Biohaven Ltd.BHVN
Biohaven Ltd. Income Taxes Disclosure
Income Taxes
*The amount of income taxes paid or refunded during the year does not meet the 5% disaggregation threshold.
As a company incorporated in the British Virgin Islands (“BVI”), the Company is principally subject to taxation in the BVI. Under the current laws of the BVI, the Company and all dividends, interest, rents, royalties, compensation and other amounts paid by the Company to persons who are not resident in the BVI and any capital gains realized with respect to any shares, debt obligations, or other securities of the Company by persons who are not resident in the BVI are exempt from all provisions of the Income Tax Ordinance in the BVI.
The Company has historically outsourced all of the research and clinical development for its programs under a master services agreement with Biohaven Pharmaceuticals, Inc. (“BPI”). As a result of providing services under this agreement, BPI was profitable during the years ended December 31, 2025, 2024 and 2023. A similar arrangement is also in place for the Company's subsidiary, Biohaven Biosciences Ireland Limited ("BBIL"). The Companies are subject to taxation in the United States and Ireland, respectively, and the Company's tax provision includes the effects of consolidating the results of operations of BPI and BBIL.
At December 31, 2025 and 2024, the Company continued to maintain a full valuation allowance against its net deferred tax assets, which are comprised primarily of net operating loss carryforwards and research and development tax credit carryforwards, based on management’s assessment that it is more likely than not that the deferred tax assets will not be realized. The Company will continue to evaluate the need for a valuation allowance on its deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of these allowances.
The Company recorded an income tax provision during the year ended December 31, 2025 of $1,442, an income tax provision during the year ended December 31, 2024 of $735, and an income tax benefit during the year ended December 31, 2023 of $1,383, which primarily represent Federal and state taxes related to the Company’s profitable operations in the U.S. and Ireland.
Loss before provision for income taxes consisted of the following:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| BVI | $ | (783,270) | $ | (885,508) | $ | (424,647) | ||||||||||||||
| Foreign | 45,890 | 39,821 | 15,096 | |||||||||||||||||
| Loss before provision for income taxes | $ | (737,380) | $ | (845,687) | $ | (409,551) | ||||||||||||||
The provision for income taxes consisted of the following:
Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Current income tax provision (benefit): | ||||||||||||||||||||
| BVI | $ | — | $ | — | $ | — | ||||||||||||||
| Foreign | 1,442 | 735 | (1,383) | |||||||||||||||||
Total current income tax provision (benefit) | 1,442 | 735 | (1,383) | |||||||||||||||||
| Deferred income tax provision (benefit): | ||||||||||||||||||||
| BVI | — | — | — | |||||||||||||||||
| Foreign | — | — | — | |||||||||||||||||
| Total deferred income tax provision (benefit) | — | — | — | |||||||||||||||||
Total provision (benefit) for income taxes | $ | 1,442 | $ | 735 | $ | (1,383) | ||||||||||||||
A reconciliation of the BVI statutory income tax rate of 0% to the Company's effective income tax rate is as follows:
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| Federal Statutory Tax Rate | $ | — | 0.0 | % | $ | — | 0.0 | % | $ | — | 0.0 | % | ||||||||||||||||||||||||||
Foreign Tax Effects | ||||||||||||||||||||||||||||||||||||||
United States | ||||||||||||||||||||||||||||||||||||||
| Statutory tax rate difference between U.S. and BVI | 11,624 | 1.6 | 6,262 | 0.7 | 5,144 | 1.3 | ||||||||||||||||||||||||||||||||
| Changes in U.S. Federal valuation allowance | 11,169 | 1.5 | 17,230 | 2.0 | 26,332 | 6.4 | ||||||||||||||||||||||||||||||||
| U.S. Federal Tax Credits | (21,683) | (2.9) | (23,518) | (2.8) | (30,546) | (7.4) | ||||||||||||||||||||||||||||||||
| Changes in State valuation allowance | (1,775) | (0.2) | 2,513 | 0.3 | 16,940 | 4.1 | ||||||||||||||||||||||||||||||||
| U.S. State Tax Credits | 322 | 0.0 | (4,150) | (0.5) | (21,382) | (5.2) | ||||||||||||||||||||||||||||||||
| Other | 1,426 | 0.2 | 2,121 | 0.4 | 1,983 | 0.5 | ||||||||||||||||||||||||||||||||
| Other foreign jurisdictions | 359 | 0.0 | 277 | 0.0 | 146 | 0.0 | ||||||||||||||||||||||||||||||||
| Effective income tax rate | $ | 1,442 | 0.2 | % | $ | 735 | 0.1 | % | $ | (1,383) | (0.3) | % | ||||||||||||||||||||||||||
The Company's income tax provision primarily represents Federal and state taxes related to the profitable operations of its subsidiaries in the United States and Ireland. On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into U.S. law, which contains a broad range of tax reform provisions impacting businesses that apply beginning in 2025. The OBBBA has not materially impacted the Company's effective tax rate.
The income tax benefit recorded during the year ended December 31, 2023 was primarily attributable to the adoption of the guidance contained in a Notice of Proposed Rule Making issued by the United States Internal Revenue Service during the third quarter of 2023 ("the Notice"). The Notice indicates that BPI has the ability to immediately deduct R&D expenditures which were incurred in the U.S. and reimbursed by its foreign parent. Previously these expenditures were capitalized, as was generally required under the Tax Cuts and Jobs Act, which was effective for tax years beginning on or after January 1, 2022.
Net deferred tax assets (liabilities) consisted of the following:
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| Foreign net operating loss carryforwards | $ | 120,704 | $ | 144,179 | ||||||||||
| Tax credits | 158,931 | 140,201 | ||||||||||||
| R&D capitalization | 2,372 | 5,891 | ||||||||||||
| Other | 39,184 | 21,878 | ||||||||||||
| Valuation allowance | (313,353) | (303,731) | ||||||||||||
| Total deferred tax assets | 7,838 | 8,418 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
Other | (7,838) | (8,418) | ||||||||||||
| Total deferred tax liabilities | (7,838) | (8,418) | ||||||||||||
| Net deferred tax asset (liability) | $ | — | $ | — | ||||||||||
As of December 31, 2025 and 2024, the Company had foreign net operating loss carryforwards of $780,531 and $890,792, respectively, which begin to expire in 2037. As of December 31, 2025 and 2024, the Company had federal and state research and development and orphan drug credits of $158,931 and $140,201, respectively, which begin to expire in 2040.
Changes in the valuation allowance for deferred tax assets during the year ended December 31, 2025 were primarily due to increased deferred employee stock compensation deductions and research and development tax credits, partially offset by a decrease in the write-off of capitalized research and development costs capitalized and net operating losses in the US. Changes in the valuation allowance for deferred tax assets during the year ended December 31, 2024 were due primarily to the acquisition of Pyramid offset by the utilization of net operating losses and tax credit carryforwards. The change in the valuation allowance for deferred tax assets during the year ended December 31, 2023 was due primarily to generation of net operating losses and tax credit carryforwards.
Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Valuation allowance as of beginning of year | $ | 303,731 | $ | 259,448 | $ | 216,061 | ||||||||||||||
| Increases recorded to Purchase Accounting and Net Investment from Former Parent | — | 21,538 | — | |||||||||||||||||
| Increases recorded to income tax provision | 9,622 | 22,745 | 43,387 | |||||||||||||||||
| Valuation allowance as of end of year | $ | 313,353 | $ | 303,731 | $ | 259,448 | ||||||||||||||
The Company followed the authoritative guidance for recognizing and measuring uncertainty in income taxes for tax positions taken or expected to be taken in a tax return.
The beginning and ending amounts of unrecognized tax benefits reconciles as follows:
Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Beginning of period balance | $ | 2,300 | $ | 2,200 | $ | 2,200 | ||||||||||||||
| Increase for tax positions taken during the current period | 300 | 100 | — | |||||||||||||||||
| End of period balance | $ | 2,600 | $ | 2,300 | $ | 2,200 | ||||||||||||||
The unrecognized tax benefits relate primarily to issues common among multinational corporations. All of these unrecognized tax benefits, if recognized, would impact the Company's effective income tax rate. The Company's policy is to record interest and penalties related to income taxes, if any, as part of its income tax provision. As of December 31, 2025 and 2024, the total amount of accrued interest and penalties was not significant.
BPI, Kleo and Pyramid file income tax returns in the U.S. and certain state jurisdictions. The U.S. federal and state income tax returns are generally open to tax examinations for the tax year ended December 31, 2022 and subsequent years. BPI and Kleo are under exam by the State of Connecticut for the tax years December 31, 2017 and forward.
A summary of the income taxes paid, net of funds received, are as follows:
Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
US Federal | $ | (172) | $ | (2,456) | $ | (32,953) | ||||||||||||||
US State and Local | ||||||||||||||||||||
California | * | (719) | * | |||||||||||||||||
Illinois | * | (1,967) | * | |||||||||||||||||
Massachusetts | * | (729) | * | |||||||||||||||||
New York | * | (2,182) | * | |||||||||||||||||
Virginia | (44) | * | * | |||||||||||||||||
Other | (53) | (2,391) | (347) | |||||||||||||||||
Total US State and Local | (97) | (7,988) | (347) | |||||||||||||||||
Ireland | 402 | * | * | |||||||||||||||||
Total income taxes paid, net of refunds received | $ | 133 | $ | (10,444) | $ | (33,300) | ||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 23, 2023 | |
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.