ANI PHARMACEUTICALS INCANIP
ANI PHARMACEUTICALS INC Income Taxes Disclosure
INCOME TAXES
The foreign current and foreign deferred (benefit) expense below represent the Company's tax (benefit) expense from Canada, India, United Kingdom, Ireland, Portugal, and Germany.
The Company is required to establish a valuation allowance for deferred tax assets if, based on the weight of all available evidence, 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 periods in which those temporary differences become deductible. The Company considers the projected future taxable income and tax planning strategies in making this assessment.
As of December 31, 2025 and 2024, the consolidated valuation allowance was $12.4 million and $9.5 million, respectively, primarily related to deferred tax assets for net operating losses in the UK and certain U.S. state jurisdictions.
In July 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. For fiscal year 2025, the primary impact of the OBBBA to the tax provision was the accelerated expensing of domestic research and development activities which reduced the Company's deferred tax assets and reduced its current income tax liability. The OBBBA restored an EBITDA-based calculation permanently and it resulted in the reduction of deferred tax assets and additional tax-deductible interest expense.
Income (loss) before expense (benefit) for income taxes consisted of the following:
Years Ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| United States | $ | 103,588 | $ | (24,618) | $ | 19,124 | |||||||||||
| Foreign | (7,797) | 2,406 | 748 | ||||||||||||||
Income (loss) before expense (benefit) for income taxes | $ | 95,791 | $ | (22,212) | $ | 19,872 | |||||||||||
Total income tax expense (benefit) for income taxes consists of the following for the years ended December 31:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current income tax expense (benefit) | |||||||||||||||||
| Federal | $ | (3,011) | $ | 13,714 | $ | 9,117 | |||||||||||
| State | 5,533 | 2,231 | 3,534 | ||||||||||||||
| Foreign | 171 | 1,876 | 26 | ||||||||||||||
| Total current tax expense | 2,693 | 17,821 | 12,677 | ||||||||||||||
| Deferred income tax expense (benefit) | |||||||||||||||||
| Federal | 15,979 | (17,876) | (7,601) | ||||||||||||||
| State | (1,250) | (3,906) | (3,946) | ||||||||||||||
| Foreign | (2,942) | (1,217) | (29) | ||||||||||||||
| Total deferred tax expense (benefit) | 11,787 | (22,999) | (11,576) | ||||||||||||||
| Change in valuation allowance | 2,974 | 1,488 | (8) | ||||||||||||||
| Total expense (benefit) for income taxes | $ | 17,454 | $ | (3,690) | $ | 1,093 | |||||||||||
The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the year ended December 31, 2025, updated for the new disclosure guidance within ASU 2023-09, which the Company has adopted prospectively.
| Year Ended December 31, 2025 | |||||||||||
(in thousands) | Amount | Percentage | |||||||||
| Tax expense at federal statutory rate | $ | 20,116 | 21.0 | % | |||||||
| State and local income tax, net of federal (national) income tax effect | 2,902 | 3.0 | % | ||||||||
| Foreign tax effects: | |||||||||||
| Foreign Tax Effects - United Kingdom - Valuation Allowance | 2,974 | 3.1 | % | ||||||||
| Foreign Tax Effects - United Kingdom - Other | (468) | (0.5) | % | ||||||||
| Foreign Tax Effects - Other foreign jurisdictions | (662) | (0.7) | % | ||||||||
| Tax Credits - Research and Experimentation | (3,771) | (3.9) | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Nontaxable or Nondeductible Items - Executive compensation | 2,668 | 2.8 | % | ||||||||
| Nontaxable or Nondeductible Items - Equity compensation | (1,281) | (1.3) | % | ||||||||
| Nontaxable or Nondeductible Items - Contingent consideration | (5,992) | (6.3) | % | ||||||||
| Nontaxable or Nondeductible Items - Other | 989 | 1.0 | % | ||||||||
| Other adjustments | (21) | — | % | ||||||||
| Tax expense at effective rate | $ | 17,454 | 18.2 | % | |||||||
The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended December 31, 2024 and 2023, prior to the application of ASU 2023-09:
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| US federal statutory rate | 21.0 | % | 21.0 | % | |||||||
| State taxes, net of federal benefit | 2.5 | % | 4.8 | % | |||||||
| Foreign taxes | (3.0) | % | 0.0% | ||||||||
| Change in valuation allowance | (6.7) | % | 0.0% | ||||||||
| Stock-based compensation | (6.5) | % | 10.8 | % | |||||||
| Non-deductible costs | (8.8) | % | 2.1 | % | |||||||
| Change in state apportionment factors, state and foreign rates | 4.0 | % | (11.8) | % | |||||||
| Research and experimentation and charitable credits | 14.1 | % | (19.0) | % | |||||||
| Transfer pricing and other | — | % | (2.4) | % | |||||||
| Effective income tax rate | 16.6 | % | 5.5 | % | |||||||
The components of deferred tax assets and liabilities as of December 31, 2025 and 2024, are as follows (in thousands):
| As of December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Accruals and advances | $ | 18,944 | $ | 16,318 | |||||||
| Stock-based compensation | 8,430 | 7,373 | |||||||||
| Accruals for chargebacks and returns | 19,447 | 23,427 | |||||||||
| Inventories | 6,614 | 5,234 | |||||||||
| Net operating loss carryforwards | 28,148 | 27,254 | |||||||||
| Capitalized research expenditures | — | 19,836 | |||||||||
| Interest expense carryforwards | — | 6,400 | |||||||||
| Debt instruments | 7,728 | 9,590 | |||||||||
| Charitable contribution carryforward | 7,003 | — | |||||||||
| Other assets | 7,718 | 5,305 | |||||||||
| Total deferred tax assets | $ | 104,032 | $ | 120,737 | |||||||
| Less valuation allowance | (12,423) | (9,450) | |||||||||
| Total net deferred tax assets | $ | 91,609 | $ | 111,287 | |||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation | $ | (6,336) | $ | (6,710) | |||||||
| Intangible assets | (7,358) | (12,537) | |||||||||
| Other liabilities | (8,843) | (6,934) | |||||||||
| Total deferred tax liabilities | $ | (22,537) | $ | (26,181) | |||||||
| Deferred tax assets, net of deferred tax liabilities and valuation allowance | $ | 69,072 | $ | 85,106 | |||||||
As of December 31, 2025, the Company had U.S. federal net operating loss carryforwards of approximately $48.3 million and UK net operating loss carryforwards of approximately $61.9 million as a result of the acquisition of Alimera. Net operating loss carryforwards related to the Alimera acquisition are indefinite lived. State net operating loss carryforwards related to the 2013 merger with BioSante Pharmaceuticals, Inc., if not used, expire in annual increments through 2033. All of the net operating loss carryforwards are limited on an annual basis as prescribed by Section 382 of the U.S. Internal Revenue Code; the current annual limitation is approximately $7.2 million per year. Additionally, as of December 31, 2025, the Company had tax effected total net operating losses in various states of $2.2 million which begin to expire through 2030.
The amounts of income tax paid by the Company, net of refunds, for the year ended December 31, 2025 were as follows:
(in thousands) | Amount | ||||
| United States - federal | $ | 13,699 | |||
| United States - state and local - other | 2,343 | ||||
| United States - state and local - Pennsylvania | 976 | ||||
| Foreign | 656 | ||||
Total | $ | 17,674 | |||
The Company is subject to income taxes in numerous jurisdictions in the U.S. and certain foreign jurisdictions. Significant judgment is required in evaluating tax positions and determining the expense for income taxes. The Company established liabilities for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities are established when the Company believe that certain positions might be challenged despite its belief that its tax return positions are fully supportable. The Company adjusts these liabilities in light of changing facts and circumstances, such as the outcome of a tax audit. The expense for income taxes includes the impact of changes to the liability that is considered appropriate. The Company has not identified any material uncertain income tax positions as of December 31, 2025 and 2024.
While the general IRS assessment statute of limitations is three years, the IRS can examine an original loss year return to verify a net operating loss deduction, even if it is beyond the three-year statute. This exception applies because a net operating loss deduction may affect the taxable income in other years, and the IRS retains the right to audit the original year to ensure the net operating loss was properly calculated.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 9, 2023 | |
| 2021 | Mar 15, 2022 | |
| 2020 | Mar 11, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Mar 2, 2017 | |
| 2015 | Feb 23, 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.