STANDARD BIOTOOLS INC. Income Taxes Disclosure
15. Income Taxes
The Company' loss before income taxes consists of the following (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Domestic |
|
$ |
(110,938 |
) |
|
$ |
(40,587 |
) |
|
$ |
(174,041 |
) |
International |
|
|
(27,374 |
) |
|
|
(33,617 |
) |
|
|
(18,887 |
) |
Loss before income taxes |
|
$ |
(138,312 |
) |
|
$ |
(74,204 |
) |
|
$ |
(192,928 |
) |
Significant components of the Company's benefit (expense) from income taxes are as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
State |
|
|
(233 |
) |
|
|
(197 |
) |
|
|
(87 |
) |
Foreign |
|
|
(103 |
) |
|
|
(373 |
) |
|
|
(405 |
) |
Total current tax expense |
|
|
(336 |
) |
|
|
(570 |
) |
|
|
(492 |
) |
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
— |
|
|
|
— |
|
|
|
— |
|
State |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Foreign |
|
|
(237 |
) |
|
|
118 |
|
|
|
3,322 |
|
Total deferred benefit |
|
|
(237 |
) |
|
|
118 |
|
|
|
3,322 |
|
Total benefit (expense) from income taxes |
|
$ |
(573 |
) |
|
$ |
(452 |
) |
|
$ |
2,830 |
|
Reconciliation of income taxes at the statutory rate to the benefit (expense) from income taxes recorded in the statements of operations is as follows:
|
|
Year Ended December 31, |
|
|||||||||
|
|
2024 |
|
|
2023 |
|
|
2022 |
|
|||
Tax benefit at federal statutory rate |
|
|
21.0 |
% |
|
|
21.0 |
% |
|
|
21.0 |
% |
State tax expense, net of federal benefit |
|
|
2.4 |
|
|
|
1.3 |
|
|
|
0.8 |
|
Foreign tax expense |
|
|
0.0 |
|
|
|
8.1 |
|
|
|
0.8 |
|
Change in valuation allowance |
|
|
(8.2 |
) |
|
|
(21.9 |
) |
|
|
17.1 |
|
Federal R&D credit |
|
|
0.8 |
|
|
|
0.2 |
|
|
|
0.2 |
|
Unrecognized tax benefit |
|
|
1.0 |
|
|
|
— |
|
|
|
0.9 |
|
Non-deductible interest/premium |
|
|
|
|
|
— |
|
|
|
(0.3 |
) |
|
Bargain purchase gain |
|
|
3.8 |
|
|
|
|
|
|
|
||
Non-deductible loss on Forward Sale of Preferred Stock and Bridge Loans |
|
|
— |
|
|
|
— |
|
|
|
(8.0 |
) |
R&D tax credits expiring unutilized |
|
|
(11.5 |
) |
|
|
— |
|
|
|
(5.2 |
) |
NOL carryforwards expiring unutilized |
|
|
(4.1 |
) |
|
|
(5.5 |
) |
|
|
(22.8 |
) |
Transaction costs |
|
|
(1.6 |
) |
|
|
(1.5 |
) |
|
|
— |
|
Executive stock-based compensation |
|
|
(2.3 |
) |
|
|
(2.6 |
) |
|
|
(0.8 |
) |
Return to provision |
|
|
(0.5 |
) |
|
|
2.5 |
|
|
|
— |
|
Other, net |
|
|
(1.2 |
) |
|
|
(2.0 |
) |
|
|
(2.2 |
) |
Effective tax rate |
|
|
(0.4 |
)% |
|
|
(0.4 |
)% |
|
|
1.5 |
% |
Significant components of the Company's deferred tax assets and liabilities are as follows (in thousands):
|
|
Year Ended December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Net operating loss carryforward |
|
$ |
242,050 |
|
|
$ |
96,242 |
|
Reserves and accruals |
|
|
14,672 |
|
|
|
3,152 |
|
Depreciation and amortization |
|
|
3,354 |
|
|
|
564 |
|
Capitalized R&D costs |
|
|
25,138 |
|
|
|
5,962 |
|
Tax credit carryforwards |
|
|
17,216 |
|
|
|
15,463 |
|
Stock-based compensation |
|
|
7,801 |
|
|
|
1,143 |
|
Right-of-use lease liabilities |
|
|
7,749 |
|
|
|
7,782 |
|
Total gross deferred tax assets |
|
|
317,980 |
|
|
|
130,308 |
|
Valuation allowance on deferred tax assets |
|
|
(304,382 |
) |
|
|
(124,124 |
) |
Total deferred tax assets, net of valuation allowance |
|
|
13,598 |
|
|
|
6,184 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Fixed assets and intangibles |
|
|
(7,740 |
) |
|
|
(54 |
) |
Right-of-use assets |
|
|
(6,801 |
) |
|
|
(6,836 |
) |
Total deferred tax liabilities |
|
|
(14,541 |
) |
|
|
(6,890 |
) |
Net deferred tax liability |
|
$ |
(943 |
) |
|
$ |
(706 |
) |
|
|
|
|
|
|
|
||
Deferred tax liability per balance sheet |
|
$ |
(1,081 |
) |
|
$ |
(841 |
) |
Less deferred tax assets included in other long-term assets |
|
|
138 |
|
|
|
135 |
|
Net deferred tax liability |
|
$ |
(943 |
) |
|
$ |
(706 |
) |
Utilization of the net operating loss carryforwards and credits may be subject to a substantial annual limitation due to the ownership change limitations provided by Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. The Company is in the process of updating its Section 382 Study through December 31, 2024, and anticipates that an ownership change occurred on March 18, 2024 due to the change in the public group of shareholders. The Company is anticipating that as a result of this ownership change, a portion of the Company's net operating loss carryforwards and its R&D credits will expire unutilized. Subsequent ownership changes may further affect the limitation in future years.
The Company establishes a valuation allowance for deferred tax assets if the Company determines it is more likely than not the related tax benefit will not be realized. The Company relies on several factors when assessing the realizability of deferred tax assets, including historical financial results, the Company's ability to recover net operating loss carry-forwards, the projected future operating results, and the Company's ability to use tax planning strategies.
The valuation allowances of $304.4 million and $124.1 million as of December 31, 2024 and 2023, respectively, primarily relate to temporary tax differences, net operating losses and research and development credits generated in the current and prior years. The Company believes it is more likely than not that U.S. federal and state, Canada and Netherlands deferred tax assets relating to temporary differences, net operating losses and research and development credits are not realizable. As such, full valuation allowances have been applied against the deferred tax assets relating to jurisdictions of the U.S. federal and state, Canada, the Netherlands, and Malaysia.
A reconciliation of the beginning and ending amounts of the valuation allowance for the years ended December 31, 2024, 2023 and 2022, is as follows (in thousands):
|
|
Valuation Allowance |
|
|
December 31, 2021 |
|
$ |
141,087 |
|
Charges to earnings |
|
|
— |
|
Charges to other accounts |
|
|
(33,194 |
) |
December 31, 2022 |
|
|
107,893 |
|
Charges to earnings |
|
|
— |
|
Charges to other accounts |
|
|
16,231 |
|
December 31, 2023 |
|
|
124,124 |
|
Charges to earnings |
|
|
— |
|
Charges to other accounts |
|
|
180,258 |
|
December 31, 2024 |
|
$ |
304,382 |
|
As of December 31, 2024, the Company had net operating loss carryforwards for U.S. federal income tax purposes of $947.8 million, and U.S. federal research and development tax credits of $1.6 million, which begin expiring in 2044. As of December 31, 2024, the Company had net operating loss carryforwards for state income tax purposes of $666.3 million, which expire in the year beginning 2025, and California research and development tax credits of $14.2 million, which do not expire. As of December 31, 2024, we had foreign net loss carryforwards of $50.6 million, which will begin to expire in 2028, and Canada investment tax credit carryforwards of $7.4 million, which begin to expire in 2036.
The aggregate changes in the balance of the Company's gross unrecognized tax benefits during 2024, 2023, and 2022, were as follows (in thousands):
December 31, 2021 |
|
$ |
8,515 |
|
Increases in balances related to tax positions during a prior |
|
|
154 |
|
Increases in balances related to tax positions taken during current |
|
|
— |
|
Decreases in balances related to tax positions during a prior |
|
|
(1,697 |
) |
December 31, 2022 |
|
|
6,972 |
|
Increases in balances related to tax positions during a prior |
|
|
105 |
|
Decreases in balances related to tax positions taken during current |
|
|
(138 |
) |
December 31, 2023 |
|
|
6,939 |
|
Increases in balances related to tax positions during a prior |
|
|
— |
|
Increases in balances related to tax positions taken during |
|
|
2,682 |
|
Decreases in balances related to tax positions during a prior |
|
|
(357 |
) |
December 31, 2024 |
|
$ |
9,264 |
|
As of December 31, 2024, there were no unrecognized tax benefits that, if recognized, would reduce the Company's effective tax rate. The Company does not anticipate that existing unrecognized tax benefits will significantly increase or decrease within the next 12 months.
Accrued interest and penalties related to unrecognized tax benefits was included in the income tax provision. The amount was immaterial as of December 31, 2024, 2023, and 2022.
The Company files income tax returns in the United States, its various states, and in certain foreign jurisdictions. As a consequence of having operating loss carryforwards, all tax years are open to federal and state examination in the United States. The Company is currently under examination by the Canada Revenue Agency (CRA) for 2022 and 2023. As of December 31, 2024, tax years from 2019 are open to examination in various foreign countries.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 11, 2025 | Showing above |
| 2023 | Mar 1, 2024 | |
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.