GCT Semiconductor Holding, Inc. Income Taxes Disclosure

12. Income Taxes

Determining the provision for income taxes, other taxes payable, and deferred tax assets and liabilities involves judgment. The Company calculates and provides for income taxes in each of the tax jurisdictions in which it operates, which involves estimating current tax exposures and making judgments regarding the recoverability of deferred tax assets in each jurisdiction. The estimates used could differ from actual results, and this may have a significant impact on financial position, operating results and cash flows in future periods.

For the years ended December 31, 2025 and 2024, the Company's provision for income taxes did not include any amounts related to deferred income tax. The reconciliation of federal statutory income tax to the Company’s provision for income taxes is as follows (in thousands):

For the years ended December 31, 2025 and 2024, the Company’s provision for income taxes differed from the federal statutory tax rate due primarily to the full valuation allowance for federal and state purposes, true-up deferred taxes, research and development credits, exchange rate differences and change in tax rate.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024, are as follows (in thousands):

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 and 2024, the Company has provided a valuation allowance against the Company’s U.S. net deferred tax assets. The valuation allowance increased by $14.7 million and $1.5 million for the years ended December 31, 2025 and 2024, respectively.

The Company had net operating loss carryforwards (“NOL”) for federal, state and foreign income tax purposes of approximately $357.3 million, $74.6 million and $16.7 million, respectively, as of December 31, 2025. State NOL will begin to expire in 2029, $197.5 million of the Company’s federal NOL will begin to expire in 2026, and $159.8 million of the Company’s federal NOL will last indefinitely (limited to 80% of taxable income in a given year).

As of December 31, 2025, the Company had federal and state research credit carryforwards of approximately $2.8 million and $2.6 million, respectively. The federal research credit carryforwards will begin to expire in 2027 while the California research credits carryforward have an indefinite life.

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 (“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 Section 382 and similar state provisions. The Company may, in the future, experience one or more additional ownership changes as defined by Section 382. If so, the Company may not be able to utilize some of its carryforwards or other tax attributes, even if the Company achieves profitability in the jurisdiction of the carryforwards or other tax attributes. The Company has not completed a study to assess whether a change of ownership has occurred, or whether there have been multiple ownership changes since its formation, due to the significant cost and complexity associated with such a study. Any limitation may result in expiration of a portion of the NOL carryforwards before utilization. Further, until the Company completes its study and any limitation is known, no amounts are presented as uncertain tax positions.

As of December 31, 2025 the Company had unrecognized tax benefits of $3.5 million, which does not include any reserved interest or penalties. Of this amount $1.9 million would currently affect the Company’s effective tax rate if recognized due to the Company’s deferred tax assets being fully offset by a valuation allowance. The Company estimates that there will be no material changes in its uncertain tax positions existing as of December 31, 2025 in the next twelve months.

The Company files income tax returns in the U.S. federal jurisdiction, California and in many foreign jurisdictions. The Company’s tax years for 2022 and forward are subject to examination by the U.S. tax authorities. The Company’s tax years for 2021 and forward are subject to examination by various state tax authorities. However, due to the fact that the Company had loss and credits carried forward in some jurisdictions, certain items attributable to technically closed years are still subject to adjustment by the relevant taxing authority through an adjustment to tax attributes carried forward to open years. The Company files U.S. and foreign income tax returns with

varying statutes of limitations. Due to the Company’s net carryover of unused operating losses, all years remain subject to future examination by tax authorities

As of December 31, 2025, the Company asserts that it will indefinitely reinvest undistributed earnings to ensure sufficient working capital and further expand existing operations outside the U.S. As of December 31, 2025 and 2024, the Company’s foreign subsidiaries operated at a cumulative deficit for U.S. earnings and profit purposes. In the event the Company is required to repatriate funds from outside of the U.S., such repatriation would be subject to local laws, customs, and tax consequences. Determination of the amount of unrecognized deferred tax liability related to these earnings is not practicable.

One Big Beautiful Bill Act

In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States, which includes significant changes to federal tax law and other regulatory provisions that may affect the Company. The OBBBA did not have material impact on the provision for income taxes reported for the year ended December 31, 2025. The Company is currently evaluating the potential impact of the new legislation, including implications for deferred taxes, for future reporting periods.