Jaguar Health, Inc. Income Taxes Disclosure
14. Income Taxes
The Company's loss before provision for income taxes during the years ended December 31, 2024 and 2023, was a domestic loss of $34.3 million and $35.6 million, and a foreign loss of $5.0 million and $6.3 million, respectively.
The effective tax rate for 2024 and 2023, was 0%. As a result of the Company's history of net operating losses (“NOL”) and a full valuation allowance against its deferred tax assets, there was minimal current income tax and no deferred income tax provision for the years ended December 31, 2024 and 2023.
The Company’s effective tax during the years ended December 31, 2024 and 2023, differed from the federal statutory rate as follows:
|
|
December 31, |
||||||||
|
|
2024 |
|
2023 |
||||||
Statutory rate |
|
|
(21.0 |
) |
% |
|
|
(21.0 |
) |
% |
State taxes |
|
|
(4.5 |
) |
% |
|
|
(2.0 |
) |
% |
Intercompany transactions |
|
|
— |
|
% |
|
|
1.0 |
|
% |
Valuation allowance |
|
|
91.4 |
|
% |
|
|
20.7 |
|
% |
Nondeductible warrant expense |
|
|
— |
|
% |
|
|
— |
|
% |
Book loss on debt extinguishment |
|
|
(3.2 |
) |
% |
|
|
(1.9 |
) |
% |
Foreign rate differential |
|
|
(0.1 |
) |
% |
|
|
(1.8 |
) |
% |
Other |
|
|
(62.6 |
) |
% |
|
|
4.9 |
|
% |
Effective tax rate |
|
|
— |
|
% |
|
|
— |
|
% |
Net deferred tax assets as of December 31, 2024 and 2023 consisted of the following:
|
|
December 31, |
|
|||||||
(In thousands) |
|
2024 |
|
|
2023 |
|
||||
Non-current deferred tax assets: |
|
|
|
|
|
|
|
|
||
Net operating losses |
|
$ |
|
77,749 |
|
|
$ |
|
51,853 |
|
Tax credits |
|
|
|
241 |
|
|
|
|
241 |
|
Stock compensation |
|
|
|
419 |
|
|
|
|
559 |
|
Other |
|
|
|
15,703 |
|
|
|
|
4,981 |
|
|
|
|
|
94,112 |
|
|
|
|
57,634 |
|
Valuation allowance |
|
|
|
(93,567 |
) |
|
|
|
(56,222 |
) |
Net non-current deferred tax assets |
|
|
|
545 |
|
|
|
|
1,412 |
|
Non-current deferred tax liabilities: |
|
|
|
|
|
|
|
|
||
Other |
|
|
|
(545 |
) |
|
|
|
(1,431 |
) |
Property and equipment |
|
|
|
— |
|
|
|
|
19 |
|
Net non-current deferred tax liability |
|
|
|
(545 |
) |
|
|
|
(1,412 |
) |
Net non-current deferred tax asset (liability) |
|
$ |
|
— |
|
|
$ |
|
— |
|
A valuation allowance is provided when it is more likely than not that the deferred tax assets will not be realized. The Company has established a valuation allowance to offset net deferred tax assets as of December 31, 2024 and 2023, due to the uncertainty of realizing future tax benefits from its NOL carryforwards and other deferred tax assets.
The valuation allowance increased by $37.3 million during the year ended December 31, 2024.
As of December 31, 2024, the Company have federal and California NOL carryovers of approximately $212.9 million and $119.6 million, respectively. The Company also have California research credit carryovers of approximately $382,000. The California research credits carry forward indefinitely. The Company had no Federal research credit carryovers.
Enacted on March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“the CARES Act”) authorizes more than $2.0 trillion to battle COVID-19 and its economic effects, including immediate cash relief for individual citizens, loan programs for small business, support for hospitals and other medical providers, and various types of economic relief for impacted businesses and industries. The CARES Act does not have a material impact on the Company’s financial results for the year ended December 31, 2024 and 2023.
The Consolidated Appropriations Act, 2021 (the "Act") was enacted in the US on December 27, 2020. The Act enhances and expands certain provisions of the CARES Act. The Act does not have a material impact on the Company’s financial results for the year ended December 31, 2024 and 2023.
Uncertain Tax Positions
The Company has adopted the provisions of ASC 740, Income Taxes Related to Uncertain Tax Positions. Under these principals, tax positions are evaluated in a two-step process. The Company first determines whether it is more-likely-than-not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold it is then measured to determine the amount of benefit to be recognized in the financial statements. The tax position is measured as the largest amount of benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement.
As of December 31, 2024, all unrecognized tax benefits were offset against deferred tax assets which are subject to a full valuation allowance, and if recognized, will not affect the Company's tax rate.
The Company does not anticipate that the total amounts of unrecognized tax benefits will significantly increase or decrease in the next 12 months.
The Company's policy is to include interest and penalties related to unrecognized tax benefits within its provision for income taxes. Due to the Company's net operating loss position, the Company has not recorded an accrual for interest or penalties related to uncertain tax positions for the years ended December 31, 2024 or 2023.
The following is a reconciliation of the beginning and ending amount of the Company’s total gross unrecognized tax benefit liabilities:
|
|
December 31, |
|
|||||||
(In thousands) |
|
2024 |
|
|
2023 |
|
||||
Gross Unrecognized Tax Benefit--Beginning Balance |
|
$ |
|
77 |
|
|
$ |
|
77 |
|
Increases Related to Tax Positions from Prior Years |
|
|
|
— |
|
|
|
|
— |
|
Increases Related to Tax Positions Taken During the Current Year |
|
|
|
— |
|
|
|
|
— |
|
Gross Unrecognized Tax Benefit--Ending Balance |
|
$ |
|
77 |
|
|
$ |
|
77 |
|
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.