Jaguar Health, Inc. Income Taxes Disclosure
14. Income Taxes
The Company's loss before provision for income taxes during the years ended December 31, 2025 and 2024, was a domestic loss of $48.8 million and $34.3 million, and a foreign loss of $5.6 million and $5.0 million, respectively.
The effective tax rate for 2025 and 2024, 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, 2025 and 2024.
The Company’s effective tax during the years ended December 31, 2025 and 2024, differed from the federal statutory rate as follows:
|
|
December 31, |
|
|
|||||
|
|
2025 |
|
|
2024 |
|
|
||
Statutory rate |
|
|
(21.0 |
) |
% |
|
(21.0 |
) |
% |
State taxes |
|
|
(4.2 |
) |
% |
|
(4.5 |
) |
% |
Intercompany transactions |
|
|
— |
|
% |
|
— |
|
% |
Valuation allowance |
|
|
22.0 |
|
% |
|
91.4 |
|
% |
Nondeductible warrant expense |
|
|
— |
|
% |
|
— |
|
% |
Book loss on debt extinguishment |
|
|
3.7 |
|
% |
|
(3.2 |
) |
% |
Foreign rate differential |
|
|
— |
|
% |
|
(0.1 |
) |
% |
Other |
|
|
(0.5 |
) |
% |
|
(62.6 |
) |
% |
Effective tax rate |
|
|
— |
|
% |
|
— |
|
% |
Net deferred tax assets as of December 31, 2025 and 2024 consisted of the following:
|
|
December 31, |
|
|||||||
(In thousands) |
|
2025 |
|
|
2024 |
|
||||
Non-current deferred tax assets: |
|
|
|
|
|
|
|
|
||
Net operating losses |
|
$ |
|
90,810 |
|
|
$ |
|
77,749 |
|
Tax credits |
|
|
|
241 |
|
|
|
|
241 |
|
Stock compensation |
|
|
|
210 |
|
|
|
|
419 |
|
Other |
|
|
|
8,601 |
|
|
|
|
15,703 |
|
|
|
|
|
99,862 |
|
|
|
|
94,112 |
|
Valuation allowance |
|
|
|
(98,876 |
) |
|
|
|
(93,567 |
) |
Net non-current deferred tax assets |
|
|
|
986 |
|
|
|
|
545 |
|
Non-current deferred tax liabilities: |
|
|
|
|
|
|
|
|
||
Other |
|
|
|
(986 |
) |
|
|
|
(545 |
) |
Property and equipment |
|
|
|
— |
|
|
|
|
— |
|
Net non-current deferred tax liability |
|
|
|
(986 |
) |
|
|
|
(545 |
) |
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, 2025 and 2024, due to the uncertainty of realizing future tax benefits from its NOL carryforwards and other deferred tax assets.
The valuation allowance increased by $6.1 million during the year ended December 31, 2025.
As of December 31, 2025, the Company have federal and California NOL carryovers of approximately $306.5 million and $137.3 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, 2025 and 2024.
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, 2025 and 2024.
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, 2025, 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, 2025 or 2024.
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) |
|
2025 |
|
|
2024 |
|
||||
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 |
|
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted. The Company evaluated the impact of the OBBBA in accordance with ASC 740, Income Taxes, which requires that the effects of changes in tax law be recognized in the period of enactment.
Effective for tax years beginning after December 31, 2024, the OBBBA restores immediate expensing of domestic research and experimental (“R&E”) expenditures. The legislation also provides an election for certain eligible small businesses to retroactively apply this immediate expense to domestic R&E costs paid or incurred in taxable years beginning after December 31, 2021. To utilize this retroactive application, the Company must make the election within one year of the OBBBA's enactment and file amended tax returns for each affected taxable year. Alternatively, the legislation permits taxpayers to elect to accelerate the deduction of remaining unamortized domestic R&E costs capitalized in tax years 2022 through 2024, either by deducting the remaining unamortized amount entirely in the first taxable year beginning after December 31, 2024, or ratably over a 2-taxable year period. The Company has not elected to accelerate the deduction of these previously capitalized costs and will continue to amortize them over the applicable recovery period.
As a result, deferred tax assets related to previously capitalized domestic R&E expenditures were remeasured as of the enactment date to reflect the new law. The OBBBA also restores an EBITDA-based limitation under IRC Section 163(j) and permanently reinstates 100% bonus depreciation for qualified property acquired after January 19, 2025. The legislation did not modify the general rules applicable to post-2017 federal net operating loss carryforwards, which continue to carry forward indefinitely and remain subject to an 80% taxable income limitation.
As of the enactment date, the remeasurement of deferred tax assets, including those related to capitalized R&E expenditures and net operating losses, was offset by a corresponding adjustment to the Company’s valuation allowance. Accordingly, the net impact of the OBBBA on income tax expense was not material. The Company will continue to monitor future guidance and evaluate the ongoing impact of the legislation on its income tax provision.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Apr 7, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 24, 2023 | |
| 2021 | Mar 11, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Apr 3, 2020 | |
| 2018 | Apr 10, 2019 | |
| 2017 | Apr 9, 2018 | |
| 2016 | Feb 15, 2017 | |
| 2015 | Mar 29, 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.