IN8BIO, INC. Income Taxes Disclosure

10. INCOME TAXES

The Company has incurred cumulative operating losses since its inception and as a result, there is no current and deferred income tax provision for the years ended December 31, 2025 and 2024.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial statement purposes and the amounts used for income tax purposes.

As of December 31, 2025, the Company had federal net operating loss carryforwards of approximately $92.1 million, which were generated after 2017 and do not expire. As of December 31, 2025, the Company had state net operating loss carryforwards of approximately $1.1 million which will begin to expire in 2035.

The Company has evaluated both positive and negative evidence and determined that negative evidence outweighed the positive evidence and that a full valuation allowance on its net deferred tax assets will be maintained. The net change in the valuation allowance for the year ended December 31, 2025 was an increase of $2.4 million.

IRC Section 382 imposes limitations on the use of net operating loss carryovers when the stock ownership of one or more 5% shareholders (shareholders owning 5% or more of the Company’s outstanding capital stock) has increased on a cumulative basis by more than 50 percentage points. Accordingly, there is a risk of an ownership change that could trigger a limitation of the use of the loss carryover. The Company has undertaken a formal IRC Section 382 study up until December 31, 2025. As of December 31, 2025, the Company experienced an ownership change on August 7, 2025 and is in a net unrealized built-in loss (NUBIL) position. Under the OBBBA, capitalized Section 174 amounts create tax basis and are therefore included in the Section 382 built-in loss analysis. To the extent §174 amortization is treated as recognized built-in loss (RBIL), such amounts would be subject to the Company’s Section 382 limitation during the five-year recognition period. As the Company’s current Section 382 limitation is minimal, utilization of pre-change net operating losses and any RBIL is significantly restricted during the recognition period.

The Tax Cuts and Jobs Act (“TCJA”) included a change in the treatment of research and development expenditures for tax purposes under Section 174. Effective for tax years beginning after December 31, 2021, specified R&D expenditures must undergo a 5-year amortization period for domestic spend and a 15-year amortization period for foreign spend. Prior to the effective date (2021 tax year and prior), taxpayers were able to immediately expense R&D costs under Section 174(a) or had the option to capitalize and amortize R&D expenditures over a 5-year recovery period under Section 174(b).

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. OBBBA introduces significant changes to U.S. income-tax legislation. Key provisions affecting the Company include (i) permanent immediate expensing of domestic research and experimental expenditures starting January 1, 2025, and (ii) 100 percent bonus depreciation for qualified property placed in service after January 19, 2025. The Company has evaluated the current legislation at this time and prepared the provision by following the treatment of research and development expenditures for tax purposes under Section 174.

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures. Under the ASU, public business entities (“PBEs”) must annually “(1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income [or loss] by the applicable statutory income tax rate).” FASB released the ASU in response to stakeholder feedback indicating that “the existing income tax disclosures should be enhanced to provide information to better assess how an entity’s operations and related tax risks and tax planning and operational opportunities affect its tax rate and prospects for future cash flows.”

The ASU’s amendments are effective for PBEs for annual periods beginning after December 15, 2024. The Company adopted ASU 2023‑09 in the current annual period and elected to apply the amendments retrospectively to 2024 presented on the footnote to enhance comparability of income tax disclosures, including the rate reconciliation and disaggregation of income taxes paid.

In the ordinary course of business, the Company’s income tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessment by these taxing authorities. Accordingly, the Company believes that it is more likely than not that it will realize the benefits of tax positions it has taken in its tax returns or for the amount of any tax benefit that exceeds the cumulative probability threshold in accordance with FASB ASC 740. Differences between the estimated and actual amounts determined upon ultimate resolution, individually or in the aggregate, are not expected to have a material adverse effect on the Company’s financial position. The Company believes its tax positions are highly certain of being upheld upon examination. The Company is subject to the U.S. federal and state income taxes with varying statutes of limitations. Tax years from 2018 forward remaining open to examination due to the carryover of net operating losses or tax credits.