Esperion Therapeutics, Inc.ESPR
Esperion Therapeutics, Inc. Income Taxes Disclosure
Income Taxes
There was no provision for income taxes for the years ended December 31, 2024 and 2023 because the Company has incurred operating losses since inception. At December 31, 2024, the Company concluded that it is not more likely than not that the Company will realize the benefit of its deferred tax assets due to its history of losses. Accordingly, a full valuation allowance has been applied against the net deferred tax assets.
As of December 31, 2024 and 2023, the Company had net deferred tax assets, before valuation allowance, of approximately $413.1 million and $395.6 million, respectively. Realization of the deferred assets is dependent upon future taxable income, if any, the amount and timing of which are uncertain. Accordingly, the net deferred tax assets have been fully offset by a valuation allowance. As of December 31, 2024 and 2023, the Company had federal net operating loss (“NOL”) carryforwards of approximately $773.6 million and $1,027.5 million, respectively. Of the total federal NOL carryforwards, $83.5 million will expire at various dates beginning in 2037, if not utilized; the remaining federal NOLs do not expire. As of December 31, 2024 and 2023, the Company had state NOL carryforwards of approximately $644.6 million and $696.1 million, respectively. In 2022, state NOL carryforwards began to expire as they were not able to be fully utilized and will continue to expire in in future periods, if not utilized.
The Company has research and developmental tax credits of $21.0 million. The tax credit carryforwards will expire beginning in 2031, if not utilized.
The Company files income tax returns in the U.S. federal jurisdiction, and various states. With few exceptions, the Company is no longer subject to U.S. federal or state and local income tax examinations by tax authorities for years before 2018.
A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows:
| December 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | ||||||||||||||||||
| Federal income tax (benefit) at statutory rate | (21.0) | % | (21.0) | % | (21.0) | % | ||||||||||||||
| Change in state tax rate | 1.1 | % | 0.2 | % | (0.5) | % | ||||||||||||||
| Permanent items | 0.9 | % | 0.2 | % | 0.1 | % | ||||||||||||||
| Prior period adjustments | (5.2) | % | 0.9 | % | (3.6) | % | ||||||||||||||
| Change in valuation allowance | 24.2 | % | 19.7 | % | 25.0 | % | ||||||||||||||
| Effective income tax rate | — | % | — | % | — | % | ||||||||||||||
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited. If the Company experiences a greater than 50 percentage point aggregate change in ownership of certain significant stockholders over a three-year period, a Section 382 ownership change could be deemed to have occurred. If a Section 382 change occurs, the Company’s future utilization of the net operating loss carryforwards and credits as of the ownership change will be subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. Some of the U.S. Federal and State net operating loss and credit carryforwards are subject to annual limitations due to ownership changes. The annual limitation may result in the expiration of net operating losses or credit carryforwards before utilization. The Company experienced an ownership change in 2013, 2017, 2021, 2023, and 2024. The Company may also experience ownership changes in the future as a result of future transactions in their stock. As a result of the Section 382 limitation analysis performed by the Company in 2024, it is estimated that the Company can use approximately $328.4 million of net operating loss carryforwards to offset taxable income in 2024. As the Company had less taxable income than the total allowable net deductions under section 382, it was able to use net operating loss carryforwards to fully offset taxable income in 2024. The Company had no tax expense in 2024.
The Company’s reserves related to taxes are based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. The Company recognized no material adjustment for unrecognized income tax benefits. Through December 31, 2024, the Company had accrued $2.1 million for unrecognized income tax benefits and related interest and penalties against credits.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows. The Company does not expect this amount to change in the next twelve months. At December 31, 2024, all of the amount of unrecognized tax benefits, if recognized, would result in a deferred tax asset and corresponding increase in the entity’s valuation allowance. Such unrecognized tax benefit would not affect the effective rate if recognized. There were no interest and penalties associated with unrecognized tax benefits recognized in the Statements of Operations for the years ended December 31, 2024 and 2023.
| December 31, | |||||||||||
2024 | 2023 | ||||||||||
| (in thousands) | |||||||||||
| Balance at January 1 | $ | 2,099 | $ | 2,099 | |||||||
| Reductions for tax positions of prior year | — | — | |||||||||
| Balance at December 31 | $ | 2,099 | $ | 2,099 | |||||||
Significant components of the Company’s deferred tax assets are summarized in the table below:
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in thousands) | |||||||||||
| Deferred tax assets: | |||||||||||
| Federal and state operating loss carryforwards | $ | 203,889 | $ | 258,836 | |||||||
| Royalty Purchase Agreement | 71,860 | — | |||||||||
| Disallowed interest | 41,429 | 43,239 | |||||||||
| Capitalized research and development | 37,848 | 37,998 | |||||||||
| Equity compensation | 26,062 | 25,413 | |||||||||
| R&D tax credits, net of reserves | 18,887 | 18,887 | |||||||||
Other temporary differences | 14,631 | 12,362 | |||||||||
| Total deferred tax assets | 414,606 | 396,735 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Other temporary differences | (1,521) | (1,154) | |||||||||
| Total deferred tax liabilities | (1,521) | (1,154) | |||||||||
| Valuation allowance | (413,085) | (395,581) | |||||||||
| Net deferred tax assets | $ | — | $ | — | |||||||
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.