IonQ, Inc. Income Taxes Disclosure

17. INCOME TAXES

The Company’s provision for income taxes differs from the amount determined by applying the applicable federal statutory tax rate to the loss before income taxes primarily due to the valuation allowance for the net deferred income tax assets. The Company recognized an income tax benefit for the year ended December 31, 2025, of $44.6 million primarily related to the recognition of net deferred tax liabilities in connection with certain acquisitions, which resulted in a decrease to the Company's valuation allowance.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):

The Company had U.S. federal, state, and foreign net operating loss carryforwards of approximately $653.8 million, $454.7 million, and $140.6 million, respectively, as of December 31, 2025. The Company’s U.S. federal net operating loss carryforwards generated prior to January 1, 2018, of $9.7 million will begin to expire, if not utilized, in 2036, and net operating loss carry forwards generated after January 1, 2018, of $644.1 million will carryforward indefinitely, although limited to 80% of taxable income annually. The Company has $357.0 million in definite-lived state net operating loss carryforwards, which will begin to expire in 2033. The Company has $80.0 million in definite-lived foreign net operating loss carryforwards, of which $15.8 million will begin to expire in 2026 and the remaining will carryforward indefinitely. As of December 31, 2025, the Company had U.S. federal and state tax credit carryforwards of $64.2 million. The tax credit carryforwards will expire between 2026 and 2045.

The deductibility of such credits and net operating losses (“NOL”) may be limited. Under Sections 383 and 382 of the Internal Revenue Code of 1986, as amended (the “Code”), and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which generally occurs if the percentage of the corporation’s stock owned by 5% stockholders increases by more than 50% over a three-year period, the corporation’s ability to use its pre-change credits and NOL carryforwards and other pre-change tax attributes to offset its post-change income, may be limited. The Company has not determined if it has experienced Section 383/382 ownership changes in the past and if a portion of its NOL and tax credit carryforwards are subject to an annual limitation. In addition, the Company may experience ownership changes in the future as a result of subsequent shifts in its stock ownership, some of which may be outside of its control. If the Company determines that an ownership change has occurred and its ability to use its historical NOL and tax credit carryforwards is significantly limited, it would harm the Company’s future operating results by effectively increasing its future tax obligations.

The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets. Based on the Company’s history of operating losses, including a three-year cumulative loss position as of December 31, 2025 and 2024, the Company has concluded that it is not more likely than not that its net deferred income tax assets will be realized in the U.S. and Switzerland. Accordingly, the Company has provided a full valuation allowance for those jurisdictions as of December 31, 2025 and 2024. The net increase in the valuation allowance of $185.7 million is due to the impact of current year operating losses, research and development credits, and acquired deferred income tax assets, offset by decreases for acquired deferred income tax liabilities.

The Company considers the outside basis of its foreign subsidiaries to be indefinitely reinvested as it intends to further invest in its foreign operations. The determination of any unrecorded deferred income tax asset or liability on the remaining excess carrying amount of the Company's investments over their respective tax bases is not practicable due to the uncertainty of how these investments would be recovered and such differences are not expected to be recognized in the foreseeable future.

Uncertain income tax positions were not material as of December 31, 2025 and 2024. Interest and penalties recorded in the consolidated statements of operations were not material for any of the years ended December 31, 2025, 2024 and 2023. Cash paid for income taxes is not material for any of the years ended December 31, 2025, 2024 and 2023.

The Company files incomes tax returns in the United States, including various state jurisdictions, and in various foreign jurisdictions. The current tax years that are subject for examination are tax years 2021 through 2024, although tax years dating back to 2016 remain open up to the tax attribute amounts carried forward for future use.