Fulgent Genetics, Inc. Income Taxes Disclosure
Note 11. Income Taxes
(Benefit from) provision for income taxes consists of U.S. federal and state income taxes. A deferred tax liability is recognized for all taxable temporary differences, and a deferred tax asset is recognized for all deductible temporary differences, operating losses and tax credit carryforwards. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.
The following table summarizes loss before income taxes:
|
Year Ended December 31, |
|
|||||||||
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
(in thousands) |
|
|||||||||
U.S. loss before income taxes |
$ |
(61,759 |
) |
|
$ |
(46,813 |
) |
|
$ |
(147,464 |
) |
Foreign loss before income taxes |
|
(8,266 |
) |
|
|
(5,143 |
) |
|
|
(26,621 |
) |
Loss before income taxes |
$ |
(70,025 |
) |
|
$ |
(51,956 |
) |
|
$ |
(174,085 |
) |
(Benefit from) provision for income taxes consisted of the following:
|
Year Ended December 31, |
|
|||||||||
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
(in thousands) |
|
|||||||||
Current |
|
|
|
|
|
|
|
|
|||
Federal |
$ |
(6,470 |
) |
|
$ |
(2,441 |
) |
|
$ |
(5,590 |
) |
State |
|
(965 |
) |
|
|
(2,107 |
) |
|
|
(4,722 |
) |
Foreign |
|
175 |
|
|
|
148 |
|
|
|
— |
|
Total Current |
|
(7,260 |
) |
|
|
(4,400 |
) |
|
|
(10,312 |
) |
Deferred |
|
|
|
|
|
|
|
|
|||
Federal |
|
(7,580 |
) |
|
|
(10,313 |
) |
|
|
(12,771 |
) |
State |
|
197 |
|
|
|
(734 |
) |
|
|
4,100 |
|
Foreign |
|
(1,113 |
) |
|
|
602 |
|
|
|
(188 |
) |
Change in valuation allowance |
|
7,362 |
|
|
|
6,709 |
|
|
|
20,325 |
|
Total Deferred |
|
(1,134 |
) |
|
|
(3,736 |
) |
|
|
11,466 |
|
(Benefit from) provision for income taxes |
$ |
(8,394 |
) |
|
$ |
(8,136 |
) |
|
$ |
1,154 |
|
Reconciliation of the difference between the federal statutory income tax rate and the effective income tax rate for the year ended December 31, 2025, in accordance with the guidance in ASU 2023-09, is as follows:
|
Year Ended December 31, 2025 |
|
|||||
|
Amount |
|
|
Percent |
|
||
Tax provision at federal statutory rate |
$ |
(14,705 |
) |
|
|
21.00 |
% |
State and local income taxes, net of federal benefit(1) |
|
3,133 |
|
|
|
-4.47 |
% |
Foreign tax effects |
|
|
|
|
|
||
China |
|
|
|
|
|
||
Foreign tax rate differential |
|
835 |
|
|
|
-1.19 |
% |
NOL carryforward |
|
(496 |
) |
|
|
0.71 |
% |
Valuation allowance |
|
496 |
|
|
|
-0.71 |
% |
Other |
|
175 |
|
|
|
-0.25 |
% |
Australia |
|
|
|
|
|
||
Foreign tax rate differential |
|
888 |
|
|
|
-1.27 |
% |
NOL carryforward |
|
1,609 |
|
|
|
-2.30 |
% |
Valuation allowance |
|
(1,609 |
) |
|
|
2.30 |
% |
Effect of cross-border tax laws: |
|
326 |
|
|
|
-0.47 |
% |
Tax Credits |
|
|
|
|
|
||
Research and development credits |
|
(3,913 |
) |
|
|
5.59 |
% |
IRA tax credits |
|
(7,035 |
) |
|
|
10.05 |
% |
Change in valuation allowance |
|
3,727 |
|
|
|
-5.32 |
% |
Nontaxable or nondeductible items |
|
|
|
|
|
||
Equity-based compensation |
|
3,465 |
|
|
|
-4.95 |
% |
162(m) nondeductible compensation |
|
3,348 |
|
|
|
-4.78 |
% |
Section 280C adjustment |
|
647 |
|
|
|
-0.92 |
% |
Other |
|
566 |
|
|
|
-0.81 |
% |
Change in unrecognized tax benefits |
|
565 |
|
|
|
-0.81 |
% |
Return to provision adjustments |
|
|
|
|
|
||
Federal true-ups |
|
1,604 |
|
|
|
-2.29 |
% |
State true-ups |
|
(2,020 |
) |
|
|
2.88 |
% |
Effective tax rate |
$ |
(8,394 |
) |
|
|
11.99 |
% |
(1) For the year ended December 31, 2025, state and local taxes in New Jersey, Texas, and New York City made up the majority (greater than 50%) of the tax effect in this category.
Reconciliation of the difference between the federal statutory income tax rate and the effective income tax rate for the years ended December 31, 2024, and 2023, in accordance with the guidance prior to the adoption of ASU 2023-09, are as follows:
|
Year Ended December 31, |
|
|||||
|
2024 |
|
|
2023 |
|
||
Tax provision at federal statutory rate |
|
21.00 |
% |
|
|
21.00 |
% |
State taxes |
|
-1.70 |
% |
|
|
0.22 |
% |
Equity-based compensation |
|
-6.79 |
% |
|
|
-1.65 |
% |
Nondeductible compensation - 162(m) |
|
-2.10 |
% |
|
|
-0.55 |
% |
Goodwill impairment |
|
0.00 |
% |
|
|
-10.62 |
% |
Amended state tax refunds |
|
8.29 |
% |
|
|
0.00 |
% |
Federal return to provision |
|
-2.07 |
% |
|
|
-0.21 |
% |
State return to provision |
|
-0.78 |
% |
|
|
3.41 |
% |
Other permanent differences |
|
1.83 |
% |
|
|
-1.15 |
% |
Uncertain tax positions |
|
-1.14 |
% |
|
|
0.18 |
% |
Research & development credit |
|
6.95 |
% |
|
|
3.19 |
% |
IRA tax credit |
|
4.82 |
% |
|
|
0.00 |
% |
Foreign tax rate differential |
|
-1.68 |
% |
|
|
-2.42 |
% |
Stranded tax effect |
|
4.25 |
% |
|
|
0.00 |
% |
Foreign NOL carryforward |
|
-1.19 |
% |
|
|
0.11 |
% |
Other |
|
-0.29 |
% |
|
|
0.00 |
% |
Change in valuation allowance |
|
-13.29 |
% |
|
|
-12.20 |
% |
Effective tax rate |
|
16.11 |
% |
|
|
-0.69 |
% |
Disclosed below is a summary of income taxes paid (net of refunds received) by jurisdiction. The amounts for the year ended December 31, 2025, are presented pursuant to the disclosure requirements of ASU 2023-09.
|
Year Ended December 31, |
|
|
|
2025 |
|
|
Federal |
$ |
99,601 |
|
State and local |
|
(3,180 |
) |
Foreign |
|
24 |
|
|
$ |
96,445 |
|
The following table summarizes the elements of the deferred tax assets (liabilities). Net deferred tax assets are included in other long-term assets in the Consolidated Balance Sheets.
|
As of December 31, |
|
|||||
|
2025 |
|
|
2024 |
|
||
|
(in thousands) |
|
|||||
Deferred tax assets |
|
|
|
|
|
||
Accrued vacation and other accrued expenses |
$ |
6,133 |
|
|
$ |
1,775 |
|
Provision for credit losses |
|
3,460 |
|
|
|
2,990 |
|
Net operating losses |
|
20,557 |
|
|
|
11,875 |
|
Equity-based compensation |
|
1,478 |
|
|
|
2,022 |
|
State income taxes |
|
272 |
|
|
|
284 |
|
Excess tax basis in FF Gene Biotech net assets |
|
921 |
|
|
|
1,527 |
|
Lease liability |
|
613 |
|
|
|
789 |
|
Unrealized gain/loss on available-for-sale debt securities |
|
— |
|
|
|
757 |
|
Research and development credits |
|
6,405 |
|
|
|
2,762 |
|
Section 174 research & experimental expenditures |
|
15,038 |
|
|
|
25,626 |
|
Equity loss in investment |
|
5,478 |
|
|
|
2,965 |
|
Other |
|
10 |
|
|
|
74 |
|
Gross deferred tax assets |
|
60,365 |
|
|
|
53,446 |
|
Less: Valuation allowance |
|
(27,598 |
) |
|
|
(22,702 |
) |
Net deferred tax assets |
|
32,767 |
|
|
|
30,744 |
|
Deferred tax liabilities |
|
|
|
|
|
||
Intangible assets |
|
29,717 |
|
|
|
29,540 |
|
Depreciation |
|
7,963 |
|
|
|
6,198 |
|
Right of use asset |
|
594 |
|
|
|
767 |
|
Unrealized gain/loss on available-for-sale debt securities |
|
975 |
|
|
|
— |
|
Other |
|
454 |
|
|
|
609 |
|
Total deferred tax liabilities |
|
39,703 |
|
|
|
37,114 |
|
Net deferred tax liabilities |
$ |
(6,936 |
) |
|
$ |
(6,370 |
) |
As of December 31, 2025, the Company has $62.9 million estimated federal net operating loss, or NOL, carryforwards and estimated state NOL carryforwards of $86.5 million. The Company’s state NOLs are scheduled to begin expiring in 2026. The Company also has foreign NOL carryforwards of $14.4 million which are scheduled to expire from 2026 through 2030. Utilization of our net operating loss carryforwards may be subject to annual limitations due to ownership changes as imposed by the Internal Revenue Code and similar state provisions.
ASC 740-10-30-5 requires that deferred income tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred income tax assets will not be realized. The Company has evaluated the realizability of its deferred tax assets and has concluded that it is more likely than not that the Company may not realize the benefit of certain deferred tax assets and, accordingly, has established a full valuation allowance of $27.6 million on its deferred tax assets as of December 31, 2025. The Company maintained a full valuation allowance of $22.7 million on its deferred tax assets as of December 31, 2024. The increase in the valuation allowance of $4.9 million for the year ended December 31, 2025, was primarily due to the increase in losses in the current year.
The Organization for Economic Cooperation and Development has enacted model rules for a new global minimum tax framework (“BEPS Pillar II”). Various jurisdictions have enacted, or are in the process of enacting, legislation on these rules. Based on our assessment of the current BEPS Pillar II landscape, the Company has not met the Pillar II reporting threshold.
Uncertain Tax Positions
The Company is subject to income taxation by the U.S. government and certain states in which the Company’s activities give rise to an income tax filing requirement. The Company does not have any significant income tax filing requirements in any foreign jurisdiction. The Company’s tax returns are subject to statutes of limitations that vary by jurisdiction. As of December 31, 2025, the Company remains subject to income tax examinations in the United States, and various states for tax years 2020 through 2025. However, due to the Company’s NOL carryforwards in various jurisdictions, tax authorities have the ability to adjust carryforwards related to closed years until the statute expires on the year(s) in which the NOL carryforwards are utilized.
The Company is under examination by certain tax authorities for the 2020 through 2022 tax years. While the timing of the conclusion of the examination is uncertain, the Company believes that adequate amounts have been reserved for adjustments that may result.
A reconciliation of the Company’s gross unrecognized tax benefits is as follows:
|
Year Ended December 31, |
|
|||||||||
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
|
(in thousands) |
|
|||||||||
Balance at beginning of year |
$ |
4,176 |
|
|
$ |
5,833 |
|
|
$ |
9,742 |
|
Increases to prior year positions |
|
(288 |
) |
|
|
(2,692 |
) |
|
|
(3,845 |
) |
Increases for current year positions |
|
1,783 |
|
|
|
1,035 |
|
|
|
(64 |
) |
Balance at end of year |
$ |
5,671 |
|
|
$ |
4,176 |
|
|
$ |
5,833 |
|
As of December 31, 2025, the Company has $5.7 million of gross unrecognized tax benefits, all of which would affect the effective tax rate if recognized. The Company has accrued $1.6 million and $0.4 million for interest at December 31, 2025, and 2024, respectively. Although it is possible that the amount of unrecognized benefits with respect to our uncertain tax positions will increase or decrease in the next 12 months, the Company does not expect material changes.
While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could differ from the Company’s accrued positions. Accordingly, additional provisions on federal, state and foreign tax-related matters could be recorded in future periods as revised estimates are settled or otherwise resolved.
The Company received $4.6 million, $40.0 million, and $12.5 million, in income tax refunds in 2025, 2024, and 2023, respectively. The income tax refunds received, which were due to overpayment in prior years, were netted in the income tax paid amounts included in the supplemental disclosure in the accompanying Consolidated Statements of Cash Flows for 2025 after the adoption of ASU 2023-09. The income tax refunds received, were not netted in the income tax paid amounts included in the supplemental disclosure in the accompanying Consolidated Statements of Cash Flows for 2024 and 2023.
In 2025, the Company purchased $106.3 million worth of Investment Tax Credits, or ITCs, under the transferability provisions of the Inflation Reduction Act of 2022 for $99.5 million in cash. The $6.8 million difference between purchase price and the face value of the credits has been recorded as an increase to the Company’s income tax benefit for the period. The $99.5 million cash payment was included in the income tax paid amounts included in the supplemental disclosure in the accompanying Consolidated Statements of Cash Flows. The Company has utilized $0.2 million of the acquired credits on its 2024 tax return and carried back the remainder of $106.1 million to its 2021 and 2022 tax years and filed a request for a refund. The Company did not receive the $106.1 million of ITCs that were carried back to the 2021 and 2022 tax years in cash in 2025. We expect cash receipt in 2026.
In 2024, the Company purchased $27.1 million worth of ITCs, under the transferability provisions of the Inflation Reduction Act of 2022 for $24.6 million in cash. The $2.5 million difference between the purchase price and the face value of the credits has been recorded as an increase to the Company’s income tax benefit for the period. The $24.6 million cash payment was included in the income tax paid amounts included in the supplemental disclosure in the accompanying Consolidated Statements of Cash Flows. The Company has utilized $0.4 million of the acquired credits on its 2023 tax return and carried back the remainder of $26.7 million to its 2020 tax year and filed a request for a refund. The Company has received the full amount of $26.7 million of ITCs that were carried back to the 2020 tax year in cash in 2024.
On July 4, 2025, the One Big Beautiful Bill Act, or OBBBA, was signed into law, making permanent certain provisions of the Tax Cuts and Jobs Act, including 100% bonus depreciation and domestic research cost expensing. In accordance with ASC 740, “Income Taxes,” the Company has recognized the effects of the new tax law in the period of enactment. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The legislation does not have a material impact on our consolidated financial statements for the year ended December 31, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 8, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2017 | Mar 20, 2018 | |
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.