Income taxes

All of the Company’s income or loss from continuing operations before income tax is derived from its domestic operating subsidiaries. The following table presents the components of the provision for income taxes from continuing operations:


	Year ended
	May 25, 2025		May 26, 2024
Current:
Federal	$	14	$	(10)
State	148		37
Total	162		27
Deferred:
Federal	(124)		173
State	5		(17)
Total	(119)		156
Income tax provision	$	43	$	183

Income tax expense differs from the amount calculated using the 21% statutory U.S. federal income tax rate as follows:


	Year ended
	May 25, 2025		May 26, 2024
Tax at U.S. statutory rate	$	(8,122)	$	1,998
State income taxes, net of federal benefit	(197)		52
Compensation-related activity	799		418
Return to provision adjustments	213		3,136
Deferred tax write-offs	(748)		711
Tax credit carryforwards	(539)		(518)
Other	96		158
Change in valuation allowance	8,541		(5,772)
Income tax expense	$	43	$	183

The following table presents the components of deferred tax assets and liabilities reported in the balance sheets:


	Year ended
	May 25, 2025		May 26, 2024
Deferred tax assets:
Net operating loss carryforwards	$	40,677	$	40,806
Limitations on business interest expense	15,573		11,783
Research credit carryforwards	7,116		6,700
Capitalized research and development	3,767		2,916
Other	6,338		4,609
Deferred tax assets before valuation allowance	73,471		66,814
Less: valuation allowance	(54,714)		(46,173)
Deferred tax assets	18,757		20,641
Deferred tax liabilities:
Depreciation	(10,735)		(11,809)
Debt derivative liability and related debt discount	(7,026)		(7,911)
Other	(1,419)		(1,464)
Deferred tax liabilities	(19,180)		(21,184)
Net deferred tax liability	$	(423)	$	(543)

The Company continues to maintain a full valuation allowance against its U.S. and state deferred tax assets based on available positive and negative evidence, including historical losses during the most recent three-year period. The Company will re-evaluate the need for a valuation allowance in future periods based on its operating results as a standalone entity.

The following table presents the amounts and expiration dates of net operating loss and tax credit carryforwards as of May 25, 2025:


	Net operating loss carryforwards			Research and development credits
	Amount		Begin to expire	Amount		Life	Begin to expire
Federal	$	172,048	2028	$	3,858	20 years	2033
California	52,239		2025	2,058		unlimited	none
All other states	16,512		2025	2,024		15 years	2029

The Federal net operating loss carryforwards presented in the table above include $164,770 with no expiration date. The Company estimated utilization of $2,051 and $3,907 of Federal net operating loss carryforwards and no material state operating loss carryforwards for the fiscal years ended May 25, 2025 and May 26, 2024, respectively.

As of May 25, 2025, the total amount of net unrecognized tax benefits is $1,323, of which $1,186, if recognized, would affect the effective tax rate. No interest and penalties have been accrued as of May 25, 2025. The Company has not had, and does not expect to have, any significant increase or decrease to its unrecognized tax benefits within the next twelve months.

Due to tax attribute carryforwards, the Company is subject to examination for tax years 2012 forward for U.S. tax purposes. The Company was also subject to examination in various state jurisdictions for tax years 2012 forward.

New tax legislation was passed subsequent to year-end, see note 18 for additional information.

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.

LIFECORE BIOMEDICAL, INC. \DE\ Income Taxes Disclosure

About Income Taxes Disclosures

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