Lucid Group, Inc.LCID
Lucid Group, Inc. Income Taxes Disclosure
INCOME TAXES
(1) State income taxes in Florida and Pennsylvania made up the majority (greater than 50 percent) of the tax effect in this category.
The components of loss before provision for (benefit from) income taxes for the years ended December 31, 2025, 2024, and 2023, were as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Loss subject to domestic income taxes | $ | (2,693,686) | $ | (2,699,739) | $ | (2,825,820) | |||||||||||
Loss subject to foreign income taxes | (6,698) | (13,004) | (1,574) | ||||||||||||||
Loss before provision for (benefit from) income taxes | $ | (2,700,384) | $ | (2,712,743) | $ | (2,827,394) | |||||||||||
The Company recorded provision for (benefit from) income taxes in connection with its domestic, state, and foreign subsidiaries for the years ended December 31, 2025, 2024, and 2023, respectively, as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | 328 | — | 24 | ||||||||||||||
| Foreign | 2,569 | 1,339 | 1,002 | ||||||||||||||
Total current tax expense | $ | 2,897 | $ | 1,339 | $ | 1,026 | |||||||||||
| Deferred | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | — | — | — | ||||||||||||||
| Foreign | (5,230) | (140) | — | ||||||||||||||
Total deferred tax expense | $ | (5,230) | $ | (140) | $ | — | |||||||||||
Total provision for (benefit from) income taxes | $ | (2,333) | $ | 1,199 | $ | 1,026 | |||||||||||
The reconciliation of taxes at the federal statutory rate to our provision for (benefit from) income taxes for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09 was as follows (in thousands, except percent data):
Year Ended December 31, 2025 | |||||||||||
Amount | Percent | ||||||||||
U.S. federal statutory tax rate | $ | (567,080) | 21.0% | ||||||||
State income taxes, net of federal income tax effect(1) | 259 | — | |||||||||
Foreign tax effects | (1,212) | — | |||||||||
Effect of cross-border tax laws | 3,035 | (0.1) | |||||||||
Tax credits | (45,625) | 1.7 | |||||||||
Changes in valuation allowances | 717,016 | (26.5) | |||||||||
Nontaxable or nondeductible items | |||||||||||
Tax effects of stock-based compensation(2) | 32,859 | (1.2) | |||||||||
Derivative liability fair value adjustment | (130,926) | 4.8 | |||||||||
Other nontaxable or nondeductible items | (10,765) | 0.4 | |||||||||
Other | 106 | — | |||||||||
Effective tax rate | $ | (2,333) | 0.1% | ||||||||
(2) U.S. stock-based compensation includes nondeductible costs, windfall and shortfall tax benefits, and executive compensation.
The reconciliation of taxes at the federal statutory rate to our provision for income taxes for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:
Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
U.S. federal statutory tax rate | 21.0% | 21.0% | |||||||||
| Stock-based compensation | (1.6) | (1.5) | |||||||||
| Change in fair value of warrant liability | 1.5 | 0.6 | |||||||||
| Nondeductible expenses | 0.6 | (1.5) | |||||||||
| Tax credits | 1.2 | 0.7 | |||||||||
| Change in valuation allowance | (22.7) | (19.3) | |||||||||
Effective tax rate | —% | —% | |||||||||
The amount of provision for (benefit from) income taxes differs from the expected benefit due to the impact of the U.S. valuation allowance, as well as income taxes associated with foreign operations.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred taxes as of December 31, 2025 and 2024, were as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 2,890,054 | $ | 1,605,236 | |||||||
| Tax credit carryforwards | 310,041 | 192,810 | |||||||||
| Capitalization of research and development costs | 33,154 | 443,311 | |||||||||
| Accruals and reserves | 299,415 | 232,487 | |||||||||
Inventory | 401,809 | 461,127 | |||||||||
| Other | 177,489 | 152,886 | |||||||||
| Total deferred tax assets | 4,111,962 | 3,087,857 | |||||||||
| Valuation allowance | (3,877,614) | (2,904,865) | |||||||||
| Total deferred tax assets, net of valuation allowance | 234,348 | 182,992 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation | (103,489) | (72,023) | |||||||||
| Right-of-use assets | (105,616) | (70,890) | |||||||||
Tax accounting method change | (19,874) | (39,939) | |||||||||
| Total deferred tax liabilities | (228,979) | (182,852) | |||||||||
| Deferred tax assets (liabilities), net of valuation allowance | $ | 5,369 | $ | 140 | |||||||
The Company does not anticipate foreign earnings would be subject to U.S. taxation upon repatriation. However, distributions of unremitted foreign earnings may be subject to foreign withholding taxes. Accordingly, provisions have not been made on the Company’s basis differences in investments that primarily result from earnings in foreign subsidiaries which are indefinitely reinvested. If recorded, the deferred tax liability associated with indefinitely reinvested basis differences would be immaterial to the financial statements.
A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax asset will not be realized in a particular tax jurisdiction. All available evidence, both positive and negative, is considered to determine whether, based on the weight of that evidence, a valuation allowance is needed for some portion or all of a deferred tax asset. Judgment must be used in considering the relative impact of negative and positive evidence. Based on the weight of the available evidence, which includes the Company’s historical operating losses, lack of taxable income, and the accumulated deficit, as of December 31, 2025 and 2024, the Company provided a full valuation allowance against its U.S. and state deferred tax assets. The valuation allowance for deferred tax assets was $3,877.6 million and $2,904.9 million, as of December 31, 2025 and 2024, respectively. The valuation allowance on the Company’s net deferred taxes increased by $972.7 million and $767.0 million during the years ended December 31, 2025 and 2024, respectively.
The Company had federal, state, and foreign net operating loss carryforwards of $10,833.3 million, $7,797.6 million, and $44.3 million, respectively, as of December 31, 2025, which will begin to expire at various dates beginning in 2027. The Company also had federal and state tax research and development tax credit carryforwards of $205.4 million and $162.5 million, respectively. The federal research and development tax credit carryforwards will expire at various dates beginning in 2036, if not utilized. The state research and development tax credit carryforwards do not have an expiration date.
The Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of net operating losses and certain credits in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses and certain credits may be limited as prescribed under Internal Revenue Code Section 382, which provide for limitations on net operating losses carryforwards and certain built in losses following ownership changes, and Section 383, which provides for special limitations on certain excess credits, etc. (collectively, “IRC Section 382”). Utilization of the carryforwards may be subject to substantial annual limitation due to the ownership change limitations provided by the IRC Section 382 and similar state provisions, resulting in a reduction in the gross deferral tax assets before considering the valuation allowance. The Company has completed a formal Section 382 study of our equity transactions through December 31, 2020. The study determined that the Company experienced an “ownership change” in 2016, and the Company will not be able to utilize $12.0 million of our U.S. federal net operating loss and $3.0 million of U.S. federal research and development tax credit carryforwards.
On July 4, 2025, the OBBBA was signed into law, introducing significant changes to the U.S. federal income tax code. The OBBBA included provisions that allow for the immediate expensing of domestic research and development expenses and certain capital expenditures, as well as other changes related to the U.S. taxation of profits derived from foreign operations. The Company is electing to fully amortize its previously capitalized domestic research and development expenses in the current year. Due to the Company’s full valuation allowance on its U.S. deferred tax assets, the net tax impact of the legislation is immaterial.
Income Tax Payments
The Company paid income taxes (net of refunds received) of $4.5 million during the year ended December 31, 2025, which were primarily related to Netherlands and Kingdom of Saudi Arabia.
Uncertain Tax Positions
The following table summarizes the activity related to unrecognized tax benefits for the years ended December 31, 2025, 2024, and 2023 (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Unrecognized tax benefits—beginning of period | $ | 38,523 | $ | 140,767 | $ | 105,234 | |||||||||||
| Gross increases—prior-period tax positions | 5,166 | — | 539 | ||||||||||||||
| Gross decreases—prior-period tax positions | (21) | (111,065) | (581) | ||||||||||||||
| Gross increases—current-period tax positions | 11,731 | 8,904 | 35,575 | ||||||||||||||
| Gross decrease—current-period tax positions | — | — | — | ||||||||||||||
| Statute lapse | (25) | (83) | — | ||||||||||||||
Unrecognized tax benefits—end of period | $ | 55,374 | $ | 38,523 | $ | 140,767 | |||||||||||
As of December 31, 2025, 2024 and 2023, the total amount of unrecognized tax benefits was $55.4 million, $38.5 million, and $140.8 million, respectively, of which $0.9 million, $0.9 million, and $1.1 million, if recognized for respective periods, would favorably impact the Company's effective tax rate.
Related to the unrecognized tax benefits above, the interest expense and penalty expense recognized as part of provision for (benefit from) income taxes in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2025, 2024, and 2023 were not material. As of December 31, 2025 and 2024, the Company recorded immaterial liability for interest expense and penalties, which was included within other long-term liabilities in the consolidated balance sheets.
The Company files U.S., state, and foreign income tax returns with varying statutes of limitations. The federal, state, and foreign returns statutes of limitations remains open for all years. There are currently no income tax audits underway by U.S., state, or foreign tax authorities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 16, 2021 | |
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.