BioXcel Therapeutics, Inc. Income Taxes Disclosure

Note 16. Income Taxes

As a result of the prospective adoption of ASU 2023-09, Improvements to Income Tax Disclosures, certain tables are presented in a different format not comparable to prior year disclosures, and certain data contained within the tables may be presented differently than in prior years.

The significant components of the Company's net deferred tax assets at December 31, 2025 are shown below. In determining the realizability of the Company's net deferred tax assets, the Company considered numerous factors, including historical profitability, estimated future taxable income, and the industry in which it operates. Based on this information the Company has provided a valuation allowance for the full amount of its net deferred tax asset because the Company has determined that it is more likely than not that they will not be realized.

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A reconciliation between the Company’s effective tax rate and the federal statutory rate are as follows:

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At December 31, 2025 the Company had approximately $510,296 of gross federal and $530,648 of gross state net operating loss carry-forwards. If not utilized, the federal and state net operating loss carry-forwards will begin to expire in 2037. Of the total federal net operating loss, $507,650 incurred after December 31, 2017 will carryforward indefinitely. The utilization of such net operating loss carry-forwards and realization of tax benefits in future years depends predominantly upon having taxable income. The Company has approximately $17,736 of federal orphan drug credits and research and development credits which will begin to expire in 2037 if not utilized. The Company also has approximately $1,640 of state research and development credits which will begin to expire in 2040 if not utilized.

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Utilization of the NOL and research tax credit carryforwards may be subject to a substantial annual limitation due to ownership limitations that has occurred or that could occur in the future, as required by section 382 of the Code, as well as similar state and foreign provisions. These ownership changes may limit the amount of the NOL and research credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an "ownership change" as defined by Section 382 of the Code results from a transaction or series of transactions over a three year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a by certain stockholders or public groups.

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Entities are also required to evaluate, measure, recognize and disclose any uncertain income tax positions taken on their income tax returns. The Company has analyzed its tax positions and has concluded that as of December 31, 2025, there were no uncertain positions. The Company's U.S. federal and state NOLs have occurred since its inception in 2017 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 U.S. Internal Revenue Service and/or state taxing authorities. The Company did not have any unrecognized tax benefits and has not accrued any interest or penalties for the years ended December 31, 2025 and 2024.

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On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act, was enacted in the U.S., which includes a broad range of tax reform provisions, including extending and modifying certain key Tax Cuts and Jobs Act Provisions, and provisions allowing accelerated tax deductions for qualified property and research expenditures. The legislation has multiple effective dates, with certain provisions effective in 2025 and others to be implemented through 2027. The tax impacts of this legislation do not have a material impact on the Company’s current tax provision.