INOVIO PHARMACEUTICALS, INC.INO
INOVIO PHARMACEUTICALS, INC. Income Taxes Disclosure
Income Taxes
In accordance with the guidance pursuant to accounting for income taxes, a deferred tax asset or liability is determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. The Company provides a valuation allowance against net deferred tax assets unless, based upon the available evidence, it is more likely than not that the deferred tax asset will be realized.
The components of pretax loss from operations are as follows:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. Domestic | $ | (107,254,126) | $ | (134,979,579) | |||||||
| Foreign | — | (137,772) | |||||||||
| Pretax loss from operations | $ | (107,254,126) | $ | (135,117,351) | |||||||
There was no provision for or benefit from income taxes for the years ended December 31, 2024 and 2023.
The reconciliation of income taxes attributable to continuing operations computed at the statutory tax rates to income tax benefit, using a 21% statutory tax rate for December 31, 2024 and 2023, is as follows:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Benefit from income taxes at statutory rates | $ | (22,523,000) | $ | (28,375,000) | |||||||
| State income tax, net of federal benefit | (1,543,000) | (3,922,000) | |||||||||
| Change in valuation allowance | 21,749,000 | 28,394,000 | |||||||||
| Research and development tax credits | (5,846,000) | (2,139,000) | |||||||||
| Stock-based compensation | 1,579,000 | 2,099,000 | |||||||||
| Uncertain tax positions | 2,344,000 | 861,000 | |||||||||
| Goodwill impairment | — | 1,962,000 | |||||||||
| Expired NOLs and credits | 4,687,000 | 1,352,000 | |||||||||
| Limited NOLs and credits | (2,056,000) | (997,000) | |||||||||
| Change in tax rates | 403,000 | 365,000 | |||||||||
| Foreign tax rate differential | — | (4,000) | |||||||||
| Other | 1,206,000 | 404,000 | |||||||||
| $ | — | $ | — | ||||||||
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023 are shown below:
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Deferred tax assets: | |||||||||||
| Capitalized research expense | $ | 54,204,000 | $ | 50,143,000 | |||||||
| NOL carryforwards | 250,336,000 | 235,624,000 | |||||||||
| Research and development and other tax credits | 31,250,000 | 27,734,000 | |||||||||
| Deferred revenue | — | 22,000 | |||||||||
| Stock-based compensation | 3,060,000 | 3,683,000 | |||||||||
| Acquired intangibles | 774,000 | 907,000 | |||||||||
| Investment in affiliated entity | 1,651,000 | 1,406,000 | |||||||||
| Lease liability | 2,492,000 | 2,822,000 | |||||||||
| Fixed assets | 441,000 | 337,000 | |||||||||
| Other | 6,720,000 | 6,808,000 | |||||||||
| 350,928,000 | 329,486,000 | ||||||||||
| Valuation allowance | (349,224,000) | (327,493,000) | |||||||||
| Total deferred tax assets | 1,704,000 | 1,993,000 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right of use asset | (1,704,000) | (1,993,000) | |||||||||
| Total deferred tax liabilities | (1,704,000) | (1,993,000) | |||||||||
| Net deferred tax liabilities | $ | — | $ | — | |||||||
As of December 31, 2024, the Company had federal, California and other state tax net operating loss (NOL) carryforwards of $1.1 billion, $259.9 million and $88.6 million, respectively, net of the net operating losses that will expire due to IRC Section 382 limitations. The aggregate federal net operating losses generated in 2018 and after for the amount of $801.9 million will carryforward indefinitely and be available to offset up to 80% of future taxable income each year. The federal NOL carryforward began to expire in 2025, and the California and other state NOL carryforwards will begin and have begun to expire in 2028 and 2025, respectively, unless previously utilized.
The Company also had Korean NOL carryforward of $1.0 million as of December 31, 2024. The Korean NOLs are available to offset up to 60% of future taxable income and will begin to expire in 2035, unless previously utilized.
In addition, as of December 31, 2024, the Company had federal and state research and development (R&D) tax credit carryforwards of $46.1 million and $7.9 million, respectively. The federal tax credit carryforwards will begin to expire in 2029. The California research tax credits do not expire.
Based upon statute, federal and state losses and credits are expected to expire as follows (in millions):
| Expiration Date: | Federal NOLs | State NOLs | Foreign NOLs | Federal R&D | State R&D | ||||||||||||||||||||||||
| 2025 | $ | 16.0 | $ | 5.2 | $ | — | $ | — | $ | — | |||||||||||||||||||
| 2026 | 17.1 | 7.1 | — | — | — | ||||||||||||||||||||||||
| 2027 | 6.1 | 1.9 | — | — | — | ||||||||||||||||||||||||
| 2028 and thereafter | 245.9 | 333.6 | 1.0 | 46.1 | — | ||||||||||||||||||||||||
| Indefinite | 801.9 | 0.7 | — | — | 7.9 | ||||||||||||||||||||||||
| $ | 1,087.0 | $ | 348.5 | $ | 1.0 | $ | 46.1 | $ | 7.9 | ||||||||||||||||||||
Pursuant to Internal Revenue Code (IRC) Sections 382 and 383, annual use of the Company’s NOL and R&D credit carryforwards may be limited in the event that a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has completed an IRC Section 382/383 analysis regarding the limitation of NOL and R&D credit carryforwards as of December 31, 2024. As a result of the analysis, the Company estimates that approximately $5.3 million of tax benefits related to NOL and R&D carryforwards will expire unused. Accordingly, the related NOL and R&D credit carryforwards have been removed from deferred tax assets, accompanied by a corresponding reduction of the valuation allowance. Due to the existence of the valuation allowance, limitations created by current and future ownership changes, if any,
related to the Company's operations in the United States will not impact its effective tax rate. Any additional ownership changes, could further limit the ability to use the NOL and R&D carryforwards.
The Tax Cuts and Jobs Act of 2017 subjects a U.S. stockholder to tax on Global Intangible Low-Taxed Income (GILTI) earned by certain foreign subsidiaries. The FASB Staff Q&A, Topic 740, No. 5, Accounting for Global Intangible Low-Taxed Income, states that an entity can make an accounting policy election to recognize deferred taxes for temporary basis differences expected to reverse as GILTI in future years or to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. The Company has elected to provide for the tax expense related to GILTI in the year the tax is incurred as a period expense only. For 2024 and 2023, the Company did not generate any GILTI due to losses earned by its foreign subsidiary.
The following table summarizes the activity related to the Company's unrecognized tax benefits:
| Year ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Balance at beginning of the year | $ | 22,114,000 | $ | 21,139,000 | |||||||
| Increases related to current year tax positions | 2,297,000 | 1,816,000 | |||||||||
| Increases (decreases) related to prior year tax positions | 197,000 | (841,000) | |||||||||
| Balance at end of the year | $ | 24,608,000 | $ | 22,114,000 | |||||||
The amount of unrecognized tax benefits that, if recognized and realized, would affect the effective tax rate was $22.9 million and $20.5 million as of December 31, 2024 and 2023, respectively, subject to valuation allowances. The Company has not recorded any interest and penalties on the unrecognized tax positions as the Company has continued to generate net operating losses after accounting for the unrecognized tax benefits. The Company does not anticipate that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of the reporting date.
The Company and its subsidiaries are subject to U.S. federal income tax as well as income tax in multiple state and foreign jurisdictions. With few exceptions, the Company is no longer subject to United States federal income tax examinations for years before 2021 and state and local income tax examinations before 2020. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses were generated and carried forward, and make adjustments up to the amount of the NOL carryforward amount. The Company is not to its knowledge currently under Internal Revenue Service (“IRS”), state, local or foreign tax examination.
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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.