Cingulate Inc. Income Taxes Disclosure

(13) Income Taxes

 

Cingulate Inc. is taxed as a C corporation under the Internal Revenue Code. Cingulate Inc. records deferred income taxes to reflect the impact of temporary differences between the recorded amounts of assets and liabilities for financial reporting purposes and such amounts as measured by tax laws and regulations. CTx is a wholly-owned disregarded entity of Cingulate Inc., and all of the activity for CTx, along with its wholly-owned subsidiary Cingulate Works Inc., is included in the calculation of the current and deferred tax assets and liabilities for Cingulate Inc. No deferred income tax benefit or expense was recorded as of December 31, 2025 or December 31, 2024, for federal or state income taxes.

 

Income tax expense differed from the expected expense computed by applying U.S. Federal income tax rate for the respective years ended as follows:

Schedule of Effective Income Tax Rate Reconciliation 

		December 31, 2025				December 31, 2024
Federal income tax benefit at statutory rate		$	(4,714,067	)		$	(3,477,517	)
State income tax benefit			(300,532	)			(541,359	)
Discount on FMV of Shares Issued			241,641				212,858
Permanent differences			15,366				13,582
Change in valuation allowance			4,785,198				4,802,119
Research and development tax crediit- prior period			(540,085	)			(972,372	)
Cancellation of Debt applied to prior year NOL			514,342
Other			(1,863	)			(37,311	)
Total income tax expense		$	-			$	-

 

At December 31, 2025, the Company has net operating loss (“NOL”) carryforwards for federal income tax purposes of approximately $63,699,000. The NOL carryforwards generated do not expire and are carried forward indefinitely. The Company has state NOLs of approximately $50,852,000 at December 31, 2025. The Company also has approximately $2,269,000 of research and development tax credit carryforwards for federal purposes which have a 20-year carryforward period and will begin to expire in 2041. Due to the change in ownership provisions of the Internal Revenue Code, the availability of the Company’s NOL carryforwards and research and development credit carryforwards may be subject to annual limitations under Section 382 of the Internal Revenue Code against taxable income in the future period, which could substantially limit the eventual utilization of such carryforwards.

 

Evaluating the need for, and amount of, a valuation allowance for deferred tax assets often requires significant judgment and extensive analysis of all available evidence on a jurisdiction-by-jurisdiction basis. Such judgments require the Company to interpret existing tax law and other published guidance as applied to its circumstances. As part of this assessment, the Company considers both positive and negative evidence about its profitability and tax situation. A valuation allowance is provided if, based on available evidence, it is more likely than not that all or some portion of a deferred tax asset will not be realized. The Company determined that it was more likely than not that it would not realize its deferred tax assets, based on historical levels of income and future forecasts of taxable income, among other items. The Company recorded a valuation allowance of its net deferred tax assets totaling $22,218,350 and $17,433,152, respectively, at December 31, 2025 and 2024, which was recorded as a component of income tax expense on the accompanying consolidated statements of operations and other comprehensive loss.

 

The Company files income tax returns in the U.S. federal and various state jurisdictions. The Company is not subject to U.S. federal and state income tax examinations by tax authorities for years before 2021.

 

 

The Company follows the provisions of ASC Topic 740, Income Taxes, to evaluate uncertain tax positions. This topic prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company has not identified any material uncertain tax positions requiring recognition in the consolidated financial statements as of December 31, 2025 or December 31, 2024.

 Schedule of Deferred Tax Assets and Liabilities

		December 31, 2025				December 31, 2024
Deferred income tax assets:
Current:
Research and development costs		$	2,914,603			$	1,662,662
Other			1,286				443
Non-current:
Net operating losses			15,987,951				9,314,876
Research and development costs			183,388				4,269,254
Unvested stock options			1,065,120				693,193
Research and development tax credits			2,268,580				1,728,495
Patents			145,465				146,433
Right-of-use liabilities			364,333				35,306
Gross deferred income tax assets			22,930,726				17,850,662
Less: valuation allowance			(22,218,350	)			(17,433,152	)
Net deferred income tax asset			712,376				417,510
Deferred income tax liabilities:
Non-current
Property and equipment			(348,043	)			(391,634	)
Right-of-use liabilities			(364,333	)			(25,876	)
Gross deferred income tax liabilities			(712,376	)			(417,510	)
Net deferred tax asset (liability)		$	-			$	-

 

On July 4, 2025, H.R. 1, commonly known as the One Big Beautiful Bill Act (the “OBBB”), was signed into law. This includes significant changes to the federal corporate tax provisions and extends certain otherwise expiring provisions of the 2017 Tax Cuts and Jobs Act. Among other things, the legislation reinstates expensing for domestic research and experimental expenditures, imposes new limitations on interest expense deductibility, and expands disallowed deductions for certain employee remuneration. FASB ASC 740 Income Taxes requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the relevant legislation is enacted. The OBBB may affect the Company’s gross tax assets and liabilities in future periods. The Company accounted for the tax effects of the legislation during the year ended December 31, 2025, and elected to deduct domestic research and development expenses in 2025 and 2026 rather than amortize over multiple years.