enGene Therapeutics Inc. Income Taxes Disclosure
12. Income Taxes
Loss before provision for income taxes consisted of the following:
|
|
Year ended October 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Domestic (Canada) |
|
$ |
(103,727 |
) |
|
$ |
(53,460 |
) |
Foreign (US) |
|
|
(13,575 |
) |
|
|
(1,701 |
) |
Loss before income taxes |
|
$ |
(117,302 |
) |
|
$ |
(55,161 |
) |
The components of the provision for (recovery of) income taxes is as follows:
|
|
Year ended October 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Current expense (benefit): |
|
|
|
|
|
|
||
Domestic (Canada) |
|
$ |
— |
|
|
$ |
— |
|
Foreign (US) |
|
|
— |
|
|
|
(19 |
) |
Total current expense (benefit) |
|
|
— |
|
|
|
(19 |
) |
|
|
|
|
|
|
|
||
Deferred expense (benefit) |
|
|
|
|
|
|
||
Domestic (Canada) |
|
|
— |
|
|
|
— |
|
Foreign (US) |
|
|
— |
|
|
|
— |
|
Total deferred tax expense (benefit) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
||
Total income tax expense (benefit) |
|
$ |
— |
|
|
$ |
(19 |
) |
A reconciliation of the Company's statutory income tax rate to the Company's effective income tax rate is as follows:
|
|
Year ended October 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Income at Canadian statutory rate |
|
|
26.50 |
% |
|
|
26.50 |
% |
State taxes, net of federal benefit |
|
|
0.66 |
% |
|
|
0.18 |
% |
Permanent differences |
|
|
(0.29 |
)% |
|
|
(2.77 |
)% |
Tax credits |
|
|
0.60 |
% |
|
|
1.07 |
% |
Foreign rate differential |
|
|
(0.64 |
)% |
|
|
(0.17 |
)% |
Valuation allowance |
|
|
(26.82 |
)% |
|
|
(25.02 |
)% |
Other |
|
|
(0.01 |
)% |
|
|
0.24 |
% |
|
|
|
(0.00 |
)% |
|
|
0.03 |
% |
The net deferred income tax balances related to the following:
|
|
October 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
R&D expenditures |
|
|
10,021 |
|
|
|
8,172 |
|
Net operating loss (NOL) carryforwards |
|
|
61,127 |
|
|
|
31,661 |
|
Capital loss carryforwards |
|
|
285 |
|
|
|
97 |
|
Investment tax credits, net |
|
|
2,688 |
|
|
|
1,934 |
|
Property and equipment |
|
|
270 |
|
|
|
704 |
|
Financing costs |
|
|
4,000 |
|
|
|
5,452 |
|
Accruals |
|
|
924 |
|
|
|
747 |
|
Operating lease liability |
|
|
2,270 |
|
|
|
404 |
|
Note payable |
|
|
15 |
|
|
|
197 |
|
Stock-based compensation |
|
|
894 |
|
|
|
|
|
Other |
|
|
— |
|
|
|
1 |
|
Total deferred tax assets |
|
|
82,494 |
|
|
|
49,369 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Operating lease-right of use asset |
|
|
(2,068 |
) |
|
|
(377 |
) |
Total deferred tax liabilities |
|
|
(2,068 |
) |
|
|
(377 |
) |
Valuation allowance |
|
|
(80,426 |
) |
|
|
(48,992 |
) |
Net deferred tax assets (liability) |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
||
The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the provinces and states in which the Company operates or does business. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.
The Company records uncertain tax positions as liabilities in accordance with ASC 740 and adjusts these liabilities when the Company’s judgment changes as a result of evaluating new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of October 31, 2025 and 2024, no uncertain tax positions have been recorded in the consolidated financial statements.
The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations and comprehensive loss. As of October 31, 2025 and 2024, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheet.
As of October 31, 2025, the Company has Canadian Federal NOL carryforwards of $220.5 million, that expire between 2026 and 2045 and Canadian provincial NOL carryforwards of $214.3 million, that expire between 2028 and 2045. These losses are available to offset future taxable income in Canada and Quebec. As of October 31, 2025, the Company has a U.S. Federal NOL carryforward of $11.7 million, that may be carried forward indefinitely, and a U.S. state NOL carryforward of $10.0 million, which are available to offset against future taxable income in the U.S and Massachusetts. The U.S. State tax loss carryforward will expire between 2041 and 2045. The Company has not recognized the tax benefit of these losses.
As of October 31, 2025, the Company also has non-refundable Canadian investment tax credits of $3.7 million that expire between 2026 and 2045. These credits may be utilized to reduce Canadian federal income taxes payable. The Company has not recognized the tax benefits related to these non-refundable investment tax credits.
As of October 31, 2025, the Company also has capital losses of $2.2 million which are available to be used indefinitely against future capital gains.
As of October 31, 2025, the Company had Scientific Research and Experimental Development (“SR&ED”) expenditures of approximately $36.7 million for Canadian federal and $39.2 million for Québec provincial purposes, which have not been deducted. These expenditures are available to reduce future taxable income and have an unlimited carryforward period. SR&ED expenditures are subject to verification by the tax authorities and, accordingly, the amounts may vary.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 22, 2025 | Showing above |
| 2024 | Dec 19, 2024 | |
| 2023 | Jan 29, 2024 | |
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.