Caris Life Sciences, Inc.CAI
Caris Life Sciences, Inc. Income Taxes Disclosure
Income Taxes
For financial reporting purposes, income before income taxes includes the following components:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (amounts in thousands) | |||||||||||||||||
| United States | $ | (70,469) | $ | (283,720) | $ | (339,724) | |||||||||||
| Foreign | 2,381 | 1,830 | (1,691) | ||||||||||||||
| Total | $ | (68,088) | $ | (281,890) | $ | (341,415) | |||||||||||
The Company had no income tax expense or benefit for the years ended December 31, 2025, 2024, and 2023. A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:
| Year ended December 31, 2025 | |||||||||||
Amount | Percent | ||||||||||
(amounts in thousands) | |||||||||||
| U.S. Federal statutory tax rate | $ | (14,299) | 21.0 | % | |||||||
| Effect of cross-border tax laws | 14 | — | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Permanent differences - warrant fair value | 16,784 | (24.7) | % | ||||||||
| Permanent differences - other | 1,495 | (2.2) | % | ||||||||
| Adjustments to NOLs | (1,144) | 1.7 | % | ||||||||
| Valuation allowance | (5,888) | 8.7 | % | ||||||||
| Other | 3,538 | (5.2) | % | ||||||||
| State and local income taxes, net of federal income tax effect | — | — | % | ||||||||
| Foreign tax effects | (500) | 0.7 | % | ||||||||
| Effective tax rate | $ | — | — | % | |||||||
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for years prior to the adoption of ASU 2023-09 is as follows:
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (amounts in thousands) | |||||||||||
| Computed statutory benefit | $ | (59,197) | $ | (71,697) | |||||||
| Change in valuation allowance | 67,333 | 85,643 | |||||||||
| State taxes, net of federal benefit | (10,173) | (15,342) | |||||||||
| Permanent differences | 2,946 | 1,231 | |||||||||
| Permanent difference — warrant fair value adjustment | (1,489) | (55) | |||||||||
| Foreign rate differential | (267) | (5) | |||||||||
| Adjustments to foreign NOL's | 117 | 174 | |||||||||
| Adjustments to state NOL's | (114) | (522) | |||||||||
| Adjustments to stock-based compensation | 137 | 671 | |||||||||
| Rate change | (68) | (40) | |||||||||
| Other | 775 | (58) | |||||||||
| Income tax benefit | $ | — | $ | — | |||||||
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 and liabilities are as follows:
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (amounts in thousands) | |||||||||||
| Deferred tax assets | |||||||||||
| Net operating loss carryforward | $ | 309,547 | $ | 290,514 | |||||||
| Accrued liabilities | 9,997 | 8,449 | |||||||||
| Stock-based compensation | 14,039 | 5,993 | |||||||||
| Interest limitation | 44,214 | 35,614 | |||||||||
| Research and development credits | 2,842 | 2,842 | |||||||||
| Intangibles | 3,164 | 3,557 | |||||||||
| Lease obligation | 12,278 | 11,601 | |||||||||
| Contractual allowances | 18,268 | 16,867 | |||||||||
| Research and development costs | — | 52,140 | |||||||||
| Property and equipment basis difference | 3,745 | 4,796 | |||||||||
| Others | 6,227 | 1,956 | |||||||||
| Total deferred tax assets | 424,321 | 434,329 | |||||||||
| Deferred tax liabilities | |||||||||||
| Right of use assets | (10,033) | (9,033) | |||||||||
| Excess tax goodwill amortization | (281) | (262) | |||||||||
| Derivative liability fair value adjustment | (3,598) | (3,456) | |||||||||
| Others | — | — | |||||||||
| Total deferred tax liabilities | (13,912) | (12,751) | |||||||||
| Valuation allowance | (410,409) | (421,578) | |||||||||
| Net deferred tax asset (liability) | $ | — | $ | — | |||||||
Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the use of the existing deferred tax assets. A significant piece of objective negative
evidence evaluated was the cumulative loss over the three-year period ended December 31, 2025. Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections for future growth. On the basis of this evaluation, as of December 31, 2025, a valuation allowance of $410.4 million has been recorded to recognize only the portion of the deferred tax assets that is more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if additional objectively verifiable positive evidence materializes in future reporting periods, such as a demonstrated operating profitability.
The valuation allowances increased $11.2 million and $67.3 million during the fiscal years ended December 31, 2025 and 2024, respectively, primarily due to increased U.S. federal and state net operating loss carryforwards.
The Company has gross federal, state, and foreign net operating loss carryforwards of approximately $2,250.3 million which expire as follows:
Expiration Year | Federal | State | Foreign | Total | ||||||||||||||||||||||
(amounts in thousands) | ||||||||||||||||||||||||||
| 2025 - 2030 | $ | 6,338 | $ | 11,695 | $ | 7,125 | $ | 25,158 | ||||||||||||||||||
| 2031 - 2040 | 209,538 | 284,733 | 2,489 | 496,760 | ||||||||||||||||||||||
| 2041 - 2045 | — | 534,354 | — | 534,354 | ||||||||||||||||||||||
| Indefinite | 1,041,526 | 152,472 | — | 1,193,998 | ||||||||||||||||||||||
| Total | $ | 1,257,402 | $ | 983,254 | $ | 9,614 | $ | 2,250,270 | ||||||||||||||||||
The 2018 through 2025 net operating losses do not expire under the Tax Cuts and Jobs Act of 2017, and are subject to the 80% of taxable income limitation.
Federal tax laws impose substantial restrictions on the utilization of net operating loss and credit carryforwards in the event of an ownership change, as defined in Section 382 of the Internal Revenue Code of 1986. Accordingly, the Company's ability to utilize these carryforwards may be limited in the event of any such ownership change. We have completed a Section 382 analysis for changes in ownership through December 31, 2024 and continue to monitor for changes that could trigger a limitation. Based on this analysis, the Company does not expect to have any permanent limitations on the utilization of its federal net operating losses.
The Company has U.S. federal and state tax research and development credit carryforwards of $2.8 million as of December 31, 2025 and 2024, with expiration dates through 2031 and 2026, respectively. The Company has recorded a full valuation allowance related to the credit carryforwards as of December 31, 2025.
The Company is subject to taxation in the United States and various states and foreign jurisdictions. As of December 31, 2025, all loss years remain open to examination by the taxing authorities.
The recognition and measurement of certain tax benefits includes estimates and judgment by management that inherently involve subjectivity. Changes in estimates may create volatility in the Company’s effective tax rate in future periods and may be due to the expiration of various statutes of limitations, settlements with tax authorities, or acquisition of new information about particular tax positions that may require management to change its estimates.
The Company accounts for uncertainty in income taxes in accordance with ASC Topic 740, Income Taxes (“ASC 740”). Through December 31, 2025, the Company has evaluated all tax positions for which the statute of limitations remained open, and the Company has not recognized any reserve for uncertain tax positions or any penalties or interest through the income statement or balance sheet as of December 31, 2025.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.