MACROGENICS INCMGNX
MACROGENICS INC Income Taxes Disclosure
Income Taxes
For the year ended December 31, 2025, the Company recorded an income tax benefit of $0.7 million which reflects refunds net of income taxes paid. For the year ended December 31, 2024 the Company was is in a taxable income position due to the Tax Cuts and Jobs Act of 2017 (the Jobs Act) limitation on utilization of Net Operating Losses to 80% of taxable income as well as the limitation on utilization of income tax credits, while the company remains in a full valuation allowance position. For the year ended December 31, 2023 there was no provision for income taxes due to taxable losses generated, fully offset by a valuation allowance. During the year ended December 31, 2025, the Company paid $0.3 million in taxes (net of refunds) to the state of Maryland, and all of the payments made for Federal taxes were refunded.
The Company recorded income tax benefit (expense) as follows (in thousands):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current income tax (benefit) expense: | |||||||||||||||||
| Federal | $ | (435) | $ | 707 | $ | — | |||||||||||
| State | (237) | 237 | — | ||||||||||||||
| Total | $ | (672) | $ | 944 | $ | — | |||||||||||
Beginning in 2025 annual reporting, the Company adopted ASU 2023-09 prospectively. See Note 2, Summary of Significant Accounting Policies - Recently Adopted Accounting Pronouncements for additional details. The reconciliation of the reported estimated income tax expense to the amount that would result by applying the U.S. federal statutory tax rate to the net income is as follows (in thousands):
Year Ended December 31, 2025 | |||||||||||
| Amount | Rate | ||||||||||
| United States federal tax at statutory rate | $ | (15,811) | 21.00 | % | |||||||
Maryland taxes (net of federal benefit) | (237) | 0.31 | % | ||||||||
| Research credit, net | 448 | (0.60) | % | ||||||||
| Orphan drug credit, net | 15 | (0.02) | % | ||||||||
Officers limit on compensation | 1,239 | (1.65) | % | ||||||||
| Equity-based compensation | 2,024 | (2.69) | % | ||||||||
| Change in valuation allowance | 12,066 | (16.03) | % | ||||||||
Other | (416) | 0.55 | % | ||||||||
| Income tax expense/(benefit) | $ | (672) | 0.89 | % | |||||||
Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| United States federal tax at statutory rate | $ | (13,866) | $ | (1,902) | |||||||
| State taxes (net of federal benefit) | (4,183) | (163) | |||||||||
| Deferred income tax adjustments | (7,299) | 5,024 | |||||||||
| Deferred state blended rate adjustments | (2,663) | 1,841 | |||||||||
| Research credit, net | (12,082) | (3,168) | |||||||||
| Orphan drug credit, net | (1,308) | 2,374 | |||||||||
Other permanent items | 388 | 1,301 | |||||||||
| Equity-based compensation | 5,594 | 1,950 | |||||||||
| Change in valuation allowance | 36,287 | (7,257) | |||||||||
Other | 76 | — | |||||||||
| Income tax expense/(benefit) | $ | 944 | $ | — | |||||||
The significant components of the Company's deferred income tax assets (liabilities) were as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Federal U.S. net operating loss carryforward | $ | 136,476 | $ | 116,341 | |||||||
| State net operating loss carryforward | 33,028 | 31,758 | |||||||||
| Research and development credit, net | 78,946 | 79,108 | |||||||||
| Orphan drug credit, net | 33,817 | 33,834 | |||||||||
| Operating lease liabilities | 10,116 | 10,308 | |||||||||
| Deferred revenue | 35,108 | 18,795 | |||||||||
| Section 174 deferred tax asset | 68,910 | 98,810 | |||||||||
Equity based compensation | 15,838 | 16,272 | |||||||||
| Other | 5,584 | 4,971 | |||||||||
| Gross deferred income tax assets | 417,823 | 410,197 | |||||||||
| Valuation allowance | (410,103) | (401,297) | |||||||||
| Net deferred income tax assets | 7,720 | 8,900 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Operating lease ROU assets | (6,300) | (6,745) | |||||||||
| Prepaid expenditures | (1,420) | (2,155) | |||||||||
| Gross deferred income tax liabilities | (7,720) | (8,900) | |||||||||
| Net deferred income tax asset/(liability) | $ | — | $ | — | |||||||
In assessing the realization of deferred tax assets, the Company considers whether it is more likely than not that some portion or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon future generation for taxable income during the periods in which temporary differences representing net future deductible amounts become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. After consideration of all the information available, the Company continues to maintain a full valuation allowance against U.S. federal and state net deferred tax assets due to the Company’s cumulative loss position and lack of sufficient positive evidence to support the realizability of its U.S. net deferred tax assets.
The activity in the valuation allowance on deferred tax assets was as follows (in thousands):
| Balance at Beginning of Year | Additions | Deductions | Balance at End of Year | ||||||||||||||||||||
| Year Ended December 31, 2025 | $ | 401,297 | $ | 8,806 | $ | — | $ | 410,103 | |||||||||||||||
| Year Ended December 31, 2024 | 365,010 | 36,287 | — | 401,297 | |||||||||||||||||||
| Year Ended December 31, 2023 | 372,267 | — | (7,257) | 365,010 | |||||||||||||||||||
As of December 31, 2025, the Company has U.S. federal and state net operating loss (NOL) carryforwards of approximately $650.0 million. Of these NOLs, $2.2 million will expire beginning in 2027 through 2028. $647.8 million of NOLs were generated post December 31, 2017 and carryforward indefinitely. In addition, the Company has U.S. federal tax credits of $108.5 million, which will expire in various years beginning in 2027 through 2045.
Utilization of the Company's U.S. federal NOL and tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code (IRC) of 1986, and corresponding provisions of state law, due to ownership changes that may have occurred previously or that could occur in the future. These ownership changes may limit the amount of net operating loss and research and development tax credit carryforwards that can be utilized annually to offset future tax liabilities.
Beginning January 1, 2022, the Jobs Act eliminated the option to deduct research and development expenditures in the current year and requires taxpayers to capitalize such expenses pursuant to IRC Section 174. The capitalized expenses are amortized over a 5-year period for domestic expenses and a 15-year period for foreign expenses.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 9,334 | $ | 7,821 | $ | 7,376 | |||||||||||
| Increases for current year tax positions | 398 | 1,001 | 449 | ||||||||||||||
| Increases/(decreases) for prior year tax positions | (1,393) | 512 | (4) | ||||||||||||||
| Ending balance | $ | 8,339 | $ | 9,334 | $ | 7,821 | |||||||||||
As of December 31, 2025 and 2024, of the total gross unrecognized tax benefits, approximately $8.3 million and $9.3 million would favorably impact the Company's effective income tax rate, respectively. Although, due to the Company's determination that the deferred income tax asset would not more likely than not be realized, a valuation allowance would be recorded, therefore, zero net impact would result within the Company's effective income tax rate. The Company's uncertain income tax position liability has been recorded to deferred income taxes to offset the tax attribute carryforward amounts.
For the years ended December 31, 2025, 2024 and 2023, the Company has not recognized any interest or penalties related to the uncertain income tax positions due to the fact such position is related to tax attribute carryforwards which have not yet been utilized. The Company does not anticipate any significant changes to its unrecognized income tax position within the next twelve months.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable.The Company's tax years in the U.S from 2007 forward remain open to examination due to the carryover of unused income tax credits and net operating losses.
On July 4, 2025, the One Big Beautiful Bill Act of 2025 (OBBBA) was enacted, which includes, among other provisions, changes to the U.S. corporate income tax system including the allowance of immediate expensing of qualifying research and development expenses and permanent extensions of certain provisions within the Jobs Act. The Company is currently evaluating the impact that the OBBBA will have on its financial statements, but it is not expected have a material impact on the Company’s consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 9, 2026 | Showing above |
| 2024 | Mar 20, 2025 | |
| 2023 | Mar 7, 2024 | |
| 2022 | Mar 15, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 29, 2016 | |
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.