CareDx, Inc.CDNA
CareDx, Inc. Income Taxes Disclosure
INCOME TAXES
The components of the provision for (benefit from) income taxes are summarized as follows (in thousands):
As of December 31, | ||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||
Pre-tax earnings | ||||||||||||||
Domestic | $ | (19,128) | $ | 55,151 | $ | (188,421) | ||||||||
Foreign | (1,955) | (2,292) | (1,722) | |||||||||||
| $ | (21,083) | $ | 52,859 | $ | (190,143) | |||||||||
Current tax expense (benefit) | ||||||||||||||
US federal | $ | — | $ | 2 | $ | (117) | ||||||||
US state & local | 420 | 198 | 186 | |||||||||||
Foreign | — | 9 | — | |||||||||||
Total current tax expense (benefit) | 420 | 209 | 69 | |||||||||||
Deferred tax expense (benefit) | ||||||||||||||
US federal | $ | (77) | $ | (10) | $ | 184 | ||||||||
US state & local | (11) | (26) | (112) | |||||||||||
Foreign | (61) | 137 | — | |||||||||||
Total deferred tax expense (benefit) | (149) | 101 | 72 | |||||||||||
Provision for (benefit from) income taxes | $ | 271 | $ | 310 | $ | 141 | ||||||||
Upon adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 2, Summary of Significant Accounting Policies, the Company's actual provision for tax differed from the amounts computed by applying the U.S. federal income tax rate of 21% to pretax income as a result of the following (in thousands, except for percentages):
| As of December 31, | |||||||||||
| 2025 | |||||||||||
Effective tax rate reconciliation | |||||||||||
US federal statutory income tax rate | $ | (4,427) | 21.0 | % | |||||||
| Domestic federal | |||||||||||
| Tax credits | |||||||||||
| Research credits | (77) | 0.4 | % | ||||||||
| Nontaxable and nondeductible items | |||||||||||
| Non-deductible executive compensation | 2,217 | (10.5) | % | ||||||||
| Changes in valuation allowances | (254) | 1.2 | % | ||||||||
| Excess tax benefits on share-based payments | (2,115) | 10.0 | % | ||||||||
| Other | 323 | (1.5) | % | ||||||||
| Domestic state and local income taxes, net of federal effect | (407) | 1.9 | % | ||||||||
| Foreign tax effects | 350 | (1.7) | % | ||||||||
| Worldwide changes in unrecognized tax benefits | 4,662 | (22.1) | % | ||||||||
| Total income tax expense (benefit) | $ | 271 | (1.3) | % | |||||||
The reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows (in millions):
Year ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Federal tax statutory rate | 21.0 | % | 21.0 | % | |||||||
| Stock-based compensation | (6.3) | % | (3.8) | % | |||||||
| Change in valuation allowance | (18.9) | % | (18.1) | % | |||||||
| Foreign rate differential | — | % | 0.2 | % | |||||||
| Non-deductible executive compensation | 9.9 | % | (0.4) | % | |||||||
| Research credits | (5.1) | % | 0.4 | % | |||||||
| Changes in net operating loss carryforwards, including expirations | — | % | 0.8 | % | |||||||
| Other | — | % | (0.2) | % | |||||||
| Effective income tax rate | 0.6 | % | (0.1) | % | |||||||
The Company determines the amount of state tax liability based on current year operations. In accordance with the guidance under ASU 2023-09, California, Pennsylvania, and New York contributed to a majority of the effect of the state income taxes.
Deferred income tax assets and liabilities consist of the following (in thousands):
As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 34,632 | $ | 29,839 | |||||||
| Tax credit carryforwards | 14,429 | 14,045 | |||||||||
| Accruals | 8,322 | 5,027 | |||||||||
| Lease Liability | 5,543 | 6,843 | |||||||||
| Section 174 Capitalized Costs | 24,381 | 33,651 | |||||||||
| Stock-based compensation | 15,793 | 16,163 | |||||||||
| Other | 1,130 | 1,061 | |||||||||
Total deferred tax assets | 104,230 | 106,629 | |||||||||
Valuation allowance | (92,636) | (92,217) | |||||||||
Deferred tax assets, net of valuation allowance | 11,594 | 14,412 | |||||||||
Deferred tax liabilities: | |||||||||||
| Purchased intangibles | (3,269) | (4,828) | |||||||||
| Right-of-Use Asset | (4,693) | (5,858) | |||||||||
| Property and equipment | (3,363) | (3,524) | |||||||||
| Other | (450) | (366) | |||||||||
Total deferred tax liabilities | (11,775) | (14,576) | |||||||||
Net deferred tax asset (liability) | $ | (181) | $ | (164) | |||||||
The Company assesses the realizability of its net deferred tax assets by evaluating all available evidence, both positive and negative, including (1) cumulative results of operations in recent years, (2) sources of recent losses, (3) estimates of future taxable income and (4) the length of net operating loss carryforward periods. The Company believes that based on the history of its U.S. losses and other factors, the weight of available evidence indicates that it is more likely than not that it will not be able to realize its U.S. net deferred tax assets.
Accordingly, the U.S. and Sweden net deferred tax assets have been offset by a full valuation allowance. The valuation allowance increased by $0.4 million and decreased by $10.6 million during the years ended December 31, 2025 and 2024, respectively.
As of December 31, 2025, the Company had domestic federal net operating loss carryforwards of $130.8 million, domestic state net operating loss carryforwards of $6.2 million, and foreign net operating loss carryforwards of $29.3 million that can reduce future taxable income. The domestic federal and state net operating loss carryforwards will begin to expire in 2026 and 2027, respectively. The foreign and $111 million of federal net operating loss carryforwards can be carried forward indefinitely.
As of December 31, 2025, the Company had credit carryforwards of approximately $12.4 million and $13.9 million available to reduce future taxable income, if any, for domestic federal and California state income tax purposes, respectively. The domestic federal credit carryforwards will begin to expire in 2026. California credits have no expiration date.
A reconciliation of the Company's unrecognized tax benefits is as follows (in thousands):
Year ended December 31, | ||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||
Unrecognized tax benefits | ||||||||||||||
Balance, beginning of year | $ | 8,641 | $ | 6,184 | $ | 5,436 | ||||||||
Increases related to prior year tax positions | 4,587 | 1,134 | — | |||||||||||
Decreases related to prior year tax positions | (525) | — | (91) | |||||||||||
Increases related to current year tax positions | 776 | 1,323 | 839 | |||||||||||
Balance, end of year | $ | 13,479 | $ | 8,641 | $ | 6,184 | ||||||||
Year ended December 31, | |||||
| 2025 | |||||
Income taxes paid, net of refunds received | |||||
U.S. state & local | 284 | ||||
| Total | 284 | ||||
None of the $13.5 million of net unrecognized tax benefit as of December 31, 2025, if recognized, would impact the Company's effective tax rate. During the year ended December 31, 2025, given the Company's valuation allowance, the uncertain tax benefits would not have impacted the effective tax rate.
The Company files U.S., state and foreign income tax returns in jurisdictions with varying statutes of limitations. Due to net operating loss and credit carryovers, the domestic federal and state income tax returns are subject to tax authority examination from inception. In the foreign jurisdictions where the Company files income tax returns, the statutes of limitations with respect to these jurisdictions vary from jurisdiction to jurisdiction and range from 4 to 6 years.
As of December 31, 2025, the Company had gross unrecognized tax benefits of $13.5 million which included penalties and interest of $0.2 million, of which approximately $0.2 million is recorded as a noncurrent liability. At this time, the Company is unable to make a reasonably reliable estimate of the timing of payments in individual years in connection with these tax liabilities; therefore, such amounts are not included in the above contractual obligation table.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 6, 2019 | |
| 2017 | Mar 22, 2018 | |
| 2016 | Apr 21, 2017 | |
| 2015 | Mar 29, 2016 | |
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.