Axsome Therapeutics, Inc. Income Taxes Disclosure

Note 18. Income Taxes

A valuation allowance is provided for deferred tax assets where the recoverability of the assets is uncertain. The determination to provide a valuation allowance is dependent upon the assessment of whether it is more likely than not that sufficient future taxable income will be generated to utilize the deferred tax assets. Based on the weight of the available evidence, which includes the Company’s historical operating losses and forecast of future losses, the Company provided a valuation allowance against substantially all of the deferred tax assets in the U.S. and Malta. The valuation allowance increased by $34.0 million, $58.7 million and $39.0 million, in 2025, 2024 and 2023, respectively, as a result of the increase of the deferred tax assets.

As of December 31, 2025, the Company has U.S. federal net operating loss (“NOL”) carryforwards of approximately $577.9 million and foreign NOL carryforwards of $281.3 million. U.S. federal NOLs amounting to $59.8 million generated before the 2018 tax year will start expiring beginning 2032, and the NOLs of approximately $518.1 million generated in 2018 and later have an indefinite carryforward period. The NOL carryforwards are subject to review and possible adjustment by the Internal Revenue Service (“IRS”) and state tax authorities. NOL carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state tax provisions. This could limit the amount of NOLs that the Company can utilize annually to offset future taxable income or tax liabilities.

For the year ended December 31, 2025, the Company recorded $0.5 million of income tax benefit due to favorable return-to-provision adjustments attributable to certain foreign tax returns filed during the year. For the year ended December 31, 2024, the Company recorded $0.1 million of income tax expense due to state taxes. There was no income tax expense or benefit recorded by the Company in any other jurisdiction due to its net loss tax position and the valuation allowance recorded against its deferred tax assets during the years ended December 31, 2025, 2024, and 2023.

The Company files U.S. federal income tax returns as well as various state, local, and foreign jurisdictions. The Company is currently under examination by the IRS for the Company’s 2021 U.S. income tax return. The audit is nearing completion, and the Company expects a resolution in the near term. As a result of the audit, the Company recorded gross uncertain tax positions totaling $3.3 million, which have been recognized as a reduction of deferred tax assets. The Company is not currently under examination at the state level. The Company’s U.S. federal and state net operating losses have occurred since its inception in 2012 and as such, tax years subject to potential tax examination could apply from that date because the utilization of net operating losses from prior years opens the relevant year to audit by the IRS and/or state taxing authorities.

ASC 740 clarifies the accounting and reporting for uncertainties in income tax law and prescribes a comprehensive model for financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. ASC 740 requires that tax effects of an uncertain tax position be recognized only if it is “more likely than not” to be sustained by the taxing authority as of the reporting date.

Amounts included in the balance of unrecognized tax benefits as of December 31, 2025, if recognized, would not affect the effective tax rate upon recognition.

The Company has elected to account for Global Intangible Low-Taxed Income (GILTI) in the period in which it is incurred, and therefore has not provided deferred tax impacts of GILTI in its consolidated financial statements.

On July 4, 2025, the OBBBA was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company did not record material tax impacts from the legislation on its consolidated financial statements.