Korro Bio, Inc. Income Taxes Disclosure
11. Income Taxes
For the years ended December 31, 2025 and 2024, the loss before income taxes consisted of the following (in thousands):
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Domestic |
|
$ |
(117,816 |
) |
|
$ |
(83,500 |
) |
Foreign |
|
|
1,193 |
|
|
|
60 |
|
Total |
|
$ |
(116,623 |
) |
|
$ |
(83,440 |
) |
The provision for income taxes for the years ended December 31, 2025 and 2024 was comprised as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Current taxes: |
|
|
|
|
|
|
||
Federal |
|
$ |
— |
|
|
$ |
— |
|
State |
|
|
1 |
|
|
|
141 |
|
Foreign |
|
|
636 |
|
|
|
— |
|
Total current taxes |
|
|
637 |
|
|
|
141 |
|
Deferred taxes: |
|
|
|
|
|
|
||
Federal |
|
|
— |
|
|
|
— |
|
State |
|
|
— |
|
|
|
— |
|
Foreign |
|
|
— |
|
|
|
— |
|
Total deferred taxes |
|
|
— |
|
|
|
— |
|
Total provision for income taxes |
|
$ |
637 |
|
|
$ |
141 |
|
A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate is as follows (in thousands):
|
|
December 31, |
|
|||||||||||||
|
|
2025 |
|
|
2025 |
|
|
2024 |
|
|
2024 |
|
||||
Income tax computed at federal statutory rate |
|
$ |
(24,490 |
) |
|
|
21.0 |
% |
|
$ |
(17,523 |
) |
|
|
21.0 |
% |
State taxes, net of federal benefit (a) |
|
|
1 |
|
|
|
— |
% |
|
|
141 |
|
|
|
(0.2 |
)% |
Foreign tax effects |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Other foreign jurisdictions |
|
|
384 |
|
|
|
(0.3 |
)% |
|
|
(12 |
) |
|
|
— |
% |
Effect of cross boarder transactions |
|
|
251 |
|
|
|
(0.2 |
)% |
|
|
— |
|
|
|
— |
% |
Enactment of new tax laws |
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
% |
Nontaxable or nondeductible items |
|
|
485 |
|
|
|
(0.4 |
)% |
|
|
(204 |
) |
|
|
0.2 |
% |
Tax credits |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research & development credits |
|
|
(1,433 |
) |
|
|
1.2 |
% |
|
|
(3,198 |
) |
|
|
3.8 |
% |
Changes in valuation allowance |
|
|
25,512 |
|
|
|
(21.9 |
)% |
|
|
17,743 |
|
|
|
(21.3 |
)% |
Changes in unrecognized tax benefits |
|
|
— |
|
|
|
— |
% |
|
|
— |
|
|
|
— |
% |
Other items |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Stock option cancellations |
|
|
— |
|
|
|
— |
% |
|
|
2,842 |
|
|
|
(3.4 |
)% |
Other |
|
|
(73 |
) |
|
|
0.1 |
% |
|
|
352 |
|
|
|
(0.3 |
)% |
Effective tax rate |
|
$ |
637 |
|
|
|
(0.5 |
)% |
|
$ |
141 |
|
|
|
(0.2 |
)% |
(a) The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include Massachusetts. |
|
|||||||||||||||
For the years ended December 31, 2025 and 2024, the amount of cash income taxes paid by the Company was as follows (in thousands):
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Cash taxes paid: |
|
|
|
|
|
|
||
Federal |
|
$ |
— |
|
|
$ |
— |
|
State |
|
|
|
|
|
|
||
Massachusetts |
|
|
1 |
|
|
|
141 |
|
Foreign |
|
|
— |
|
|
|
— |
|
Total |
|
$ |
1 |
|
|
$ |
141 |
|
The principal components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 were comprised as follows (in thousands):
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Net operating loss carryforwards |
|
$ |
124,617 |
|
|
$ |
94,196 |
|
Tax credit carryforwards |
|
|
28,041 |
|
|
|
26,410 |
|
Capitalized research and development |
|
|
33,654 |
|
|
|
41,719 |
|
Stock-based compensation |
|
|
3,376 |
|
|
|
1,808 |
|
Amortization |
|
|
1,589 |
|
|
|
1,296 |
|
Operating lease liability |
|
|
11,883 |
|
|
|
12,075 |
|
Accrued expenses and other temporary differences |
|
|
1,386 |
|
|
|
1,147 |
|
Total deferred tax assets |
|
|
204,546 |
|
|
|
178,651 |
|
Less: valuation allowance |
|
|
(202,344 |
) |
|
|
(168,319 |
) |
Net deferred tax assets |
|
|
2,202 |
|
|
|
10,332 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Operating right-of-use asset |
|
|
(2,202 |
) |
|
|
(6,429 |
) |
Depreciation |
|
|
— |
|
|
|
(3,903 |
) |
Total deferred tax liabilities |
|
|
(2,202 |
) |
|
|
(10,332 |
) |
Net deferred taxes |
|
$ |
— |
|
|
$ |
— |
|
As of December 31, 2025, the Company had federal and state net operating loss (“NOL”) carryforwards $462.0 million and $436.9 million, respectively. Under current law, the Company's federal NOLs generated in taxable years ending after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOLs is limited to 80% of the Company's taxable income annually for tax years beginning after December 31, 2018. Federal NOLs generated in taxable years ending on or prior to December 31, 2017, however, have a 20-year carryforward period, but are not subject to the 80% limitation. The Company has federal NOLs of $22.4 million that are subject to expiration between 2036 and 2037 and has $439.6 million of federal NOLs that do not expire.
State NOLs expire at various dates from 2035 through 2045. As of December 31, 2025, the Company had federal research and development tax credit carryforwards of $20.2 million that expire at various dates from 2037 through 2045. In addition, as of December 31, 2025, the Company had state research and development tax credit carryforwards of $9.9 million that expire at various dates from 2032 through 2040.
The Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which primarily pertain to NOL carryforwards, tax credit carryforwards and capitalized research and development. The Company has determined that it is more likely than not that it will not realize the benefits of its deferred tax assets, and as a result, a valuation allowance of $202.3 million has been established at December 31, 2025. The increase in the valuation allowance of $34.0 million during the year ended December 31, 2025 was primarily due to the additional operating loss generated by the Company.
NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the IRC. This could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the Company’s value immediately prior to the ownership change. As a result of ownership changes in the Company from its inception through December 31, 2025, the Company’s NOL and tax credit carryforwards allocable to the periods preceding each such ownership change could be subject to limitations under IRC Section 382, however the Company has not yet completed an IRC Section 382 study. The Company’s foreign net operating loss carryforwards may also be limited under similar laws in the foreign jurisdiction.
The Company had no unrecognized tax benefits as of either December 31, 2025 or 2024. The Company has not conducted a study of its research and development credit carryforwards generated during any year. This study, once completed, may result in an adjustment to the Company’s research and development credit carryforwards.
However, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credit carryforwards, and if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the consolidated statements of operations and comprehensive loss if an adjustment were required.
The Company files income tax returns in the United States federal tax jurisdiction and the California, Connecticut, Florida, Massachusetts, New Hampshire, New Jersey and South Carolina state tax jurisdictions. The Company also files an income tax return in Australia for the Company’s Australian subsidiary. Because the Company is in a loss carryforward position, it is generally subject to examination by federal and state tax authorities for all tax years in which a loss carryforward is available.
As of December 31, 2025, the Company has not incurred any material interest or penalty charges.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 18, 2025 | |
| 2023 | Mar 26, 2024 | |
| 2022 | Mar 10, 2023 | |
| 2021 | Mar 15, 2022 | |
| 2020 | Mar 29, 2021 | |
| 2019 | Mar 26, 2020 | |
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.