Eos Energy Enterprises, Inc.EOSE
Eos Energy Enterprises, Inc. Income Taxes Disclosure
Income Taxes
The Company is subject to U.S., Italy and India tax laws, regulations and policies. Changes to these laws or regulations may affect the Company’s tax liability, return on investments and business operations.
Loss before income taxes
Loss before income taxes for the years ended December 31, 2025 and 2024 were as follows:
| For the years ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| U.S. | $ | (969,714) | $ | (685,809) | |||||||
| Non-U.S. | 91 | (40) | |||||||||
Total loss before income tax | $ | (969,623) | $ | (685,849) | |||||||
Income expense (benefit)
Income tax expense (benefit) was as follows:
| For the years ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Current expense (benefit): | |||||||||||
| U.S. federal | $ | — | $ | — | |||||||
| U.S. state and local | — | — | |||||||||
| Non-U.S. | 24 | 21 | |||||||||
Total current income tax provision | $ | 24 | $ | 21 | |||||||
| Deferred expense (benefit): | |||||||||||
| U.S. federal | $ | — | $ | — | |||||||
| U.S. state and local | — | — | |||||||||
| Non-U.S. | — | — | |||||||||
Total deferred income tax provision | — | — | |||||||||
Total income tax provision | $ | 24 | $ | 21 | |||||||
The Company has a tax provision of $24 and $21 for the years ended December 31, 2025 and 2024, respectively, due to foreign taxable income and the generation of U.S. taxable losses offset by a valuation allowance on the deferred tax assets.
Reconciliation of U.S. Federal Statutory income tax rate to actual income tax rate
The reconciliation from the statutory U.S. federal income tax rate to the effective tax rate is as follows:
| For the years ended December 31, | |||||||||||||||||
| 2025 | 2024 | ||||||||||||||||
| Amount | Percentage | Amount | Percentage | ||||||||||||||
| Loss before income taxes | $ | (969,623) | $ | (685,849) | |||||||||||||
| Statutory U.S. federal income tax | (203,621) | 21.0 | % | (144,029) | 21.0 | % | |||||||||||
| Foreign tax effects | 5 | — | % | 29 | — | % | |||||||||||
| Changes in valuation allowances | 74,433 | (7.7) | % | 22,182 | (3.2) | % | |||||||||||
Non-taxable or non-deductible items | |||||||||||||||||
Fair value adjustments – derivatives | 75,630 | (7.8) | % | (1,984) | 0.3 | % | |||||||||||
| Fair value adjustments – warrants | 58,771 | (6.1) | % | 112,703 | (16.4) | % | |||||||||||
| Derecognition of loan commitment asset | 4,564 | (0.5) | % | 11,416 | (1.7) | % | |||||||||||
Stock compensation | (13,693) | 1.4 | % | 2,190 | (0.3) | % | |||||||||||
| Other | (1,018) | 0.1 | % | (1,889) | 0.3 | % | |||||||||||
Other adjustments | 4,953 | (0.5) | % | (597) | — | % | |||||||||||
| Effective tax rate | 24 | — | % | 21 | — | % | |||||||||||
The reported income tax provision differs from the amount computed by applying the statutory U.S. federal income tax rate of 21% to the income before income taxes primarily due to pretax losses in the U.S. for which no tax benefit has been provided, fair value adjustments - derivatives and warrants, and stock-based compensation.
Income Taxes Paid
Cash paid for income taxes was immaterial for the years ended December 31, 2025 and 2024.
Deferred Income Taxes
The Company records deferred income taxes to reflect the net tax effects of temporary differences, if any, between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. The components of deferred tax assets and liabilities at December 31, 2025 and 2024 were as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
Net operating loss carryforwards | $ | 292,046 | $ | 178,561 | |||||||
| Capital loss carryforwards | 228 | 235 | |||||||||
| Goodwill | 5,160 | 6,109 | |||||||||
| Capitalized research & experimental costs | 7,009 | 9,737 | |||||||||
| Stock-based compensation | 2,224 | 4,841 | |||||||||
| Accruals and reserves | 5,433 | 3,455 | |||||||||
| Organizational costs | 92 | 111 | |||||||||
| Lease liability | 5,195 | 936 | |||||||||
| Fixed assets | — | 1,419 | |||||||||
| Inventory | 1,131 | 1,709 | |||||||||
| Transaction costs | 3,772 | 7,386 | |||||||||
Debt instruments | 11,466 | 8,508 | |||||||||
| Other | 62 | 10 | |||||||||
| Deferred tax assets, gross | 333,818 | 223,017 | |||||||||
| Valuation allowance | (327,138) | (222,122) | |||||||||
| Total deferred tax assets, net | $ | 6,680 | $ | 895 | |||||||
| Deferred tax liabilities: | |||||||||||
| Right of use asset | (5,018) | (853) | |||||||||
| Intangibles | (232) | (42) | |||||||||
Fixed assets | (1,430) | — | |||||||||
| Deferred tax liabilities | (6,680) | (895) | |||||||||
| Total deferred tax asset (liability) | $ | — | $ | — | |||||||
The Company maintains a valuation allowance where it is more-likely-than-not that all or a portion of a deferred tax asset may not be realized. Changes in the valuation allowance are included in the Company’s income tax provision in the period of change. In determining whether a valuation allowance is required, the Company evaluates factors such as prior earnings history, expected future earnings, reversal of existing taxable temporary differences, carry back and carry forward periods and tax planning strategies that could potentially enhance the likelihood of the realization of a deferred tax asset. The Company has determined that it is more-likely-than-not that it will not be able to utilize its U.S. deferred tax assets at December 31, 2025 and 2024 due to a history of cumulative losses. As such, the Company has a valuation allowance against its net deferred tax assets.
The valuation allowance increased by $105,016 between December 31, 2025 and 2024. The increase was primarily attributable to an increase in net operating loss ("NOL") carryforwards and the impact of debt instruments. At December 31, 2025, the valuation allowance is $327,138 of which $13,890 would be allocated to equity if released. The remaining valuation allowance of $313,248 would be released through continuing operations.
Net Operating Losses & Tax Credits
As of December 31, 2025 and 2024, the Company has federal research and development tax credits (“R&D credit”) of approximately $3,733 for both years, which begin to expire in varying amounts from 2031 – 2038, subject to the annual limitation described below.
The Company has NOL carryforwards for tax purposes and other deferred tax assets that are available to offset future taxable income, subject to the annual limitation described below.
As of December 31, 2025 and 2024, the Company has gross federal NOL carryforwards of approximately $1,224,051 and $741,178, respectively. As of December 31, 2025 and 2024, the Company has state NOL carryforwards of $450,059 and $1,032,728, respectively. Regarding the federal NOL, for the year ended December 31, 2025, $89,051 begins to expire in varying amounts from 2032 through 2036, while $1,135,000 has an indefinite carryforward period. Regarding the state NOL carryforwards for the year ended December 31, 2025, $422,893 begins to expire in varying amounts from 2033 through 2045, while $27,166 has an indefinite carryforward period. The U.S. (federal and state) operating loss carryforwards and credits may be subject to an annual limitation due to the “change in ownership” provisions of the Internal Revenue Code, and similar state provisions. In 2020, the Company determined that the merger transaction constituted a change of ownership as defined under Internal Revenue Code Section 382. In 2024, the Company determined that an ownership change occurred within the meaning of Sections 382 of the Code. Based on our ownership change limitations, the timing of the Company’s ability to utilize its pre-change federal NOLs and tax credits may be limited subject to the Section 382 limitation. However, we do not expect that the limitation due to the ownership change will result in any of the NOLs expiring unutilized as a significant amount have an indefinite life carryforward. Assuming there is sufficient projected taxable income, a majority of the Section 382 limited net operating losses will be available prior to the year ended December 31, 2029. Management believes such limitation will not have a material adverse effect on the financial statements as the Company is currently in a net loss position, and the deferred tax asset on the Company’s NOL carryforward is offset by a full valuation allowance. Based on management’s 2020 Section 383 limitation analysis, it is expected that as of December 31, 2025 and December 31, 2024, $3,733 of federal R&D credits will expire unused.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, extending key provisions of the 2017 Tax Cuts and Jobs Act including, but not limited to, federal bonus depreciation, deductions for domestic research and development expenditures and the business interest expense limitation. The impacts of the book to tax differences resulted in additional net operating losses. The Company has evaluated the OBBBA enacted during the year and determined there is no impact on the financial statements.
See Note 11, Government Grants for impact of the OBBBA on the energy-related tax incentives.
Unrecognized Tax Benefits
The Company is subject to income taxes in the United States (federal and state), India and Italy. Significant judgment is required in evaluating the Company’s tax positions and determining the Company’s provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. The Company records a liability for uncertain tax positions on the basis of a two-step process in which (i) management determines whether it is more-likely-than-not that the tax position will be sustained on the technical merits of the position and (ii) for those tax positions that meet the more-likely-than-not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
The Company has unrecognized tax benefits associated with uncertain tax positions as of December 31, 2025 and 2024 as follows:
| For the years ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Gross unrecognized tax benefits as of January 1 | $ | 1,571 | $ | 680 | |||||||
| Additions: | |||||||||||
| Current year tax positions | 644 | 890 | |||||||||
| Prior year tax positions | 1,090 | — | |||||||||
Less: | |||||||||||
Current year tax positions | — | — | |||||||||
Prior year tax positions | (890) | — | |||||||||
| Rate change | (39) | 1 | |||||||||
| Settlements | — | — | |||||||||
| Lapse of statute of limitations | — | — | |||||||||
| Gross unrecognized tax benefits as of December 31 | $ | 2,376 | $ | 1,571 | |||||||
The total amount of gross unrecognized tax benefits was $2,376 and $1,571 for the years ended December 31, 2025 and 2024, respectively. The increase in gross unrecognized tax benefits in 2025 was related to deferred revenue, payroll costs and nondeductible expenses. The decrease in gross unrecognized tax benefits was related to payroll costs.
Included in the balance of unrecognized tax benefits at December 31, 2025 are potential benefits of nil that, if recognized, would affect the effective tax rate on income from continuing operations. The open tax years for federal returns are 2022 and forward, and the open tax years for state returns are generally 2020 and forward. Net operating losses and R&D credits generated in closed years and utilized in open years are subject to adjustment by the tax authorities. The Company is currently under examination by the IRS related to tax year 2022. The Company is not under examination by any other taxing jurisdictions.
The Company regularly assesses the adequacy of its provision for income tax contingencies in accordance with ASC 740, Income Taxes. As a result, the Company may adjust the reserves for unrecognized tax benefits for the impact of new facts and developments, such as changes to interpretation of relevant tax law, assessments from taxing authorities, settlements with tax authorities and lapses of statute of limitations.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Mar 4, 2025 | |
| 2023 | Mar 4, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 26, 2021 | |
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.