Liquidia Corp Income Taxes Disclosure

​

​

10. Income Taxes

No provision for federal and state income tax expense has been recorded for the years ended December 31, 2025, 2024 and 2023 due to the valuation allowance recorded against the net deferred tax asset and recurring losses.

Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities are as follows as of December 31, 2025 and 2024:

​

​

As of December 31, 2025, 2024 and 2023, we established a full valuation allowance against our net deferred tax assets since, at the time, we could not assert that it was more likely than not that our deferred tax assets would be realized. As a result, there was an increase in the valuation allowance in 2025 and 2024 of approximately $1.4 million and $27.0 million, respectively.

As of December 31, 2025, we had federal and state income tax loss carryforwards of $396.0 million and $433.1 million, respectively, which begin to expire in 2026 for both federal and state purposes. In addition, we have tax credit carryforwards for federal tax purposes of approximately $3.4 million as of December 31, 2025, which begin to expire in 2040. The utilization of net operating loss and tax credit carryforwards to reduce future income taxes will depend on our ability to generate sufficient taxable income prior to the expiration of the loss carryforwards.

The Internal Revenue Code of 1986, as amended, contains provisions which limit the ability to utilize the net operating loss carryforwards in the case of certain events, including significant changes in ownership interests. If our net operating loss carryforwards are limited, and we have taxable income which exceeds the permissible yearly net operating loss carryforwards, we would incur a federal income tax liability even though net operating loss carryforwards would be available in future years.

During the year ended December 31, 2025, we completed a study to assess whether historical equity transactions resulted in an ownership change within the meaning of Section 382 of the Internal Revenue Code.

Based on this analysis, we determined that an ownership change occurred in a prior year. As a result, the utilization of a portion of our carryforwards is subject to an annual limitation under Section 382. The limitation may cause certain net operating loss carryforwards to expire unused before being fully utilized.

We have considered the impact of the Section 382 limitation in assessing the realizability of its deferred tax assets as of December 31, 2025.

The reasons for the difference between actual income tax expense for the year ended December 31, 2025, 2024 and 2023 and the amount computed by applying the statutory federal income tax rate to income before income tax are as follows:

​

We did not pay income taxes during the year ended December 31, 2025, 2024 and 2023. Income tax payments were not required during the period as a result of generating net operating losses. Accordingly, no disaggregation of income taxes paid by jurisdiction has been provided.

During the current year, we completed an R&D credit study covering tax years 2021 through 2024 which resulted in an increase to the R&D credit and uncertain tax position.

We have determined that there may be a future limitation on our ability to utilize its entire federal R&D credit carryover. Therefore, we recognized an uncertain tax benefit associated with the federal R&D credit carryover during the years ended December 31, 2025, 2024 and 2023, as follows:

​

​

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. We have determined that it had no other material uncertain tax benefits for the year ended December 31, 2025. If the unrecognized tax benefit is recognized, it would be in the form of additional R&D credit carryforward, which is expected to require a full valuation allowance based on present circumstances. Our policy for recording interest and penalties related to uncertain tax provisions is to record them as a component of the provision for income taxes. We did not have any accrued interest or penalties associated with any unrecognized tax positions as of December 31, 2025, 2024 and 2023, and there were no such interest or penalties recognized during the years ended December 31, 2025, 2024 and 2023.

On November 18, 2021, North Carolina enacted the 2021 Appropriations Act, which included a gradual corporate income tax rate decrease from the current 2.5% to 0% by 2030. We are in a cumulative loss position and does not have significant deferred tax liabilities that can be utilized as a source of taxable income in the future. We have reduced our deferred tax asset related to North Carolina net operating loss carryforwards to zero, as no benefit is expected to be realized from these deferred tax assets prior to 2030 when there would be no income tax in North Carolina. The reduction in the value of the deferred tax assets in each year is fully offset by a corresponding valuation allowance. If we become profitable prior to 2030, we will recognize an income tax benefit related to the portion of our deferred tax asset related to North Carolina net operating loss carryforwards utilized.

We have all tax years open to examination by federal tax and state tax jurisdictions. No income tax returns are currently under examination by taxing authorities.