BillionToOne, Inc.BLLN
BillionToOne, Inc. Income Taxes Disclosure
Income Taxes
The components of the provision for income taxes for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 92 | $ | - | $ | - | |||||||||||
| State | 213 | 29 | 9 | ||||||||||||||
| 305 | 29 | 9 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | - | - | - | ||||||||||||||
| State | - | - | - | ||||||||||||||
| - | - | - | |||||||||||||||
| Total provision for income taxes | $ | 305 | $ | 29 | $ | 9 | |||||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant
components of the Company’s deferred tax assets as of December 31, 2025 and 2024 are as follows (in thousands):
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 34,636 | $ | 36,725 | |||||||
| Capitalized R&D expenditure | 6,059 | 11,477 | |||||||||
| Accruals and reserves | 3,061 | 2,322 | |||||||||
| R&D credits | 4,817 | 3,768 | |||||||||
| Lease liability | 12,108 | 13,126 | |||||||||
| Stock-based compensation | 1,397 | 859 | |||||||||
| Other | - | 21 | |||||||||
| Total deferred tax asset | 62,078 | 68,298 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and amortization | (2,207) | (320) | |||||||||
| Right of use asset | (11,140) | (12,304) | |||||||||
| Total deferred tax liabilities | (13,347) | (12,624) | |||||||||
| Less: valuation allowance | (48,731) | (55,674) | |||||||||
| Net deferred tax assets | $ | - | $ | - | |||||||
The changes in the valuation allowance for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Valuation allowance - beginning of period | $ | 55,674 | $ | 45,555 | $ | 29,436 | |||||||||||
| Additions/(reductions) recognized in income tax provision | (6,943) | 10,119 | 16,119 | ||||||||||||||
| Valuation allowance - end of period | $ | 48,731 | $ | 55,674 | $ | 45,555 | |||||||||||
The following table presents a reconciliation of the income tax expense computed at the statutory federal rate and the Company’s income tax expense for the year ended December 31, 2025 (in thousands, except percentages):
| 2025 | |||||||||||
| Tax at the federal statutory rate | $ | 1,630 | 21 | % | |||||||
| Domestic federal | |||||||||||
| Nontaxable or nondeductible items | |||||||||||
| Meals | 963 | 12 | % | ||||||||
| Stock-based compensation | 2,582 | 33 | % | ||||||||
| Change in fair value of term loan | 2,376 | 31 | % | ||||||||
| Other | 147 | 2 | % | ||||||||
| Research and development credits | (1,689) | (22) | % | ||||||||
| Changes in tax laws or rates enacted in the current period | - | - | % | ||||||||
| Change in valuation allowance | (6,464) | (83) | % | ||||||||
| Foreign tax effects | - | - | % | ||||||||
| State and local income taxes, net of federal benefits | 169 | 2 | % | ||||||||
| Change in unrecognized tax benefit | 591 | 8 | % | ||||||||
| Total provision for income taxes | $ | 305 | 4 | % | |||||||
The following table presents a reconciliation of the income tax expense computed at the statutory federal rate and the Company’s income tax expense for the years ended December 31, 2024 and 2023 (in thousands):
| 2024 | 2023 | ||||||||||
| Tax at the federal statutory rate | $ | (8,725) | $ | (17,250) | |||||||
| Other nondeductible items | 792 | 550 | |||||||||
| Stock-based compensation | 1,359 | 832 | |||||||||
| Research and development credits | (994) | (796) | |||||||||
| Change in valuation allowance | 10,119 | 16,058 | |||||||||
| State taxes, net of federal benefits | (1,443) | (2,113) | |||||||||
| Debt extinguishment gain or loss | (1,814) | - | |||||||||
| Change in fair value of term loan | 689 | 2,749 | |||||||||
| Other | 46 | (21) | |||||||||
| Total provision for income taxes | $ | 29 | $ | 9 | |||||||
The Company’s actual tax expense differed from the statutory federal income tax expense using a tax rate of 21% for the years ended December 31, 2025 and 2024, primarily due to nondeductible expenses, research and development tax credits, change in fair value of term loan, the change in valuation allowance, and state income taxes. For the tax year ended December 31, 2025, the States of Minnesota, Idaho and Georgia made up the majority of the domestic state income taxes, net of federal tax effect.
As of December 31, 2025 and 2024, the Company had a net operating loss carryforwards of $147.0 million and $154.9 million for federal purposes, and $67.9 million and $78.6 million for state and city purposes, respectively. If not utilized, these carryforwards will begin to expire in 2026 for state and city purposes. The federal carryforwards do not expire.
Federal net operating losses incurred in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. Some but not all states conform to the federal treatment of net operating losses.
As of December 31, 2025 and 2024, the Company had research and development tax credit carryforwards for federal tax purposes of $5.5 million and state research and development tax credit carryforwards of $2.8 million. As of December 31, 2024, the Company had research and development tax credit carryforwards for federal tax purposes of $4.1 million and state research and development tax credit carryforwards of $2.1 million. The federal research and development tax credit carryforwards will expire at various dates beginning in the year 2041. The Company’s state research and development tax credit carryforwards do not expire.
Utilization of the net operating loss (“NOL”) carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of NOL carryforwards and credits before utilization. Current laws impose substantial restrictions on the utilization of NOL carryforwards and credits in the event of an “ownership change” within a three-year period as defined by the Internal Revenue Code Section 382 (“Section 382”). If there should be an ownership change, the Company’s ability to utilize its NOL carryforwards and credits could be limited. The Company experienced an ownership change on March 31, 2019, which limited its ability to utilize its NOL carryforwards generated prior to that date. The Company experienced another ownership change on November 5, 2025, which did not limit its ability to utilize its NOL carryforwards in the current year.
Based on the available objective evidence, management believes it is more likely than not that the net deferred tax assets of the Company will not be fully realizable for the years ended December 31, 2025 and 2024. Accordingly, the Company has established a full valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets. The valuation allowance decreased by approximately $6.9 million and increased by approximately $10.1 million during the years ended December 31, 2025 and 2024, respectively.
Below are the Company's income taxes paid (net of tax refund) during the year ended December 31, 2025 (in thousands):
| 2025 | |||||
| US Federal | $ | 240 | |||
| US State and Local | |||||
| Illinois | 80 | ||||
| Minnesota | 34 | ||||
| Other | 133 | ||||
| Total US State and Local | 247 | ||||
| Total taxes paid | $ | 487 | |||
The Company records unrecognized tax benefits, where appropriate, for all uncertain income tax positions. The Company recorded unrecognized tax benefits for uncertain tax positions of $3.2 million and $2.2 million as of December 31, 2025 and 2024, respectively, none of which would impact the effective tax rate if recognized, because the benefit would be offset by an increase in the valuation allowance.
A reconciliation of the beginning and ending balance of total unrecognized tax benefits is as follows (in thousands):
| 2025 | 2024 | ||||||||||
| Unrecognized tax benefits - beginning of period | $ | 2,184 | $ | 1,410 | |||||||
| Increases related to current year’s tax positions | 984 | 774 | |||||||||
| Unrecognized tax benefits - end of period | $ | 3,168 | $ | 2,184 | |||||||
The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. During the year ended December 31, 2025 and 2024, the Company recognized no interest and penalties associated with unrecognized tax benefits.
Due to the net operating loss carryforwards, all years remain open for income tax examination by tax authorities in the United States, various states and foreign tax jurisdictions in which the Company files tax returns.
On July 4, 2025, the One Big Beautiful Bill Act (“2025 Tax Act”) was enacted in the United States. This legislation includes multiple changes, such as restoration of immediate expensing of domestic research and development expenditures under Section 174, reduction of GILTI and FDII deductions under Section 250, and reinstatement of 100% bonus depreciation for qualified property acquired after January 19, 2025, to name a few. The Company elected to immediately expense current year domestic research and development expenditures and to expense prior year’s capitalized domestic research and development expenditures ratably over two years. Additionally, the Company claimed 100% bonus depreciation for qualified property acquired after January 19, 2025.
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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.