4D Molecular Therapeutics, Inc. Income Taxes Disclosure
9. Income Taxes
The Company did not record any income tax expense during the years ended December 31, 2025 and 2024. The Company has a net operating loss and has provided a valuation allowance against net deferred tax assets due to uncertainties regarding the Company’s ability to realize these assets. All losses before income taxes arose in the United States.
The Company adopted ASU No. 2023-09 for the 2025 calendar year prospectively. The effective tax rate of the Company’s income tax expense (benefit) differs from the federal statutory rate pursuant to the disclosure requirements of ASU No. 2023-09 for the year ended December 31, 2025 as follows (in thousands):
|
|
Year Ended December 31, 2025 |
|
|||||
|
|
Amount |
|
|
Percent |
|
||
US federal statutory income tax rate |
|
$ |
(29,423 |
) |
|
|
21.0 |
% |
Research tax credit |
|
|
(3,309 |
) |
|
|
2.4 |
% |
Change in valuation allowance |
|
|
29,664 |
|
|
|
(21.2 |
)% |
Nondeductible items: |
|
|
|
|
|
|
||
Stock-based compensation |
|
|
2,509 |
|
|
|
(1.8 |
)% |
Officer's compensation |
|
|
363 |
|
|
|
(0.3 |
)% |
Permanent differences |
|
|
196 |
|
|
|
(0.1 |
)% |
Provision for income taxes / Effective tax rate |
|
$ |
— |
|
|
|
0.0 |
% |
The effective tax rate of the Company’s income tax expense (benefit) differs from the federal statutory rate for the year ended December 31, 2024 as follows:
|
|
Year Ended December 31, 2024 |
|
|
Federal statutory income tax rate |
|
|
21.0 |
% |
State tax rate |
|
|
(7.6 |
)% |
Research tax credit |
|
|
(4.8 |
)% |
Permanent differences |
|
|
(0.1 |
)% |
Stock-based compensation |
|
|
(0.5 |
)% |
Officer's compensation |
|
|
(1.4 |
)% |
Valuation allowance |
|
|
(6.6 |
)% |
Provision for income taxes |
|
|
0.0 |
% |
The tax effects of temporary differences that give rise to significant components of the deferred taxes are as follows (in thousands):
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred Tax Assets |
|
|
|
|
|
|
||
Net operating loss carryforwards |
|
$ |
74,366 |
|
|
$ |
72,385 |
|
Deferred revenue |
|
|
232 |
|
|
|
254 |
|
Research tax credits |
|
|
11,372 |
|
|
|
7,235 |
|
Stock-based compensation expense |
|
|
6,777 |
|
|
|
5,336 |
|
Intangible asset basis |
|
|
618 |
|
|
|
689 |
|
Operating lease liabilities |
|
|
4,502 |
|
|
|
5,168 |
|
Capitalized research expenditures |
|
|
62,343 |
|
|
|
40,345 |
|
Other |
|
|
3,490 |
|
|
|
2,321 |
|
Total deferred tax assets |
|
$ |
163,700 |
|
|
$ |
133,733 |
|
|
|
|
|
|
|
|
||
Deferred Tax Liabilities |
|
|
|
|
|
|
||
Operating lease right-of-use assets |
|
$ |
(3,814 |
) |
|
$ |
(4,426 |
) |
Prepaid expenses |
|
|
(1,331 |
) |
|
|
(1,223 |
) |
Total deferred tax liabilities |
|
$ |
(5,145 |
) |
|
$ |
(5,649 |
) |
Less: valuation allowance |
|
|
(158,555 |
) |
|
|
(128,084 |
) |
Total net deferred tax |
|
$ |
— |
|
|
$ |
— |
|
The Company's valuation allowance increased by $30.5 million during the year ended December 31, 2025 and $10.6 million during the year ended December 31, 2024. The increase in the valuation allowance for each of the years ended December 31, 2025 and 2024 was primarily driven by net losses incurred, capitalized research expenditures, stock-based compensation expense and tax credits generated within the U.S.
The Company had federal net operating loss (“NOL”) carryforwards of $307.6 million and $298.3 million as of December 31, 2025 and 2024, respectively, of which $9.5 million will begin to expire in 2037 and $298.1 million can be carried forward indefinitely. The Company had state NOL carryforwards of $142.3 million and $142.2 million as of December 31, 2025 and 2024, respectively. The state NOL carryforwards will begin to expire in 2036.
As of December 31, 2025 and 2024, the Company had federal research and development credit carryforwards of $9.9 million and $3.3 million, respectively, and California research and development credit carryforwards of $14.6 million and $12.5 million, respectively. The federal credit carryforwards begin to expire in 2044, and the California credits can be carried forward indefinitely.
Utilization of the NOL carryforwards and research credit carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code Sections 382 and 383, and similar state provisions. Annual limitations may result in the expiration of the NOL and tax credit carryforwards before they are utilized. The Company has experienced ownership changes in the past. As a result of the ownership changes, approximately $21.1 million of the federal research and development credits are permanently limited and will expire unused for federal income tax purposes, and such amounts are excluded from the federal research and development credit carryforwards as of 2024. Subsequent ownership changes may result in additional limitations.
A reconciliation of the beginning and ending unrecognized tax benefits amounts is as follows (in thousands):
|
|
Unrecognized |
|
|
Balance as of December 31, 2023 |
|
$ |
11,902 |
|
Additions for current year tax positions |
|
|
2,914 |
|
Reductions for tax positions of prior years |
|
|
(7,738 |
) |
Balance as of December 31, 2024 |
|
|
7,078 |
|
Additions for current year tax positions |
|
|
4,357 |
|
Reductions for tax positions of prior years |
|
|
— |
|
Balance as of December 31, 2025 |
|
$ |
11,435 |
|
The unrecognized tax benefits would not impact the Company’s effective tax rate if recognized. During the years ended December 31, 2025 and 2024, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits.
The Company files income tax returns in the U.S. federal and certain state tax jurisdictions. For jurisdictions in which tax filings have been filed, all tax years remain open for examination by the federal and state authorities for and four years, respectively, from the date of utilization of any net operating losses or credits. The Company did not make any material federal and state tax payments during the years ended December 31, 2025 and 2024. The Company has no ongoing income tax examinations by tax authorities at this time.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBB Act”) was enacted, introducing amendments to U.S. tax laws with various effective dates from 2025 to 2027. The OBBB Act modified certain business deductions, including an immediate deduction for domestic research and development expenditures, and restoration of 100% bonus depreciation. The OBBB Act did not result in a material impact to the Company’s income tax provision or effective tax rate.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 18, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
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.