Local Bounti Corporation/DELOCL
Local Bounti Corporation/DE Income Taxes Disclosure
Income Taxes
For the years ended December 31, 2025 and 2024, the Company incurred net losses and, accordingly, no federal provision for income taxes has been recorded. In addition, no deferred benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets. On December 31, 2025, the Company had approximately $373.8 million of U.S. federal and state net operating losses. On December 31, 2024, the Company had approximately $595.6 million of federal and state net operating losses. The federal net operating losses can be carried forward indefinitely while the state carryforwards will begin to expire in 2030. Federal net operating losses carryforwards generated in tax years ending after December 31, 2017 may be carried forward indefinitely, but the deductibility of such federal net operating losses carryforwards is limited to 80% of current year taxable income. Similar rules may apply under state tax laws.
The provision for income taxes consists of the following:
Year Ended December 31, | |||||||||||
2025 | 2024 | ||||||||||
| (in thousands) | |||||||||||
Currently reportable expense | |||||||||||
Federal | $ | — | $ | — | |||||||
State | — | — | |||||||||
— | — | ||||||||||
Deferred benefit: | |||||||||||
Federal | (22,039) | 22,737 | |||||||||
State | (9,911) | 8,356 | |||||||||
(31,950) | 31,093 | ||||||||||
Less: Valuation allowance | 31,950 | (31,093) | |||||||||
Total provision for income tax expense | $ | — | $ | — | |||||||
The following table presents the reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate (in thousands):
Year Ended December 31, 2025 | |||||||||||
Amount | % | ||||||||||
Tax at federal statutory rate | (19,820) | 21.0% | |||||||||
State and local income taxes, net of federal benefit | — | —% | |||||||||
Tax credits: | |||||||||||
Research tax credit | (41) | —% | |||||||||
Changes in valuation allowances | (24,120) | 25.6% | |||||||||
Non-taxable or non-deductible items: | |||||||||||
Stock compensation | 1,034 | (1.1)% | |||||||||
Executive compensation limitation | 583 | (0.6)% | |||||||||
Other | 975 | (1.0)% | |||||||||
Cancellation of debt income | 41,389 | (43.9)% | |||||||||
Effective tax rate | — | — | % | ||||||||
For the year ended December 31, 2024, prior to the adoption of ASU 2023-09, the following table presents the reconciliation of the U.S. federal statutory income tax rate to the Company’s effective tax rate:
2024 | |||||
Federal statutory income tax rate | 21.0% | ||||
State tax | 5.5% | ||||
Stock-based compensation | 0.1% | ||||
Non-deductible expenses | (0.8)% | ||||
Research and development credit | —% | ||||
Change in valuation allowance | (25.8)% | ||||
Effective tax rate | — | % | |||
The components of the Company's deferred tax assets and liabilities are as follows:
December 31, | |||||||||||
(in thousands) | |||||||||||
2025 | 2024 | ||||||||||
Gross deferred tax assets arising from: | |||||||||||
Net operating loss carryforwards | $ | 49,281 | $ | 81,865 | |||||||
ASC 842 lease liability | 4,539 | 3,838 | |||||||||
Acquired intangibles | 10,566 | 10,672 | |||||||||
Accruals and reserves | 10,667 | 11,688 | |||||||||
Capitalized research expenditures | 10,533 | 7,592 | |||||||||
Research and development credit carryforward | 310 | 269 | |||||||||
Gross deferred tax assets | 85,896 | 115,924 | |||||||||
Less: Valuation allowance | (65,196) | (97,220) | |||||||||
Deferred tax assets, net of valuation allowance | 20,700 | 18,704 | |||||||||
Deferred tax liabilities arising from: | |||||||||||
ASC 842 right-of-use asset | (2,700) | (2,924) | |||||||||
Fixed assets and land | (18,000) | (15,780) | |||||||||
Gross deferred tax liabilities | (20,700) | (18,704) | |||||||||
Net deferred tax liabilities | $ | — | $ | — | |||||||
For financial reporting purposes, the Company has incurred a loss in each period since its inception. Based on the available objective evidence, including the Company’s history of losses, management believes it is more likely than not that the net deferred tax assets will not be fully realizable. Accordingly, the Company provided for a full valuation
allowance against its net deferred tax assets at December 31, 2025 and 2024. During the years ended December 31, 2025 and 2024, the change in the valuation allowance of $(32.0) million and $31.1 million, respectively, was primarily due to a decrease in deferred tax assets resulting from the troubled debt restructuring in 2025, partially offset by the generation of additional net operating losses.
As of December 31, 2025 and 2024, the Company had $0.6 million and $0.5 million of federal research and development credits, respectively, which will begin to expire in 2042.
As of December 31, 2025 and 2024, the total amount of unrecognized tax benefits was $0.3 million and $0.3 million, respectively, none of which impact income tax expense. The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.
The Company's income tax returns and the amount of income or loss reported are subject to examination by the respective taxing authorities. If such examinations result in changes to the profits or losses, the Company's tax liabilities could be changed accordingly.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 27, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 30, 2022 | |
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.