Black Diamond Therapeutics, Inc.BDTX
Black Diamond Therapeutics, Inc. Income Taxes Disclosure
INCOME TAXES
Income (loss) before income tax expense consists of the following:
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Domestic | $ | (69,676) | $ | (82,639) | |||||||
| Foreign | — | 197 | |||||||||
Total loss before income taxes | $ | (69,676) | $ | (82,442) | |||||||
For the years ended December 31, 2024 and 2023, the Company recorded no income tax benefit for the net operating losses incurred each year, due to its uncertainty of realizing a benefit from those items. A reconciliation of income taxes computed using the U.S. federal statutory rate to that reflected in operations as of December 31, 2024 and 2023, respectively, is as follows:
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
U.S. federal statutory income tax rate | 21.0 | % | 21.0 | % | |||||||
State and local taxes, net of federal benefit | 0.4 | % | 5.3 | % | |||||||
Permanent differences | 0.0 | % | 0.0 | % | |||||||
| Stock compensation | (0.9) | % | (1.6) | % | |||||||
Research and development credits | 3.7 | % | 3.2 | % | |||||||
Change in valuation allowance | (24.2) | % | (28.6) | % | |||||||
Other | 0.0 | % | 0.7 | % | |||||||
Effective income tax rate | 0.0 | % | 0.0 % | ||||||||
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets were as follows:
| Tax year ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Deferred tax assets (liabilities): | |||||||||||
| Net operating loss carryforwards | $ | 78,879 | $ | 69,194 | |||||||
| Research and development tax credits | 13,123 | 10,766 | |||||||||
| Capitalized R&D | 26,181 | 22,139 | |||||||||
| Operating lease liabilities | 5,498 | 6,784 | |||||||||
| Accruals and other | 826 | 1,170 | |||||||||
| Stock-based compensation | 7,723 | 6,638 | |||||||||
| Total deferred tax assets | 132,230 | 116,691 | |||||||||
| Valuation Allowance | (127,585) | (110,761) | |||||||||
| Subtotal | 4,645 | 5,930 | |||||||||
| Right-of-use assets | (4,641) | (5,843) | |||||||||
| Net fixed assets | (4) | (87) | |||||||||
| Net deferred tax assets | $ | — | $ | — | |||||||
As of December 31, 2024, the Company had gross federal net operating loss carryforwards of $313,563, of which $2,556 begin to expire in 2036 and the remainder do not expire but are subject to 80% limitation. As of December 31, 2024, the Company had state net operating loss carryforwards of $208,250 that begin to expire in 2036. Additionally, the Company had federal research and development tax credit carryforwards of $11,950 that expire at various dates through 2036.
In assessing the realizability of the net deferred tax asset, the Company considers all relevant positive and negative evidence in determining whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The realization of the gross deferred tax assets is dependent on several factors, including the generation of sufficient taxable income prior to the expiration of the net operating loss carryforwards. Management believes that it is more likely than not that the Company’s deferred income tax assets will not be realized. As such, there is a full valuation allowance against the net deferred tax assets as of December 31, 2024 and 2023. The valuation allowance increased by $16,824 during the year ended December 31, 2024 primarily as a result of net operating losses generated during the period.
Utilization of the net operating loss carryforwards and research and development tax credit carryforwards may be subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. Further, until a study is completed and any limitation is known, no amounts are being presented as an uncertain tax position.
The Company also has not conducted a study of its research and development credit carryforwards, which may result in an adjustment to research and development credit carryforwards. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the balance sheets or statements of operations if an adjustment were required. Further, until a study is completed and any limitation is known, no amounts are being presented as an uncertain tax position.
The Company applies the accounting guidance in ASC 740 related to accounting for uncertainty in income taxes. The Company’s reserves related to taxes are based on a determination of whether, and how much of, a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. As of December 31, 2024 and 2023, the Company had no unrecognized tax benefits.
The Company will recognize interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2024 and 2023, the Company had no accrued interest or penalties related to uncertain tax positions.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company’s tax returns are generally open under statute from 2021 to the present. The Company’s tax attributes related to years prior to 2021 can still be adjusted under audit.
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.