Kodiak AI, Inc.KDK
Kodiak AI, Inc. Income Taxes Disclosure
16. Income Taxes
Income Taxes and Rate Reconciliation
The Company is subject to U.S. federal and state corporate income taxes. For the years ended December 31, 2025, 2024, and 2023, net loss before income taxes was generated in the U.S.
Income taxes consisted of the following for the periods presented (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Current: | |||||||||||||||||
Federal | $ | — | $ | — | $ | — | |||||||||||
State | 3 | 1 | 9 | ||||||||||||||
Total | 3 | 1 | 9 | ||||||||||||||
Deferred: | |||||||||||||||||
Federal | — | — | — | ||||||||||||||
State | — | — | — | ||||||||||||||
Total | — | — | — | ||||||||||||||
Income taxes | $ | 3 | $ | 1 | $ | 9 | |||||||||||
The U.S. federal statutory rate is reconciled to the Company's effective income tax rate for the year ended December 31, 2025 after the adoption of ASU 2023-09 as follows (in thousands):
| Year Ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| Federal statutory rate, benefit | $ | (122,960) | 21.0 | % | |||||||
| State income taxes, net of benefit | (14,600) | 2.5 | % | ||||||||
| R&D credits | (5,119) | 0.9 | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Stock-based compensation | 110,014 | (18.8) | % | ||||||||
| Change in unrecognized tax benefits | 1,035 | (0.2) | % | ||||||||
| Other | 1,626 | (0.3) | % | ||||||||
| Change in valuation allowance | 30,007 | (5.1) | % | ||||||||
| Effective tax rate | $ | 3 | — | % | |||||||
The following table presents the Company’s effective income tax rate reconciliation for the years ended December 31, 2024 and 2023, in accordance with the guidance prior to the adoption of ASU 2023-09 (in thousands):
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Federal statutory rate, benefit | $ | (14,586) | $ | (11,958) | |||||||
State income taxes, net of benefit | (5,318) | (4,881) | |||||||||
Nondeductible expenses | 35 | 153 | |||||||||
Stock-based compensation | 2,566 | 1,618 | |||||||||
Change in valuation allowance | 20,366 | 18,099 | |||||||||
R&D credits | (3,084) | (3,022) | |||||||||
Other | 22 | — | |||||||||
Income taxes | $ | 1 | $ | 9 | |||||||
The expense for income taxes in the table above related to continuing operations differs from the amounts computed by applying the statutory income tax rate of 21% due to a pretax loss in each period.
Deferred Income Taxes
The components of net deferred tax assets were as follows for the periods presented (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Deferred tax assets: | |||||||||||
Net operating loss carryforwards | $ | 76,818 | $ | 47,448 | |||||||
Accrued expenses and other current liabilities | 1,426 | 1,666 | |||||||||
Charitable contributions | 19 | 22 | |||||||||
Depreciation and amortization | 886 | 930 | |||||||||
Stock-based compensation | 1,785 | 233 | |||||||||
Operating lease liabilities | 1,292 | 2,136 | |||||||||
Capitalized research and development expense | 8,687 | 12,920 | |||||||||
Section 195 capitalization | 262 | 369 | |||||||||
Research and development credits | 15,804 | 12,076 | |||||||||
Total deferred tax assets | 106,979 | 77,800 | |||||||||
Less: valuation allowance | (105,744) | (75,737) | |||||||||
Total deferred tax assets, net of valuation allowance | 1,235 | 2,063 | |||||||||
Deferred tax liabilities: | |||||||||||
Operating lease right-of-use assets | (1,236) | (2,064) | |||||||||
Other | 1 | 1 | |||||||||
Total deferred tax liabilities | (1,235) | (2,063) | |||||||||
Net deferred tax assets | $ | — | $ | — | |||||||
The Company determines its valuation allowance on deferred tax assets by considering whether it is more likely than not that deferred tax assets will be realized. Due to the Company’s history of operating losses, the Company’s deferred tax assets are not likely to be realized and, accordingly, the Company has provided a full valuation allowance on its deferred tax assets. The valuation allowance increased by $30.0 million and $20.4 million for the years ended December 31, 2025 and 2024, respectively, primarily due to the increase in the Company’s U.S. and state net operating losses (“NOL”) carryforwards and tax credit carryforwards.
Available Carryforwards
As of December 31, 2025, NOLs and tax credit carryforwards were as follows (in millions):
Amount | Expiration Years | ||||||||||
NOLs, federal | $ | 288.7 | Indefinite | ||||||||
NOLs, state | 180.9 | 2039 | |||||||||
Research and development tax credits, federal | 11.8 | 2039 | |||||||||
Research and development tax credits, state | 8.2 | Indefinite | |||||||||
The federal and state NOL carryforwards may be subject to significant limitations under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and similar provisions under state law. These provisions limit the amount of NOL carryforwards that may be utilized in any given year in the event of certain circumstances, including significant changes in ownership.
Uncertain Tax Positions
A reconciliation of the beginning and ending balance of total gross unrecognized tax benefits was as follows for the periods presented (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Beginning balance of unrecognized tax benefits | $ | 3,269 | $ | 2,441 | |||||||
Gross increases based on tax positions related to current year | 1,035 | 795 | |||||||||
| Gross increases (decrease) based on tax positions related to prior years | (103) | 33 | |||||||||
Ending balance of unrecognized tax benefits | $ | 4,201 | $ | 3,269 | |||||||
For the years ended December 31, 2025 and 2024, no material interest and penalties related to unrecognized tax benefits were recognized. The Company is subject to taxation in the United States and various state jurisdictions. All tax years are open for examination. The Company currently has no federal or state tax examinations in progress.
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.