15. Income Taxes

The components of income before taxes are as follows:


	For the Year Ended December 31,
	2025			2024			2023
United States	$	(335,468	)	$	(231,133	)	$	(135,457	)
International		—			—			—
Loss before income tax benefit	$	(335,468	)	$	(231,133	)	$	(135,457	)

Income tax expense is comprised of the following:


	For the Year Ended December 31,
Current:	2025			2024		2023
Federal	$	—		$	—	$	—
State		64			—		4
International		—			—		—
Total current taxes	$	64		$	—	$	4

Deferred:
Federal	$	(30,617	)	$	—	$	—
State		(6,575	)		—		—
International		—			—		—
Total deferred taxes	$	(37,192	)	$	—	$	—

Income tax benefit	$	(37,128	)	$	—	$	4

On July 4, 2025, Public Law 119-21, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), was enacted in the U.S. The OBBBA introduces several significant changes, including the permanent extension and modification of certain expiring provisions of the Tax Cuts and Jobs Act. The legislation has multiple effective dates, with certain provisions taking effect in tax year 2025 and others phased in through 2027. There were no material impacts of this legislation to our financial statements for the year ended December 31, 2025; however, management will continue to evaluate the full impact of these legislative changes as more guidance becomes available.

The provision for income tax using statutory U.S. federal tax rate of 21% is reconciled to the Company’s effective tax rate as follows, pursuant to the disclosure requirements of ASU 2023-09:


	For the Year Ended December 31, 2025
Income tax benefit at statutory rate	$	(70,448	)	21	%
State and local income taxes, net of federal benefit (1)		(5,143	)	2	%
Change in valuation allowance		23,604		(7	%)
Non-taxable or non-deductible items:
Loss on derivatives		10,562		(3	%)
Other		4,297		(1	%)
Effective income tax rate	$	(37,128	)	11.0	%

(1) State and local taxes in California and Colorado comprise the majority of this category.

The provision for income tax using statutory U.S. federal tax rate of 21.0% is reconciled to the Company’s effective tax rate as follows:


	For the Year Ended December 31,
	2025			2024
Income tax benefit at statutory rate		21.0	%		21.0	%
State income taxes		3.3	%		4.5	%
Tax rate change		(0.9	%)		0.0	%
Other		0.0	%		(1.4	%)
Prior year true-ups		0.6	%		0.0	%
Permanent items		(0.2	%)		(0.5	%)
Change in valuation allowance		(23.8	%)		(23.6	%)
Effective income tax rate		0.0	%		0.0	%

Disclosed below is a summary of income taxes paid by jurisdiction pursuant to the disclosure requirements of ASU 2023-09:


	For the Year Ended December 31, 2025
United States - federal	$	—
United States - state and local		—
Total income tax payments	$	—

Temporary differences and carryforwards that gave rise to significant portions of deferred taxes were as follows:


	For the Year Ended December 31,
	2025			2024
Deferred tax assets:
Net operating loss	$	139,203		$	120,090
Credits		2,875			2,875
Capitalized research costs		87,925			56,007
Intangible assets		—			3,912
Stock-based compensation		2,948			586
Deferred lease liability		4,148			4,267
Accruals and reserves		4,464			3,944
Interest limitation carryforwards		12,218			2,515
Deferred revenue		18,960			7,865
Other		650			697
Gross deferred tax assets		273,391			202,758
Valuation allowance		(227,752	)		(194,556	)
Total deferred tax assets	$	45,639		$	8,202
Deferred tax liabilities:
Right-of-use assets		(3,402	)		(3,543	)
Property and equipment		(8,778	)		(4,659	)
Intangible assets		(31,481	)		—
Other		(1,978	)		—
Total deferred tax liabilities	$	(45,639	)	$	(8,202	)
Net deferred tax assets	$	—		$	—

For the year ended December 31, 2025, the difference between the Company’s effective tax rate and the statutory rate is primarily driven by the valuation allowance established against U.S. federal and state deferred income tax assets and recognized losses on the Company's conversion of warrants to equity.

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is more likely than not. Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of

operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided for a full net valuation allowance.

Management regularly assesses the ability to realize deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and expected future taxable income on a jurisdiction-by-jurisdiction basis. In the event that the Company changes its determination as to the amount of realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. The Company’s management believes that, based on a number of factors, it is more likely than not, that all or some portion of the deferred tax assets will not be realized; and accordingly, for the year ended December 31, 2025, the Company has provided a valuation allowance against the Company’s U.S. net deferred tax assets. The net change in the valuation allowance for the year ended December 31, 2025 was an increase of $33.2 million. The current year valuation allowance change includes a $37.2 million decrease recorded through the income statement as a result of deferred tax liabilities recorded in purchase accounting..

As of December 31, 2025, the Company had net operating loss carryforwards for U.S federal income tax purposes of $595.4 million, all of which have an indefinite carryforward period except for $5.2 million that will expire in 2037. Further, the Company has state net operating loss carryforwards of $240.7 million that expire on various dates starting 2039.

The Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of net operating losses in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses may be limited as prescribed under Internal Revenue Code Section 382 (“IRC Section 382”). Events which may cause limitations in the amount of the net operating losses that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Utilization of the federal and state net operating losses may be subject to substantial annual limitation due to the ownership change limitations provided by the IRC Section 382 and similar state provisions.

As of December 31, 2025, the Company had federal research credit carryforwards of approximately $4.8 million. The federal research credit carryforwards will begin to expire in 2037.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	For the Year Ended December 31,
	2025		2024		2023
Balance at January 1	$	2,100	$	2,100	$	2,100
Additions based on tax positions related to current year		—		—		—
Changes for tax positions of prior years		—		—		—
Reductions as a result of a lapse of applicable statute of limitations		—		—		—
Settlements		—		—		—
Balance at December 31	$	2,100	$	2,100	$	2,100

The total amount of gross unrecognized tax benefits was $2.1 million as of December 31, 2025, 2024 and 2023. There were no interest and penalties as of December 31, 2025, 2024 and 2023. As of December 31, 2025, $0.2 million of the total unrecognized tax benefits, if recognized, would have an impact on the Company’s effective tax rate.

The Company’s policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

The Company files income tax returns in the U.S. federal and various state jurisdictions with varying statutes of limitations. The Company is generally no longer subject to tax examinations for years prior to 2022 for federal purposes and 2021 for state purposes, except in certain limited circumstances.

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.

Firefly Aerospace Inc. Income Taxes Disclosure

About Income Taxes Disclosures

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