||||||||||
| Other adjustments | — | — | % | 443 | (0.17) | % | |||||||||||||||||
| Benefit for income taxes | $ | — | — | % | $ | 443 | (0.17) | % | |||||||||||||||
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.
Significant components of the Company's deferred tax assets and liabilities are as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 315,470 | $ | 243,798 | |||||||
| Tax credit carryforwards | 37,726 | 37,108 | |||||||||
| Intangibles | 10,099 | 10,757 | |||||||||
| Accrued expenses | 2,682 | 2,710 | |||||||||
| Lease liabilities | 23,297 | 22,085 | |||||||||
| Stock based compensation | 25,952 | 21,871 | |||||||||
| Investments | 23,429 | 26,009 | |||||||||
| Capitalized Research & Development | 63,696 | 89,090 | |||||||||
| Other | 10,577 | 2,396 | |||||||||
| Total deferred tax assets | 512,928 | 455,824 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right of use leased assets | (11,162) | (11,000) | |||||||||
| Other | — | (36) | |||||||||
| Total deferred tax liabilities | (11,162) | (11,036) | |||||||||
| Net deferred tax assets | 501,766 | 444,788 | |||||||||
| Valuation allowance | (501,766) | (444,788) | |||||||||
| Net deferred tax assets | $ | — | $ | — | |||||||
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Due to the lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance. The valuation allowance increased by approximately $57.0 million and $45.2 million during the years ended December 31, 2025 and 2024, respectively.
The following table sets forth the Company's federal and state NOL carryforwards and federal research and development tax credits as of December 31, 2025:
| Amount | Expiration | ||||||||||
| (in thousands) | |||||||||||
| Net operating losses, federal | $ | 1,121,330 | Indefinite | ||||||||
| Net operating losses, federal | $ | 2 | 2037 | ||||||||
| Net operating losses, state | $ | 1,146,511 | 2037-2045 | ||||||||
| Tax credits, federal | $ | 34,011 | 2038-2045 | ||||||||
| Tax credits, state | $ | 26,538 | Indefinite | ||||||||
| California Competes Tax credits, state | $ | 6,000 | 2026 -2027 | ||||||||
Current federal and California tax laws include substantial restrictions on the utilization of NOLs and tax credit carryforwards in the event of an ownership change of a corporation. Accordingly, the Company's ability to utilize NOLs and tax credit carryforwards may be limited as a result of such ownership changes. Such a limitation could result in the expiration of carryforwards before they are utilized.
Effective June 27, 2024 California's Senate Bill 167 (SB 167) introduced pivotal tax changes, including the suspension of NOLs for businesses earning over $1 million and a cap on business tax credits at $5 million. In addition, on June 29, 2024 Senate Bill 175 (SB 175) introduced an allowance for refunds on a range of tax credits—including, for the first time, the R&D credit. SB 167, which contains several tax measures, includes provisions that retroactively suspend California net operating losses (NOL) and limit the use of business tax credits for tax years beginning on and after January 1, 2024, and before January 1, 2027. SB 175 states that for taxable years beginning on or after January 1, 2024, and before January 1, 2027, taxpayers can receive a refundable credit equal to 20% of the qualified credits that could have been taken if the $5 million limitation under SB 167 had not been imposed. The Company evaluated the impact of SB 167 and determined that the legislation did not materially impact the Company’s income tax provision for the year ended December 31, 2025.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted into law, extending key provisions of the 2017 Tax Cuts and Jobs Act. Included in the legislation are provisions that allow for the immediate expensing of domestic research and development expenses and certain capital expenditures. The Company will continue to evaluate the impact of the new legislation, however there has been no material impact on the Company’s financial statements for the year ended December 31, 2025.
It is the Company’s policy to include penalties and interest expense related to income taxes as a component of interest and other income, net, as necessary. As of December 31, 2025 and 2024, there were no accrued interest and penalties related to uncertain tax positions. The reversal of the uncertain tax benefits would not affect the effective tax rate to the extent that the Company continues to maintain a full valuation allowance against its deferred tax assets. Unrecognized tax benefits may change during the next 12 months for items that arise in the ordinary course of business.
The Company applied the provisions of ASC 740 to account for uncertain income tax positions. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
| Balance at beginning of the year: | $ | 22,015 | $ | 18,895 | |||||||
| Additions based on tax positions related to current year | 2,205 | 3,120 | |||||||||
| Additions to tax position of prior year | — | — | |||||||||
| Reductions to tax position of prior years | — | — | |||||||||
| Lapse of the applicable statute of limitations | — | — | |||||||||
| Balance at end of the year | $ | 24,220 | $ | 22,015 | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 14, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Mar 8, 2019 | |
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.