ELUTIA INC. Income Taxes Disclosure

Note 13. Income Taxes

The Company is subject to income taxes in the United States. Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are calculated based on the difference between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using the enacted income tax rates expected to be in effect during the years in which the temporary differences are expected to reverse.

The Company has elected to prospectively adopt the guidance in ASU No. 2023-09 (see Note 3).  The reconciliation of the U.S. federal statutory rate to the consolidated effective tax rate for continuing operations as of December 31, 2025 is as follows:

​

*For the year ended December 31, 2025, the states of Alabama and Tennessee comprised greater than 50% of the state income tax benefit in this category.

​

The reconciliation of the U.S. federal statutory rate to the consolidated effective tax rate as of December 31, 2024 is as follows:

​

​

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes as well as net operating loss carryforwards. The significant components of the Company’s net deferred income taxes are as follows (in thousands):

​

​

During the year ended December 31, 2025, the Company realized the value of deferred tax assets totaling $9.6 million and the corresponding valuation allowance was reversed in connection with its taxable income generated from the gain on sale of its CIED Business. The Company did not recognize any deferred benefit for income taxes for the years ended December 31, 2024 as the increases to the net deferred tax asset of $8.4 million was offset by corresponding increases to the Company’s deferred tax asset valuation allowance due to the uncertainty of realizing the deferred tax assets.

The Company evaluates the need for deferred tax asset valuation allowances based on a more likely than not standard. The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. Valuation allowances are established when necessary to reduce deferred tax assets to amounts that are more likely than not to be realized. Based on the uncertainty of future taxable income generation, as of December 31, 2025 and 2024, the Company has provided valuation allowances against all deferred tax assets.

The Company regularly assesses the realizability of its deferred tax assets. Changes in historical earnings performance and future earnings projections, among other factors, may cause the Company to adjust its valuation allowance, which would impact the Company’s income tax expense in the period the Company determines that these factors have changed.

The income tax expense for the years ended December 31, 2025 and 2024 relates to current amounts due on certain state tax obligations. Furthermore, state taxes totaling $0.2 million related to the gain on sale of the CIED Business is recorded within Income (loss) from Discontinued Operations in the accompanying consolidated statements of operations. During the year ended December 31, 2025, the Company’s income taxes paid (net of refunds received) was not material.

As of December 31, 2025, the Company had remaining net operating loss carryforwards for federal income tax purposes of approximately $118.6 million, comprised of $6.6 million that will expire beginning in 2038 and 112.0 million that have no expiration date. The Company also had state net operating loss carryforwards of approximately $42.4 million that will expire beginning in 2031. Utilization of the net operating loss carryforwards may be subject to an annual limitation under Section 382 of the Code, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. If the Company has experiences a change of control, as defined by Section 382, utilization of the net operating loss carryforwards would be subject to an annual limitation under Section 382. Any limitation may result in the expiration of a portion of the net operating loss carryforwards before utilization.

In July 2025, the One Big Beautiful Bill Act (OBBBA) was enacted into law. The OBBBA amends U.S. tax laws, including provisions related to bonus depreciation and deductions for research and development expenses. The OBBBA accelerated the deductibility of the Company’s previously capitalized research and development expenses..

​

As of December 31, 2025 and 2024, the Company had no unrecognized tax benefits.