Aurinia Pharmaceuticals Inc.AUPH
Aurinia Pharmaceuticals Inc. Income Taxes Disclosure
Income Taxes
Income Tax (Benefit) Expense
Net income (loss) before income taxes consisted of the following (in thousands):
Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Canada | $ | 103,909 | $ | (8,416) | $ | (90,226) | |||||||||||
U.S. | 10,248 | 15,715 | 12,573 | ||||||||||||||
Other | — | 149 | 184 | ||||||||||||||
Net income (loss) before income taxes | $ | 114,157 | $ | 7,448 | $ | (77,469) | |||||||||||
The components of income tax (benefit) expense consisted of the following (in thousands):
| Years Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current: | ||||||||||||||||||||
| Canada | $ | — | $ | — | $ | — | ||||||||||||||
| U.S. | 3,134 | 1,598 | 154 | |||||||||||||||||
Other | 15 | 98 | 397 | |||||||||||||||||
Total current income tax expense | 3,149 | 1,696 | 551 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Canada | (62,053) | — | — | |||||||||||||||||
| U.S. | (114,141) | — | — | |||||||||||||||||
| Total deferred income tax benefit | (176,194) | — | — | |||||||||||||||||
Income tax (benefit) expense | $ | (173,045) | $ | 1,696 | $ | 551 | ||||||||||||||
For the year ended December 31, 2025, the Company recorded an income tax benefit of $173.0 million primarily due to the release of its valuation allowance on deferred tax assets that the Company now expects to realize. Historically, the Company maintained a full valuation allowance against its deferred tax assets; however, after considering all available evidence, the Company determined that it was more likely than not that it would be able to realize the benefit of its deferred tax assets. In reaching this determination, the Company considered the 3-year cumulative net income before income taxes as of December 31, 2025, and the Company’s expectations regarding the generation of future taxable income.
The Company utilizes the Canadian statutory rate because the parent entity is domiciled in Canada. For the years ending December 31, 2025, 2024 and 2023, the Canadian federal and provincial statutory rate was 24.7%, 24.7% and 24.6%, respectively.
For the year ended December 31, 2025, the components of the effective tax rate are as follows (in thousands):
Year Ended December 31, 2025 | ||||||||||||||
| Amount | Percent | |||||||||||||
Canadian federal statutory income taxa | $ | 28,540 | 25.0 | % | ||||||||||
Provincial income tax, net of federal income tax effectb | (298) | (0.3) | ||||||||||||
Foreign tax effects: | ||||||||||||||
U.S. | ||||||||||||||
Intra-entity sale | (104,216) | (91.3) | ||||||||||||
Changes in valuation allowances | (9,181) | (8.0) | ||||||||||||
Statutory tax rate difference between U.S. and Canada | (410) | (0.4) | ||||||||||||
| Other | (131) | (0.1) | ||||||||||||
Nontaxable or nondeductible items: | ||||||||||||||
Capital gains | (57,581) | (50.4) | ||||||||||||
| Other | 945 | 0.8 | ||||||||||||
Changes in valuation allowance | (151,979) | (133.1) | ||||||||||||
Tax credits | (4) | — | ||||||||||||
Other adjustments: | ||||||||||||||
Intra-entity sale | 119,297 | 104.5 | ||||||||||||
Other adjustments | 1,973 | 1.7 | ||||||||||||
| Effective tax rate | $ | (173,045) | (151.6) | % | ||||||||||
a 25% is the federal rate net of the general rate reduction.
b Primarily attributable to Alberta and British Columbia.
The effective tax rate for 2025 differs from the statutory rate primarily due to (i) the change in realizability of deferred tax assets and corresponding valuation allowance release; and (ii) the Canadian preferential capital gains treatment (only 50% of capital gains are taxable); offset by (iii) a net intra-entity sale transaction.
For the years ended December 31, 2024 and 2023, the components of the effective tax rate are as follows (in thousands):
| Years ended December 31, | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | |||||||||||||||||||||||
Canadian federal and provincial statutory income tax | $ | 1,840 | 24.7 | % | $ | (19,060) | 24.6 | % | ||||||||||||||||||
| Effect of tax rates on foreign jurisdictions | (581) | (7.8) | (452) | 0.6 | ||||||||||||||||||||||
| Withholding taxes | 152 | 2.0 | 154 | (0.2) | ||||||||||||||||||||||
Impact of future rates and tax rate changes | (481) | (6.5) | 12,071 | (15.5) | ||||||||||||||||||||||
| Foreign tax credit | (152) | (2.0) | (154) | 0.2 | ||||||||||||||||||||||
Nondeductible share-based compensation | 7,908 | 106.3 | 10,689 | (13.8) | ||||||||||||||||||||||
State income taxes | 392 | 5.3 | 698 | (0.9) | ||||||||||||||||||||||
Changes in valuation allowance | (7,446) | (100.0) | (2,440) | 3.1 | ||||||||||||||||||||||
Scientific Research and Experimental Development (“SRED”) and research credits | (153) | (2.1) | (1,005) | 1.3 | ||||||||||||||||||||||
Other adjustments | 217 | 2.9 | 50 | (0.1) | ||||||||||||||||||||||
| Effective tax rate | $ | 1,696 | 22.8 | % | $ | 551 | (0.7) | % | ||||||||||||||||||
For the year ended December 31, 2025, net cash paid for income taxes consisted of the following (in thousands):
| Year ended December 31, 2025 | ||||||||
Federal | $ | — | ||||||
Provincial | — | |||||||
Foreign: | ||||||||
U.S. federal | 2,420 | |||||||
U.S. state (Texas) | 256 | |||||||
| Other | 140 | |||||||
Net cash paid for income taxes | $ | 2,816 | ||||||
Deferred Tax Assets, Net
As of December 31, 2025 and 2024, the Company's deferred tax assets, net consisted of the following (in thousands):
| December 31, 2025 | December 31, 2024 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
Intangible assets | $ | 100,876 | $ | 1,557 | ||||||||||
Net operating loss carryforwards | 47,622 | 130,143 | ||||||||||||
Lease liability | 17,918 | 19,380 | ||||||||||||
Research credit carryforwards | 8,892 | 8,369 | ||||||||||||
Share-based compensation | 7,803 | — | ||||||||||||
Accrued expenses | 4,051 | 2,458 | ||||||||||||
Deferred compensation liability | 1,930 | 2,342 | ||||||||||||
Share issuance costs | 253 | 879 | ||||||||||||
| Other | 5,856 | 3,407 | ||||||||||||
Total deferred tax assets | 195,201 | 168,535 | ||||||||||||
| Valuation allowance | — | (154,432) | ||||||||||||
Total deferred tax assets, net of valuation allowance | 195,201 | 14,103 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Right-of-use asset | (18,607) | (13,630) | ||||||||||||
| Property, equipment and intangible assets | (400) | (473) | ||||||||||||
| Total deferred tax liabilities | (19,007) | (14,103) | ||||||||||||
Deferred tax assets, net | $ | 176,194 | $ | — | ||||||||||
The Company’s net valuation allowance decreased from $154.4 million to zero as of December 31, 2024 and 2025, respectively, due to the change in realizability of deferred tax assets and corresponding valuation allowance release.
As of December 31, 2025, the Company had $197.4 million of Canada gross net operating loss carryforwards and $6.7 million of Canada Investment Tax Credits and British Columbia SRED that expire between 2030 and 2045.
Uncertain Income Tax Positions
The Company is subject to examination in the U.S. and Canada. Tax periods remain open from 2022 through 2025 in the U.S. and from 2010 through 2025 in CanadaHistorical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 24, 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.