Harmony Biosciences Holdings, Inc. Income Taxes Disclosure

18. INCOME TAXES

Details of the provision for income taxes consist of the following:

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A reconciliation of the differences between the U.S. statutory federal income tax rate of 21.0% and the Company’s effective income tax rate as of December 31, 2025, after the adoption of ASU 2023-09, is as follows:

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*State taxes include the impact of the remeasurement of state deferred tax assets. There was no individual state that made up the majority (greater than 50%) of the tax effect in this category.

A reconciliation of the differences between the U.S. statutory federal income tax rate of 21.0% and the Company’s effective income tax rate as of December 31, 2024, and 2023, prior to the adoption of ASU 2023-09, is as follows:

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The Company made cash payments for income taxes, net of refunds, during the year ended December 31, 2025, as follows:

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Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025, and 2024, are as follows:

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As of December 31, 2025, and December 31, 2024, our deferred tax assets primarily related to acquired in-process research and development costs, operating loss carryforwards, capitalized research and development costs, inventory, and accrued rebates. On July 4, 2025, the "One Big Beautiful Bill Act" (the "OBBBA") was enacted. The OBBBA contains several changes to corporate taxation, including the allowance of immediate expensing of domestic research and development expenses. As a result, the Company recorded a $48,000 reduction to deferred tax assets related to domestic research and development expenses which is reflected in its consolidated balance sheet as of December 31, 2025. As of December 31, 2024, the Company had a valuation allowance on net operating loss carryforwards of the Company’s subsidiary, Zynerba Pharmaceuticals Pty Ltd., and net operating loss carryforwards and other deferred tax assets of the Company’s subsidiary, Harmony Biosciences Management, Inc. During the year ended December 31, 2025, it was determined that the net operating loss carryforward and other deferred tax assets related to the Company’s subsidiaries were not utilizable, accordingly the Company removed the related deferred tax asset and the corresponding valuation allowance, which reduced the valuation allowance by $2,891.

As of December 31, 2025, and 2024, the Company has approximately $203,788 and $220,243, respectively, of federal net operating loss ("NOL") carryforward available to offset future federal taxable income. The Company also has approximately $110,579 and $111,079 of state NOL carryforwards as of December 31, 2025, and 2024, respectively, available to offset future state taxable income. The Company’s state NOLs begin to expire in 2037. As of December 31, 2025, and 2024, the Company had federal tax credits of $3,499 and $3,902, respectively.

Utilization of the net operating loss carryforwards and federal tax credits may be subject to a substantial limitation under Section 382 of the Internal Revenue Code due to ownership changes that could occur in the future. These changes may limit the amount of net operating loss and tax credit carryforwards that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or public groups. The majority of the Company’s carryforwards and federal tax credits were acquired in conjunction with the Zynerba and Epygenix acquisitions and are subject to annual limitations under Section 382 of the Internal Revenue Code.

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The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending income tax examinations. The Company’s tax years are still open under statute from 2022 to present. All open years may be examined to the extent that tax credits or NOLs are used in future periods. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. The Company has not recorded any amounts for unrecognized tax benefits as of December 31, 2025, and 2024.