INSMED IncINSM
INSMED Inc Income Taxes Disclosure
14. Income Taxes
For the years ended December 31, 2025, 2024 and 2023, the Company recorded a provision for income taxes of $5.0 million, $3.7 million and $2.6 million, respectively.
The Company's loss before income taxes in the US and globally was as follows (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| US | $ | (1,118,491) | $ | (814,531) | $ | (666,181) | |||||||||||
| Foreign | (153,258) | (95,534) | (80,831) | ||||||||||||||
| $ | (1,271,749) | $ | (910,065) | $ | (747,012) | ||||||||||||
The Company's provision for income taxes consisted of the following (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | 577 | 356 | 378 | ||||||||||||||
| Foreign | 4,476 | 3,380 | 2,231 | ||||||||||||||
| Total current provision | 5,053 | 3,736 | 2,609 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | — | — | (13) | ||||||||||||||
| State | (27) | (29) | (41) | ||||||||||||||
| Foreign | — | — | — | ||||||||||||||
| Total deferred benefit | (27) | (29) | (54) | ||||||||||||||
| Provision for income taxes | $ | 5,026 | $ | 3,707 | $ | 2,555 | |||||||||||
The reconciliation between the federal statutory tax rate and the Company's effective tax rate, after the retrospective adoption of ASU 2023-09, is as follows (in thousands):
| Years Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||
| Statutory federal taxes and tax rate | $ | (267,067) | 21.0 | % | $ | (191,114) | 21.0 | % | $ | (156,873) | 21.0 | % | |||||||||||||||||||||||
State and local income taxes, net of federal income tax effect (1) | 552 | — | % | 321 | — | % | 338 | — | % | ||||||||||||||||||||||||||
| Foreign tax effects | |||||||||||||||||||||||||||||||||||
| Switzerland | |||||||||||||||||||||||||||||||||||
| Changes in valuation allowance | 12,746 | (1.0) | % | 9,056 | (1.0) | % | 8,462 | (1.1) | % | ||||||||||||||||||||||||||
| Other | 9,843 | (0.8) | % | 7,955 | (0.9) | % | 5,308 | (0.7) | % | ||||||||||||||||||||||||||
| Other foreign jurisdictions | 14,071 | (1.1) | % | 6,432 | (0.7) | % | 4,813 | (0.6) | % | ||||||||||||||||||||||||||
| Effects of cross-border tax laws | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Tax credits | |||||||||||||||||||||||||||||||||||
| Research and development tax credits | (38,872) | 3.1 | % | (30,861) | 3.4 | % | (22,330) | 3.0 | % | ||||||||||||||||||||||||||
| Changes in valuation allowances | 271,336 | (21.3) | % | 185,366 | (20.4) | % | 131,040 | (17.5) | % | ||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Stock-based compensation, net of nondeductible compensation | (59,412) | 4.7 | % | (12,574) | 1.4 | % | 2,443 | (0.3) | % | ||||||||||||||||||||||||||
| Change in fair value of contingent consideration | 52,919 | (4.2) | % | 19,253 | (2.1) | % | 6,026 | (0.8) | % | ||||||||||||||||||||||||||
| Asset acquisition | — | — | % | — | — | % | 18,217 | (2.4) | % | ||||||||||||||||||||||||||
| Other | 729 | (0.1) | % | 309 | — | % | 865 | (0.1) | % | ||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Other adjustments | 8,181 | (0.6) | % | 9,564 | (1.1) | % | 4,246 | (0.6) | % | ||||||||||||||||||||||||||
| Provision for income taxes and effective tax rate | $ | 5,026 | (0.3) | % | $ | 3,707 | (0.4) | % | $ | 2,555 | (0.1) | % | |||||||||||||||||||||||
(1) The state that contributed to the majority (greater than 50%) of the tax effect in this category was Texas.
The provisions recorded for the years ended December 31, 2025, 2024 and 2023 are primarily a result of the Company’s international subsidiaries that had taxable income during the periods and certain state taxes in the US which impose
income tax on modified gross revenues. There was a full valuation allowance recorded against the Company’s deferred tax assets and therefore no tax benefit was recorded.
The amounts of cash paid for income taxes by the Company are as follows:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | |||||||||||||||||
| Texas | 315 | 340 | 201 | ||||||||||||||
Other state (1) | 64 | 62 | 117 | ||||||||||||||
| Foreign | |||||||||||||||||
| Japan | 2,189 | 1,238 | 742 | ||||||||||||||
| Netherlands | 1,034 | 267 | 474 | ||||||||||||||
| Germany | — | 300 | 214 | ||||||||||||||
| Italy | — | 197 | — | ||||||||||||||
| Switzerland | — | — | 110 | ||||||||||||||
Other foreign (1) | 539 | 95 | 97 | ||||||||||||||
| $ | 4,141 | $ | 2,499 | $ | 1,955 | ||||||||||||
(1) In a period in which income taxes paid in a jurisdiction do not exceed 5% of total income taxes paid, the taxes paid to that jurisdiction are reported in other state or other foreign.
Deferred tax assets and liabilities are determined based on the difference between financial statement and tax bases using enacted tax rates in effect for the year in which the differences are expected to reverse. The components of the deferred tax assets and liabilities consist of the following:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss and other carryforwards | $ | 956,032 | $ | 672,735 | |||||||
| General business credits | 267,818 | 217,859 | |||||||||
| Capitalized R&D | 167,487 | 178,021 | |||||||||
| Stock-based compensation | 30,852 | 30,701 | |||||||||
Other (1) | 41,635 | 38,533 | |||||||||
| Deferred tax assets | 1,463,824 | 1,137,849 | |||||||||
| Valuation allowance | (1,456,726) | (1,125,370) | |||||||||
| Deferred tax assets, net of valuation allowance | $ | 7,098 | $ | 12,479 | |||||||
| Deferred tax liabilities: | |||||||||||
| Intangibles | $ | — | $ | (5,581) | |||||||
| Right-of-use assets | (7,127) | (6,953) | |||||||||
| Deferred tax liabilities | $ | (7,127) | $ | (12,534) | |||||||
| Net deferred tax liabilities | $ | (29) | $ | (55) | |||||||
(1) Prior period amounts have been reclassified for consistency with the current period presentation.
The deferred tax assets, net of valuation allowance, of $7.1 million and $12.5 million at December 31, 2025 and 2024, respectively, primarily consisted of net operating loss, tax credit carryforwards and capitalized R&D for income tax purposes. As required by the 2017 Tax Cuts and Jobs Act, effective January 1, 2022, and through the year ended December 31, 2024, the Company's research and development expenditures were capitalized, resulting in a deferred tax asset. As amended by the One
Big Beautiful Bill Act (OBBBA), effective January 1, 2025, the Company’s current year US research and development expenditures are no longer required to be capitalized. Due to the Company's history of operating losses, the Company recorded a valuation allowance on its net deferred tax assets by increasing the valuation allowance by $331.4 million and $221.3 million in 2025 and 2024, respectively, as it was more likely than not that such tax benefits will not be realized.
At December 31, 2025, the Company had federal net operating loss (NOL) carryforwards for income tax purposes of approximately $3.3 billion and federal tax credit carryforwards of $270.1 million. Due to the limitation on NOLs as more fully discussed below, $3.1 billion of the NOLs are available to offset future taxable income, if any. The NOL carryovers and general business tax credits expire in various years beginning in 2026. For state tax purposes, the Company has approximately $2.1 billion of NOLs in various states available to offset against future taxable income and state tax credit carryforwards of $23.1 million, expiring in various years beginning in 2026. The Company has $301.1 million of non-trading loss carryforwards in Ireland and loss carryforwards in the UK and Switzerland of $95.7 million and $277.1 million, respectively. The loss carryforwards in Ireland and the UK carry forward indefinitely while the loss carryforward in Switzerland begins to expire in 2030. The Company has disallowed interest expense carryover of $47.7 million which carries forward indefinitely.
The Company completed an Internal Revenue Code Section 382 (Section 382) analysis in order to determine the amount of losses that are currently available for potential offset against future taxable income, if any. It was determined that the utilization of the Company's NOL and general business tax credit carryforwards generated in tax periods up to and including December 2010 were subject to substantial limitations under Section 382 due to ownership changes that occurred at various points from the Company's original organization through December 2010. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of shareholders that own, directly or indirectly, 5% or more of a corporation's stock, in the stock of a corporation by more than 50 percentage points over a testing period (usually 3 years). Since the Company's formation in 1999, it has raised capital through the issuance of common stock on several occasions which, combined with the purchasing shareholders' subsequent disposition of those shares, have resulted in multiple changes in ownership, as defined by Section 382. These ownership changes resulted in substantial limitations on the use of the Company's NOLs and general business tax credit carryforwards up to and including December 2010. The Company continues to track all of its NOLs and tax credit carryforwards but has provided a full valuation allowance to offset those amounts.
Law Changes
On July 4, 2025, H.R. 1 – OBBBA was signed into law. OBBBA provides for US tax law changes and modifications including effective beginning in 2025, the ability to deduct US based research and development expenditures, a more favorable interest expense limitation and the reinstatement of 100% bonus depreciation on qualified property. OBBBA also includes several changes to the US taxation of foreign activity, including changes to foreign tax credits, global intangible low-taxed income and foreign derived intangible income, among other things. Given the Company’s history of net operating losses, OBBBA did not have a significant impact on the Company’s financial statements.
The Organisation for Economic Co-operation and Development (OECD) recently published a framework to implement a global corporate minimum income tax rate of 15% on income arising in low-tax jurisdictions (Pillar Two). The Pillar Two proposed legislation is applicable to multinational corporations with global revenue exceeding €750 million for at least two years of the preceding four years. Over 140 countries have agreed in principle to implement Pillar Two and many have, or are in the process of, enacting related legislation. In January 2026, the OECD released a "side-by-side" package introducing new safe harbors and providing an exemption for US-based multinational companies from parts of the global minimum tax framework. The Pillar Two legislation is not anticipated to be effective for the Company until the Company’s annual global revenues have exceeded the €750 million threshold for at least two years of the preceding four years. The Company will continue to evaluate the potential consequences of Pillar Two on its longer-term financial position.
The financial statement recognition of the benefit for a tax position is dependent upon the benefit being more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than 50% likely of being realized upon ultimate settlement. If such unrecognized tax benefits were realized and not subject to valuation allowances, the Company would recognize a tax benefit of $24.7 million. The following table summarizes the gross amounts of unrecognized tax benefits (in thousands):
| 2025 | 2024 | ||||||||||
| Balance as of January 1, | $ | 19,014 | $ | 14,753 | |||||||
| Additions related to prior period tax positions | — | — | |||||||||
| Additions related to current period tax positions | 5,649 | 4,261 | |||||||||
| Balance as of December 31, | $ | 24,663 | $ | 19,014 | |||||||
The Company is subject to US federal and state income taxes and the statute of limitations for tax audit is open for the federal tax returns for the years ended 2022 and later, and is generally open for certain states for the years 2021 and later. The Company has incurred net operating losses since inception, except for the year ended December 31, 2009. Such loss carryforwards would be subject to audit in any tax year in which those losses are utilized, notwithstanding the year of origin.
The Company's policy is to recognize interest accrued related to unrecognized tax benefits and penalties in income tax expense. The Company has recorded no such expense. As of December 31, 2025 and 2024, the Company has recorded reserves for unrecognized income tax benefits of $24.7 million and $19.0 million, respectively. As any adjustment to the Company’s uncertain tax positions would not result in a cash tax liability, it has not recorded any accrued interest or penalties related to its uncertain tax positions. If any of these unrecognized tax benefits were released, there would be no impact to the Company's effective tax rate.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 25, 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.