ALX ONCOLOGY HOLDINGS INC Income Taxes Disclosure

(11) INCOME TAXES

The Company has not recorded any income tax expense for the years ended December 31, 2025, 2024 and 2023.

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.

The Company filed a change in tax status for ALX Oncology Limited in 2023. The reorganization resulted in an increase to capitalized R&D and other deferred tax assets, as well as a corresponding increase in valuation allowance.

State income taxes in California comprise the majority of the state income taxes, net of federal effect category for the years ended December 31, 2025, 2024 and 2023, respectively.

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that the Company’s management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, the Company’s management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. The valuation allowance increased by approximately $20.3 million and $33.1 million for the years ended December 31, 2025 and 2024, respectively.

As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the “change in valuation allowance” line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance for the years ended December 31, 2025, 2024 and 2023 (in thousands):

Utilization of the Company’s U.S. net operating loss and credit carryforwards may be subject to substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitation could result in the expiration of the U.S. net operating loss and credit carryforwards before utilization. To date, the Company has not performed an analysis to determine whether there would be a substantial annual limitation due to a change in ownership.

Unrecognized Tax Benefits

The Company recognizes the tax benefit from uncertain tax positions if it is more likely than not that the tax positions will be sustained on examination by the tax authorities, based on the technical merits of the position. The tax benefit is measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company files income tax returns in the U.S. federal and California jurisdiction, which is not currently under exam, and all years since inception are opened to examination.

The unrecognized tax benefits as of December 31, 2025, 2024 and 2023 were $4.7 million, $4.1 million and $3.1 million, respectively. Future changes in the unrecognized tax benefits will not impact the effective tax rate due to the Company’s full valuation allowance.

During the years ended December 31, 2025, 2024 and 2023, no significant interest or penalties were required to be recognized relating to unrecognized tax benefits.