Cue Biopharma, Inc. Income Taxes Disclosure
13. Income Taxes
The Company accounts for income taxes under the provision of ASC 740, Income Taxes. For the year ended December 31, 2025, the Company reported a tax provision of $0.5 million relating to foreign withholding taxes. The Company did not report a tax provision for the year ended December 31, 2024 due to historically incurred net operating losses.
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:
|
|
December 31, |
|
|||||
(In thousands) |
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Net operating loss carryforwards |
|
$ |
60,647 |
|
|
$ |
58,121 |
|
Research and other credits |
|
|
9,260 |
|
|
|
8,272 |
|
R&D capitalization |
|
|
19,759 |
|
|
|
20,764 |
|
Stock-based compensation |
|
|
5,058 |
|
|
|
6,096 |
|
Reserves and accruals |
|
|
1,110 |
|
|
|
1,681 |
|
Other |
|
|
988 |
|
|
|
244 |
|
Total gross deferred tax assets |
|
|
96,822 |
|
|
|
95,178 |
|
Less valuation allowance |
|
|
(95,889 |
) |
|
|
(93,965 |
) |
Total deferred tax assets |
|
|
933 |
|
|
|
1,213 |
|
Deferred tax liability: |
|
|
|
|
|
|
||
Depreciation |
|
|
(933 |
) |
|
|
(1,213 |
) |
Net deferred tax assets |
|
$ |
— |
|
|
$ |
— |
|
In assessing the potential realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the Company attaining future taxable income during the periods in which those temporary differences become deductible. As of December 31, 2025, and 2024, management was unable to determine if it is more likely than not that the Company’s deferred tax assets will be realized and has therefore recorded a 100% valuation allowance against deferred tax assets at such dates.
No Federal tax provision has been provided for the years ended December 31, 2025 and 2024 due to the losses incurred during such periods. A reconciliation of the difference between the income tax rate computed by applying the U.S. Federal statutory rate and the effective tax rate for the years ended December 31, 2025 and 2024 is as follows:
|
|
Year Ended December 31, |
|
|
Year Ended December 31, |
|
||||||||||
|
|
2025 |
|
|
2024 |
|
||||||||||
(Dollars in thousands) |
|
Amount |
|
|
Percent |
|
|
Amount |
|
|
Percent |
|
||||
Pretax loss |
|
$ |
(26,102 |
) |
|
|
|
|
$ |
(40,674 |
) |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
US federal statutory tax rate |
|
|
(5,481 |
) |
|
|
21.0 |
% |
|
|
(8,541 |
) |
|
|
21.0 |
% |
Foreign tax effects: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Singapore foreign withholding tax |
|
|
500 |
|
|
|
(1.9 |
)% |
|
|
— |
|
|
|
0.0 |
% |
Tax credits: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Federal R&D credit |
|
|
(845 |
) |
|
|
3.2 |
% |
|
|
(731 |
) |
|
|
1.8 |
% |
Change in valuation allowance |
|
|
5,262 |
|
|
|
(20.1 |
)% |
|
|
7,724 |
|
|
|
(19.0 |
)% |
Nontaxable or nondeductible items: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock-based compensation |
|
|
1,129 |
|
|
|
(4.3 |
)% |
|
|
1,527 |
|
|
|
(3.8 |
)% |
Other |
|
|
(65 |
) |
|
|
0.2 |
% |
|
|
21 |
|
|
|
0.0 |
% |
Total |
|
$ |
500 |
|
|
|
(1.9 |
)% |
|
$ |
(0 |
) |
|
|
(0.0 |
)% |
The Company has applied the provisions of ASC 740, which clarifies the accounting for uncertainty in tax positions and requires the recognition of the impact of a tax position in the financial statements if that position is more likely than not of being sustained on a tax return, based on the technical merits of the position, upon examination by the relevant taxing authority. At December 31, 2025 and 2024, the Company had unrecognized tax benefits related to Federal and state research tax credits of $3.4 million and $3.1 million, respectively. The Company is subject to Federal and state income tax examinations by taxing authorities for all years since its incorporation in 2014 to the extent tax attributes from those years are utilized. The Company is currently not under examination by any tax authority.
At December 31, 2025, the Company has available net operating loss carryforwards for Federal and state income tax purposes of $224.1 million and $215.8 million, respectively, which, if not utilized earlier, will begin to expire in 2035. $195.5 million of the federal net operating losses have an indefinite carryforward. The Company has Federal research credits of $10.3 million, which, if not utilized earlier, will begin to expire in 2035, and state research credits of $2.7 million, which, if not utilized earlier, will begin to expire in 2032. State research credits of $0.2 million have an indefinite carryforward.
Ownership changes, as defined in the Internal Revenue Code, including those resulting from the issuance of common stock in connection with the Company's public offerings, may limit the amount of net operating loss and tax credit carryforwards that can be utilized to offset future taxable income or tax liability. The amount of the limitation is determined in accordance with Section 382 of the Internal Revenue Code.
The following is a reconciliation of the Company's gross uncertain tax position at December 31, 2025 and 2024:
|
December 31, |
|
|||||
(In thousands) |
2025 |
|
|
2024 |
|
||
Balance at the beginning of year |
$ |
3,138 |
|
|
$ |
2,927 |
|
Additions for current year tax provisions |
|
281 |
|
|
|
278 |
|
Additions for prior year tax provisions |
|
— |
|
|
|
— |
|
Reductions of prior year tax provisions |
|
(19 |
) |
|
|
(67 |
) |
Balance as of end of year |
$ |
3,400 |
|
|
$ |
3,138 |
|
The following summarizes the Company's income taxes paid (net of refunds received) for the years presented below:
|
Year Ended December 31, |
|
|||||
(In thousands) |
2025 |
|
|
2024 |
|
||
Federal |
$ |
— |
|
|
$ |
— |
|
State |
|
— |
|
|
|
— |
|
Foreign |
|
500 |
|
|
|
— |
|
Total |
$ |
500 |
|
|
$ |
— |
|
The following summarizes the jurisdictions that exceeded 5% of the Company's total income taxes paid (net of refunds) for the years presented below:
|
Year Ended December 31, |
|
|||||
(In thousands) |
2025 |
|
|
2024 |
|
||
Foreign |
|
|
|
|
|
||
Singapore |
$ |
500 |
|
|
$ |
— |
|
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 21, 2023 | |
| 2021 | Mar 16, 2022 | |
| 2020 | Mar 9, 2021 | |
| 2019 | Mar 12, 2020 | |
| 2018 | Mar 14, 2019 | |
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.