ENANTA PHARMACEUTICALS INC Income Taxes Disclosure

14. Income Taxes

Income before income taxes for all periods presented is from domestic operations, which are the Company’s only operations. During the years ended September 30, 2025, 2024, and 2023, the Company recorded income tax benefit (expense) as follows:

The effective tax rates during the years ended September 30, 2025 and 2024 differ from the U.S. federal statutory rate primarily due to the full valuation allowance maintained on the Company’s net deferred tax assets.

As of September 30, 2025, the Company had federal net operating loss carryforwards of $58,907 which do not expire and state net operating loss carryforwards of $38,200, which may be available to offset future taxable income and expire at various dates beginning in 2032. As of September 30, 2025, the Company also had federal and state research and development tax credit carryforwards of $18,043 and $7,981, respectively, which may be available to reduce future tax liabilities and expire at various dates beginning in 2042 and 2035, respectively.

Utilization of the federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code (“IRC”) of 1986, and corresponding provisions of state law, due to ownership changes that may have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss and research and development tax credit carryforwards that can be utilized annually to offset future tax liabilities. In general, an ownership change, as defined by Section 382, results from transactions that increase the ownership of 5% stockholders in the stock of a corporation by more than 50% in the aggregate over a three-year period. The Company completed a review of the changes in ownership through September 30, 2022 and determined that the transactions have not resulted in an ownership change during the year ended September 30, 2022, as defined by Section 382. The impact of the historical ownership changes have been reflected within our deferred tax assets shown in the table above. Although the Company believes that these ownership changes have not resulted in material limitations on its ability to use these net operating losses and credit carryforwards, its ability to utilize these and future net operating losses and credit carryforwards may be limited due to future ownership changes or for other reasons. As a result, the Company may not be able to take full advantage of its carryforwards for U.S. federal and state tax purposes.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets, which are comprised primarily of net operating loss carryforwards, research and development tax credit carryforwards and stock compensation expense. The Company considers it more likely that it will not have sufficient taxable income in the future that will allow it to realize all of its existing deferred tax assets. This is due to the fact the Company continues to progress its wholly-owned research and development programs and its declining royalty revenues from its Collaboration Agreement with AbbVie. As a result, the Company continued to record a valuation allowance as of September 30, 2025 against its deferred tax assets to reduce a portion of the Company’s deferred tax assets for which the Company does not believe it is more likely than not these will be realized.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The Company’s tax years in the U.S. are still open under statute from 2021 to the present. Earlier years may be examined to the extent that tax credit or net operating loss carryforwards are used in future periods. During the year ended September 30, 2024, the Company received notice of examination by the Internal Revenue Service (“IRS”) for the years ending September 30, 2018 and September 30, 2019. The Company received and agreed to a notice of proposed adjustment from the IRS in October 2024, resulting in an additional refund of $871 related to the year ended September 30, 2019. The Company has not received notice of examination by any other jurisdictions for any other tax year open under statute.

Beginning in October 1, 2022, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) eliminated the Company’s option to deduct research and development expenditures currently and requires taxpayers to amortize them over five years for domestic research expenditures and over fifteen years for foreign research expenditures, pursuant to IRC 174. The most significant impact of this provision is an increase to the current taxable income for the year ended September 30, 2023, the tax year in which the provision took effect for the Company.

In response to the COVID-19 pandemic, the CARES Act was signed into law in March 2020. The CARES Act lifted certain deduction limitations originally imposed by the Tax Act. Under the CARES Act, the Company was permitted to carryback net operating losses for up to five years for losses generated in fiscal 2018 through fiscal 2021. Net operating loss carrybacks were previously prohibited under the Tax Act. The CARES Act also eliminated the 80% of taxable income limitations by allowing corporate entities to fully utilize net operating loss carryforwards to offset taxable income in fiscal years 2018, 2019 or 2020. In addition, the CARES Act made qualified improvement property eligible for 15-year cost-recovery and 100% bonus depreciation. The enactment of the CARES Act resulted in a $28,721 income tax benefit related to a federal net operating loss carryback at the previously enacted 35% rate in the Company’s consolidated financial statements during the year ended September 30, 2021. As of September 30, 2024, the Company had a federal income tax receivable $31,999, inclusive of an interest receivable of $3,292. The federal income tax refund of $33,785, inclusive of interest, was received in April 2025.

Uncertain tax positions represent tax positions for which reserves have been established. The Company’s policy is to record interest and penalties related to uncertain tax positions as part of income tax expense. Total interest related to uncertain tax positions recorded as a liability on the Company’s consolidated balance sheets were $26 and $11 as of September 30, 2025 and 2024, respectively. A reconciliation of the beginning and ending amount of uncertain tax positions is summarized as follows:

The Company does not expect that its uncertain tax position will materially change within the next twelve months.

On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act ("OBBBA"), which includes several changes to U.S. federal income tax law, including the temporary and permanent extension of expiring provisions of the Tax Act of 2017. The new legislation has multiple effective dates, with certain provisions effective in 2025 and others in the future. The Company determined that the tax provisions of the legislation do not have a material impact on its 2025 consolidated financial statements and continues to assess the impact on future years.