Jade Biosciences, Inc. Income Taxes Disclosure

11. Income Taxes

In the year December 31, 2025 and the period from June 18, 2024 (Inception) to December 31, 2024, no federal, state or foreign income taxes were paid or refunds received.

As of December 31, 2025, and December 31, 2024, the Company had a federal net operating loss carryforwards of $54.5 million and $2.1 million, respectively. As of December 31, 2025, and December 31, 2024, the Company had state net operating loss carryforwards of $1.9 million and $0.1 million, respectively. The federal net operating loss carryforwards may be carried forward indefinitely. The state net operating loss carryforwards begin to expire in 2045.

As of December 31, 2025, and December 31, 2024, the Company had federal research and development credits of $1.3 million and $0.3 million, respectively. As of December 31, 2025, and December 31, 2024, the Company had state research and development credits of $0.3 million and $0.1 million, respectively. The federal research and development credits begin to expire in 2044. The state research and development credits may be carried forward indefinitely.

Future realization of the tax benefits of existing temporary differences and net operating loss carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of December 31, 2025, and December 31, 2024, the Company performed an evaluation to determine whether a valuation allowance was needed. The Company considered all available evidence, both positive and negative, which included the results of operations for the current year. The Company determined that it is more likely than not that all of the domestic deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance on its domestic net deferred tax assets as of December 31, 2025 and December 31, 2024, respectively.

For the year ending December 31, 2025 and December 31, 2024, the valuation allowance increased primarily due to the increases in net operating loss carryforwards and research and development tax credit carryforwards. The changes in the valuation allowance were as follows (in thousands):

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”), was signed into law in the United States, OBBBA contains a broad range of tax reform provisions, which includes a new Internal Revenue Code ("IRC") Section 174A. Under Section 174A, commencing with tax years beginning after December 31, 2024, domestic research or experimental expenditures may be deducted in the current period rather than capitalized and amortized over multiple years, as previously required under IRC Section 174. OBBBA does not have a material impact on our effective tax rate, financial condition, or results of operations in 2025.

Under IRC Section 382, if a corporation undergoes an ownership change, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. The Company has not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since the Company became a loss corporation as defined in Section 382. Future changes in the Company’s capital ownership, which may be outside of the Company’s control, may trigger an ownership change. In addition, future equity offerings or acquisitions that have equity as a component of the purchase price could result in an ownership change. If an ownership change has occurred or does occur in the future, utilization of the net operating loss carryforwards or other tax attributes may be limited, which could potentially result in increased future tax liability for the Company.

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the many states in which the Company operates or does business in, as well as Canada. ASC 740 states that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits.

The Company records uncertain tax positions as liabilities in accordance with ASC 740 and adjusts these liabilities when the Company’s judgment changes as a result of the evaluation of new information not previously available. Because of the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. For the period ended December 31, 2025, and December 31, 2024, the Company has not recorded any uncertain tax positions in the Company’s consolidated financial statements.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statement of operations and comprehensive loss. For the period ended December 31, 2025, and December 31, 2024, no accrued interest or penalties are included on the related tax liability line in the consolidated balance sheets.

The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal, state and foreign jurisdictions, where applicable. There are currently no pending tax examinations. Generally, the tax years 2022 through 2025 remain open to examination by the major taxing jurisdictions to which the Company is subject. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service, or state or foreign tax authorities, to the extent utilized in a future period.