Innventure, Inc.INV
Innventure, Inc. Income Taxes Disclosure
Note 16. Income Taxes
The Company is subject to federal and state income taxes with respect to any income or loss generated as well as the allocable share of any taxable income or loss of Innventure LLC and other partnership subsidiaries. The partnership subsidiaries within the consolidated group generally do not pay income taxes in most jurisdictions. Instead, taxable income or loss of the partnership subsidiaries is passed through to its members, including the Company. The partnership subsidiaries are liable for income taxes in those states not recognizing its pass-through status and for certain of its subsidiaries not taxed as pass-through entities. Through Innventure LLC, the Company acquired ownership interest in various domestic entities taxed as corporations. Where required or allowed, the corporation subsidiaries file and pay tax in a standalone basis for federal and state income tax purposes. The Company anticipates the US structure to remain in existence for the foreseeable future. In addition, Accelsius Ltd, a UK corporation, began operations in 2025 resulting in income tax return filing requirement for the Company in the UK.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into U.S. tax law. OBBBA includes a broad range of tax reform provisions, such as the permanent extension of certain expiring provisions of the 2017 Tax Cuts and Jobs Act and modifications to the international tax framework. The enactment of OBBBA did not have a material impact on the Company’s results of operations, financial position, or cash flows for the year.
The provision for income before taxes was as follows (in thousands):
| Successor | Predecessor | ||||||||||||||||
| Year Ended December 31, 2025 | October 2, 2024 through December 31, 2024 | January 1, 2024 through October 1, 2024 | |||||||||||||||
| United States | $ | (488,148) | $ | (73,375) | $ | (27,766) | |||||||||||
Foreign1 | (685) | — | — | ||||||||||||||
| Total | $ | (488,833) | $ | (73,375) | (27,766) | ||||||||||||
1The Company adopted ASU 2023-09 on a prospective basis, and as a result for the year ended December 31, 2025, foreign income is presented on the country of domicile which results in Innventure, Inc’s income before taxes included. For the periods ended December 31, 2024 and October 1,2024, Innventure, Inc’s income was included in the United States based on the country of tax jurisdiction. | |||||||||||||||||
The provision for income taxes was as follows:
| Successor | Successor | Predecessor | |||||||||||||||
| Year Ended December 31, 2025 | October 2, 2024 through December 31, 2024 | January 1, 2024 through October 1, 2024 | |||||||||||||||
| Current Expense: | |||||||||||||||||
| State | 23 | 18 | — | ||||||||||||||
| Total Current Expense | 23 | 18 | — | ||||||||||||||
| Deferred Expense: | |||||||||||||||||
| Federal | (13,648) | (3,300) | 432 | ||||||||||||||
| State | 142 | — | — | ||||||||||||||
| Total Deferred Expense | (13,506) | (3,300) | 432 | ||||||||||||||
| Total Expense: | $ | (13,483) | $ | (3,282) | $ | 432 | |||||||||||
Beginning with the year ended December 31, 2025, the Company has adopted ASU 2023-09 and, as a result, the reconciliation of income tax expense has been updated on a prospective basis. The Company did not pay income taxes net of refunds during the year ended December 31, 2025. As no income taxes were paid, disaggregation by federal, state, or foreign jurisdiction was not applicable for the period presented. The income tax benefit reflected in the Consolidated Statements of Operations differs from the tax computed by applying the statutory U.S. federal rate of 21% to "Income tax expense (Benefit)" was as follows:
| Successor | ||||||||
| December 31, 2025 | ||||||||
| In thousands (except percentages) | ||||||||
| Income taxes at federal statutory rate | (102,655) | 21.0 | % | |||||
State taxes, net of federal benefit2 | (145) | — | % | |||||
| Warrant liability | (1,379) | 0.3 | % | |||||
| Non-deductible expenses | 34 | — | % | |||||
| Change in earnout fair value | (2,098) | 0.4 | % | |||||
| Other permanent differences | 7,224 | (1.5) | % | |||||
| Change in valuation allowance | 11,618 | (2.4) | % | |||||
| Goodwill impairment | 72,777 | (14.9) | % | |||||
| Officer’s compensation | 1,141 | (0.2) | % | |||||
Total provision (benefit) for income taxes | $ | (13,483) | 2.7 | % | ||||
2Arizona, Florida, New York, Oklahoma, and Virginia represent majority of the tax effect in this category. | ||||||||
For the successor period October 2, 2024 through December 31, 2024 and the predecessor period January 1, 2024 through October 1, 2024, income tax expense reflected in the Consolidated Statements of Operations differs from the tax computed by applying the statutory U.S. federal rate of 21% to "Income tax expense (benefit)" was as follows:
| Successor | Predecessor | ||||||||||||||||||||||
| October 2, 2024 through December 31, 2024 | January 1, 2024 through October 1, 2024 | ||||||||||||||||||||||
| Income taxes at federal statutory rate | (15,405) | 21.0 | % | — | — | % | |||||||||||||||||
| State taxes, net of federal benefit | (1,801) | 2.5 | % | — | — | % | |||||||||||||||||
| Tax on pre-tax earnings of corporate subsidiaries | — | — | % | (3,022) | 10.9 | % | |||||||||||||||||
| Warrant liability | 3,685 | (5.0) | % | — | — | % | |||||||||||||||||
| Non-deductible expenses | 6 | — | % | 6 | — | % | |||||||||||||||||
| Change in earnout fair value | (714) | 1.0 | % | — | — | % | |||||||||||||||||
| Other permanent differences | (423) | 0.6 | % | — | — | % | |||||||||||||||||
| Change in valuation allowance | 11,664 | (15.9) | % | 3,448 | (12.4) | % | |||||||||||||||||
| R&D credit | (294) | 0.4 | % | — | — | ||||||||||||||||||
Total provision (benefit) for income taxes | $ | (3,282) | 4.6 | % | $ | 432 | (1.5) | % | |||||||||||||||
Entities within the consolidated group that are considered a corporation for federal income tax purposes, recognize deferred income tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases using currently enacted tax rates in effect for the year in which the differences are expected to reverse. Significant components of deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows:
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred Tax Assets: | |||||||||||
| Deferred lease liabilities | $ | 262 | $ | 138 | |||||||
| Reserves and other accruals | 8,991 | 4,873 | |||||||||
| Capitalized R&D expense | 3,740 | 2,562 | |||||||||
| Fixed assets and intangibles | 2,830 | 3,113 | |||||||||
| Unrealized Gain/Loss | 1,945 | — | |||||||||
| Loss carry-forwards and other tax attributes | 29,753 | 15,682 | |||||||||
Total Deferred Tax Assets | 47,521 | 26,368 | |||||||||
| Less: Valuation allowance | (23,130) | (11,664) | |||||||||
Net Deferred Tax Assets | $ | 24,391 | $ | 14,704 | |||||||
| Deferred Tax Liabilities: | |||||||||||
| Amortization | $ | (34,213) | $ | (38,443) | |||||||
| Investment in Partnerships | (3,982) | (3,505) | |||||||||
| Right of use assets | (44) | (109) | |||||||||
Total Deferred Tax Liabilities | (38,239) | (42,057) | |||||||||
Net Deferred Tax Liabilities | $ | (13,848) | $ | (27,353) | |||||||
Deferred tax assets are regularly reviewed for recoverability and a valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon future taxable income during the periods in which those temporary differences become deductible. In assessing the need for a valuation allowance, management considers all available positive and negative evidence, including the ability to carryback operating losses to prior periods and the expected future utilization of net operating loss carryforwards, the reversal of deferred tax liabilities, projected taxable income, and tax-planning strategies.
Valuation allowances are established when it is more likely than not that all or a portion of a deferred tax asset will not be realized. The valuation allowance on deferred tax assets was $23.1 million as of December 31, 2025 and $11.7 million as of December 31, 2024, resulting in a net change of $11.5 million. The increase in valuation allowance of $11.5 million during the period mainly relates to U.S. federal and state operating loss carryforwards and equity based compensation deferred tax assets that were deemed unrealizable. During this period, Accelsius LLC has recognized $39.6 million deferred tax liability balance in acquired intangible assets during 2024 as a result of the Business Combination transaction that is nontaxable in nature. These deferred tax liabilities are expected to reverse over time, typically as the intangible assets are amortized for financial reporting purposes. The Company and the remaining corporate subsidiaries maintained the valuation allowance as the entities have been in a pre-tax loss position, with insufficient projected taxable income (exclusive of reversing taxable temporary differences) to recognize the benefit of net deferred tax assets as of the end of the year.
As of December 31, 2025, the taxable entity had net operating loss carryforwards for income tax purposes of approximately $127.0 million related to US federal taxes and $0.7 million related to the UK, all of which may be carried forward indefinitely. The Company and certain subsidiaries also have state net operating loss (“NOL”) carryforwards in the amount of $40.6 million. The state NOL carryforwards begin to expire in 2039, however, some state NOL’s are able to be carried forward indefinitely.
As of December 31, 2025 and 2024, the Company had no material unrecognized income tax benefits or uncertain tax positions. Also, we do not expect to incur interest charges or penalties related to our tax positions, but if such charges or penalties are incurred, our policy is to account for interest charges as interest expense and penalties as tax expense in the consolidated statements of operations.
As of December 31, 2025, tax years 2023 through 2025 remain open and subject to examination by the Internal Revenue Service and the states where the Company has nexus. The company is also subject to examination for the tax year 2025 in the UK due to Accelsius LTD.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 30, 2026 | Showing above |
| 2024 | Apr 14, 2025 | |
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.