HALOZYME THERAPEUTICS, INC.HALO
HALOZYME THERAPEUTICS, INC. Income Taxes Disclosure
Income Taxes
Total income before income tax expense summarized by region was as follows (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| United States | $ | 467,527 | $ | 557,852 | $ | 348,828 | ||||||||||||||
| Foreign | (652) | (720) | (499) | |||||||||||||||||
Income before income tax expense | $ | 466,875 | $ | 557,132 | $ | 348,329 | ||||||||||||||
Significant components of our net deferred tax assets (liabilities) were as follows (in thousands).
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
Deferred tax assets | ||||||||||||||
| Net operating loss carryforwards | $ | 60,853 | $ | 20,736 | ||||||||||
Capped call transactions | 46,806 | — | ||||||||||||
Research and development and credits | 22,308 | 17,868 | ||||||||||||
| Share-based compensation | 9,960 | 6,567 | ||||||||||||
| ASC 842 lease liability | 7,927 | 7,126 | ||||||||||||
| Capitalized research expense | 5,370 | 30,253 | ||||||||||||
| Inventory related reserves | 19,691 | 19,867 | ||||||||||||
| Other, net | 16,949 | 4,206 | ||||||||||||
| Total deferred tax assets | 189,864 | 106,623 | ||||||||||||
| Valuation allowance for deferred tax assets | (878) | (2,363) | ||||||||||||
| Deferred tax assets, net of valuation allowance | 188,986 | 104,260 | ||||||||||||
Deferred tax liabilities | ||||||||||||||
| Non-deductible book amortization | (217,883) | (89,247) | ||||||||||||
| ASC 842 right of use asset | (8,589) | (7,882) | ||||||||||||
| Other, net | (5,438) | (3,276) | ||||||||||||
| Total deferred tax liabilities | (231,910) | (100,405) | ||||||||||||
Net deferred tax (liabilities) asset | $ | (42,924) | $ | 3,855 | ||||||||||
A valuation allowance of $0.9 million and $2.4 million has been established to offset the net DTAs as of December 31, 2025 and 2024, respectively, as realization of such assets is uncertain.
On a periodic basis, we reassess the valuation allowance of our DTAs, weighing all positive and negative evidence, to assess if it is more-likely-than-not that some or all our DTAs will be realized. After assessing both positive and negative evidence, we determined that it was more likely than not that our DTAs would be realized except for certain deferred tax assets associated with net operating losses in foreign jurisdictions where we do not expect benefit.
Income tax expense (benefit) was comprised of the following components (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current - federal | $ | 137,708 | $ | 98,139 | $ | 24,963 | ||||||||||||||
| Current - state | 16,741 | 13,762 | 5,717 | |||||||||||||||||
| Deferred - federal | (4,769) | 1,815 | 34,037 | |||||||||||||||||
| Deferred - state | 306 | (675) | 2,018 | |||||||||||||||||
Total income tax expense | $ | 149,986 | $ | 113,041 | $ | 66,735 | ||||||||||||||
The provision for income taxes on earnings subject to income taxes differs from the statutory federal income tax rate due to the following (dollars in thousands):
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| Dollar | Percent | Dollar | Percent | Dollar | Percent | |||||||||||||||||||||||||||||||||
U.S. federal statutory tax expense and rate | $ | 98,044 | 21.00 | % | $ | 116,998 | 21.00 | % | $ | 73,254 | 21.00 | % | ||||||||||||||||||||||||||
State and local income taxes, net of federal income tax effect(1) | 13,252 | 2.84 | % | 10,963 | 1.97 | % | 4,134 | 1.19 | % | |||||||||||||||||||||||||||||
Foreign tax effects | 137 | 0.03 | % | 151 | 0.03 | % | 105 | 0.03 | % | |||||||||||||||||||||||||||||
Effect of cross-border tax laws | ||||||||||||||||||||||||||||||||||||||
Foreign-derived intangible income | (22,921) | (4.91) | % | (19,644) | (3.53) | % | (11,989) | (3.44) | % | |||||||||||||||||||||||||||||
Tax credits | ||||||||||||||||||||||||||||||||||||||
Research and development tax credits | (1,840) | (0.39) | % | (1,457) | (0.27) | % | (4,394) | (1.26) | % | |||||||||||||||||||||||||||||
Changes in valuation allowances | (1,498) | (0.32) | % | 96 | 0.02 | % | ||||||||||||||||||||||||||||||||
Nontaxable or non-deductible items | ||||||||||||||||||||||||||||||||||||||
Non-deductible acquired IPR&D | 59,826 | 12.81 | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
Other | 5,458 | 1.17 | % | 1,942 | 0.35 | % | 2,605 | 0.75 | % | |||||||||||||||||||||||||||||
Changes in unrecognized tax benefits | 655 | 0.14 | % | 2,610 | 0.47 | % | 455 | 0.13 | % | |||||||||||||||||||||||||||||
Other adjustments | (1,127) | (0.24) | % | 1,382 | 0.25 | % | 2,565 | 0.73 | % | |||||||||||||||||||||||||||||
Income tax expense and effective income tax rate | $ | 149,986 | 32.13 | % | $ | 113,041 | 20.29 | % | $ | 66,735 | 19.13 | % | ||||||||||||||||||||||||||
(1) State taxes in NY, NJ, MN, PA, CA and MA made up the majority (greater than 50%) of the tax effect in this category.
As of December 31, 2025, our unrecognized tax benefit and uncertain tax positions were $26.9 million, of which $25.7 million will impact the effective tax rate when resolved. Interest and/or penalties related to uncertain income tax positions are recognized by us as a component of income tax expense. For the years ended December 31, 2025, 2024 and 2023, we recognized an immaterial amount of interest and penalties.
The following table summarizes the activity related to our unrecognized tax benefits (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
Gross unrecognized tax benefits, beginning of period | $ | 24,519 | $ | 21,918 | $ | 19,482 | ||||||||||||||
Increases in tax positions for current year | 702 | 612 | 791 | |||||||||||||||||
Increases in tax positions for prior years | 244 | 2,181 | 1,645 | |||||||||||||||||
Increases in tax positions related to business acquisition | 1,418 | — | — | |||||||||||||||||
Decreases in tax positions for prior years and lapse in statute of limitations | (18) | (192) | — | |||||||||||||||||
| Gross unrecognized tax benefits, end of period | $ | 26,865 | $ | 24,519 | $ | 21,918 | ||||||||||||||
As of December 31, 2025, we had U.S. federal, California, Massachusetts and other state net operating loss carryforwards of approximately $145.6 million, $236.5 million, $139.2 million and $60.6 million, respectively. The U.S. federal net operating loss will carry forward indefinitely until utilized. State net operating losses will begin to expire in 2029 unless previously utilized.
As of December 31, 2025, we had U.S. federal, California and Massachusetts research and development tax credit carryforwards of approximately $4.9 million, $25.1 million and $2.5 million, respectively. The U.S. federal research and development tax credits will begin to expire in 2040 unless previously utilized. The California research and development tax credits will carry forward indefinitely until utilized. The Massachusetts research and development tax credits will begin to expire in 2036 unless previously utilized.
Pursuant to Internal Revenue Code Section 382, the annual use of the net operating loss carryforwards and research and development tax credits could be limited by any greater than 50% ownership change during any three-year testing period. As a result of any such ownership change, portions of our net operating loss carryforwards and research and development tax credits are subject to annual limitations. We completed an updated Section 382 analysis regarding the limitation of the net operating losses and research and development credits as of the acquisition of Antares and Elektrofi. Based upon the analysis, we determined that ownership changes occurred in prior years; however, the annual limitations on net operating loss and research and development tax credit carryforwards will not have a material impact on the future utilization of such carryforwards.
We do not provide for U.S. income taxes on the undistributed earnings of our foreign subsidiary as it is our intention to utilize those earnings in the foreign operations for an indefinite period of time. As of December 31, 2025 and 2024, there were no undistributed earnings in foreign subsidiaries.
We are subject to taxation in the U.S. and in various state and foreign jurisdictions. Our tax years for 2008 and forward are subject to examination by the U.S. federal and state tax authorities due to the carryforward of unutilized net operating losses and research and development credits.
Income taxes paid, net of refunds, are as following (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
U.S. Federal | $ | 119,100 | $ | 65,000 | $ | 22,621 | ||||||||||||||
State | ||||||||||||||||||||
Pennsylvania(1) | — | — | 3,320 | |||||||||||||||||
All other states | 15,541 | 15,618 | 5,815 | |||||||||||||||||
Total income taxes paid, net of refunds | $ | 134,641 | $ | 80,618 | $ | 31,756 | ||||||||||||||
(1) Jurisdiction in which income taxes paid, net of refunds, exceeded 5% of the total income taxes paid, net of refunds. The amount of income taxes paid, net of refunds, during the years ended December 31, 2024 and December 31, 2025 did not meet the 5% disaggregation threshold, and therefore, is included in “All other states.”
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 24, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 20, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 29, 2016 | |
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.