FUELCELL ENERGY INC Income Taxes Disclosure

Note 17. Income Taxes

The components of loss before income taxes for the years ended October 31, 2025, 2024, and 2023 were as follows (in thousands):

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The Company recorded an income tax provision of $0.1 million, $0.03 million and $0.6 million for the years ended October 31, 2025, 2024 and 2023, respectively. The Company also recorded an income tax benefit of approximately $0.3 million in fiscal year 2025 which was primarily related to the impairment of the Versa reporting unit and the resulting write-off of the IPR&D deferred tax liability, which is presented net within Impairment expense in the Consolidated Statements of Operations and Comprehensive Loss.

Franchise tax expense, which is included in administrative and selling expenses, was $0.6 million, $0.5 million and $0.9 million for the years ended October 31, 2025, 2024 and 2023, respectively.

The reconciliation of the federal statutory income tax rate to our effective income tax rate for the years ended October 31, 2025, 2024 and 2023 is as follows:

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On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions such as domestic research cost expensing. The legislation has multiple effective dates, however the earliest effective date for provisions applicable to the Company would be for tax years starting January 1, 2025. Management is still finalizing its assessment of the OBBBA and its impact on the Company, but it does not expect the enactment of this law to have material impact on the tax provision or disclosures for the year ended October 31, 2025.

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Our deferred tax assets and liabilities consisted of the following as of October 31, 2025 and 2024 (in thousands):

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We continually evaluate our deferred tax assets as to whether it is “more likely than not” that the deferred tax assets will be realized. In assessing the realizability of our deferred tax assets, management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Based on the projections for future taxable income over the periods in which the deferred tax assets are realizable, management believes significant uncertainty exists surrounding the recoverability of the deferred tax assets. As a result, we recorded a valuation allowance against our net deferred tax assets. As of October 31, 2025, we had $1.1 billion of federal net operating loss (“NOL”) carryforwards, $478.2 million of which expire in the fiscal years 2026 through 2037, and $621.6 million of which do not expire. As of October 31, 2025, we also had $582.1 million of state NOL carryforwards that expire in the fiscal years 2027 through 2040. Additionally, as of October 31, 2025, we had $13.6 million of state tax credits available that will expire from fiscal years 2026 through 2044.

During the 2020 tax year, the Company experienced an “ownership change” as defined by Internal Revenue Code Section 382. As a result, the utilization of federal and state NOLs generated prior to October of 2020 is subject to limitation and a reduction was made in fiscal year 2020 to the carrying balance of the federal and state NOLs to reflect the future limitation on utilization. The Company has updated its analysis of potential ownership changes through October 31, 2025 and concluded that no additional ownership changes have occurred subsequent to October 2020.  In addition, the acquisition of Versa Power Systems Ltd. in fiscal year 2013 triggered a Section 382 ownership change at the level of Versa Power Systems Ltd. which will limit the future usage of some of the federal and state NOLs that we acquired in that transaction. Accordingly, a valuation allowance has been recorded against the deferred tax asset associated with these attributes to reflect the future limitation on utilization.

The Company’s financial statements reflect expected future tax consequences of uncertain tax positions that the Company has taken or expects to take on a tax return (including a decision whether to file or not file a return in a particular jurisdiction) presuming the taxing authorities’ full knowledge of the position and all relevant facts.

The Company did not have any unrecognized tax benefits as of October 31, 2025 and 2024. It is our policy to record interest and penalties on unrecognized tax benefits as income taxes; however, because of our significant NOLs, no provision for interest or penalties has been recorded.

We file income tax returns in the U.S. and certain states, primarily Connecticut, California and New York, as well as income tax returns required internationally for South Korea, Germany, Japan and Canada. We are open to examination by the IRS and various states in which we file for fiscal year 2004 to the present.