Mineralys Therapeutics, Inc.MLYS
Mineralys Therapeutics, Inc. Income Taxes Disclosure
Income Taxes
There was no current or deferred income tax expense or benefit for the years ended December 31, 2025 and 2024, due to the Company’s net loss and increases in its deferred tax asset valuation allowance. The components of the Company’s deferred tax assets are as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net operating loss carryforwards | $ | 55,102 | $ | 15,580 | |||||||
| Research and development credit carryforwards | 21,169 | 15,380 | |||||||||
| Capitalized research and development costs | 39,935 | 44,981 | |||||||||
| Intangible assets | 1,823 | 1,976 | |||||||||
| Other | 3,219 | 2,012 | |||||||||
| Total deferred tax assets | 121,248 | 79,929 | |||||||||
| Valuation allowance | (121,248) | (79,929) | |||||||||
| Deferred tax assets, net of valuation allowance | $ | — | $ | — | |||||||
The Company has established a valuation allowance against its net deferred tax assets due to the uncertainty surrounding the realization of such assets, which are dependent on future earnings, if any, the timing and amount of which are uncertain. The Company periodically evaluates the recoverability of the deferred tax assets. Valuation allowances are provided against deferred tax assets when, based on all available evidence, it is considered more likely than not that some portion or all of the recorded deferred tax assets will not be realized in future periods. When realization of the deferred tax asset is more likely than not to occur, the benefit related to the deductible temporary differences attributable to operations is recognized as a reduction of income tax expense. The Company’s valuation allowance increased by approximately $41.3 million and $48.4 million for the years ended December 31, 2025 and 2024, respectively.
As of December 31, 2025 and 2024, the Company had federal net operating loss (NOL) carryforwards of $244.6 million and $69.0 million available to reduce future taxable income, respectively. The federal NOL carryforward has no expiration as a result of the Tax Cuts and Jobs Act of 2017. As of December 31, 2025 and 2024, the Company had $59.5 million and $17.2 million, respectively, of state NOL carryforwards that begin expiring in 2041.
As of December 31, 2025 and 2024, the Company had federal and state research and development tax credit carryforwards of $21.6 million and $15.6 million, respectively, to reduce future taxable income. The federal research and development tax credit carryforwards begin to expire in 2041. Research and development tax credit carryforwards associated with California carry forward indefinitely. Research and development tax credit carryforwards associated with other states begin expiring in 2039.
The Internal Revenue Code (IRC) Sections 382 and 383 limit annual use of NOL and research and development credit carryforwards in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company completed an ownership change analysis pursuant to IRC Section 382 through December 31, 2025 and determined that the Company experienced ownership changes on February 16, 2021, June 1, 2022, and September 4, 2025. Since all of the Company’s federal NOLs have an indefinite carryover period, none of the federal NOLs generated prior to the ownership changes will expire prior to utilization, but will be subject to the annual limitations on future utilization. As a result of the annual limitation, approximately $0.2 million of federal research and development credits will expire prior to utilization due to the ownership change occurring on February 16, 2021. The remaining federal research and development credits are available to offset federal tax liability within their respective federal research and development credit carryover periods (20 years), subject to the annual limitations on future utilization. State NOLs and state research and development credits may be similarly limited. The Company’s use of federal and state NOLs and research and development credits could be further limited by ownership changes that occur subsequent to December 31,
2025. If eliminated, the related asset would be removed from the deferred tax asset with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate.
The Company’s effective tax rate for the years ended December 31, 2025 and 2024 was 0%. A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows (after the adoption of ASU 2023-09; amounts in thousands):
| Year Ended | |||||||||||
| December 31, 2025 | |||||||||||
| Amount | Rate | ||||||||||
| $ | (32,497) | 21.00 | % | ||||||||
State and local income tax, net of federal income tax effect(1) | (339) | 2.17 | |||||||||
| Tax credits | |||||||||||
| Research and development tax credits | (7,279) | 5.32 | |||||||||
| Change in valuation allowance | 37,466 | (26.70) | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Permanent differences | 15 | (0.01) | |||||||||
| Stock-based compensation | (4,651) | 3.01 | |||||||||
| Executive compensation | 4,835 | (3.12) | |||||||||
| Other | |||||||||||
| Other | 557 | (0.45) | |||||||||
| Changes in unrecognized tax benefits | 1,893 | (1.22) | |||||||||
| Total provision for income taxes | $ | — | — | % | |||||||
________
(1)State tax expense in California comprises the majority (greater than 50 percent) of the tax effect in this category.
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows (prior to the adoption of ASU 2023-09):
| Year Ended | |||||
| December 31, | |||||
| 2024 | |||||
| Statutory federal income tax rate | 21.00 | % | |||
| State income taxes, net of federal tax benefits | 1.76 | ||||
| Research and development credits | 5.19 | ||||
| Permanent items and other | (0.70) | ||||
| Change in valuation allowance | (27.25) | ||||
| Total provision for income taxes | — | % | |||
The Company files income tax returns in the U.S. Federal jurisdiction and various state and local jurisdictions. As of December 31, 2025, all years remained subject to examination by tax authorities. There were no federal or state income tax payments or refunds paid or received for the tax year ended December 31, 2025.
Uncertain tax positions are evaluated based on the facts and circumstances that exist at each reporting period. Subsequent changes in judgment based on new information may lead to changes in recognition, derecognition, and measurement. Adjustment may result, for example, upon resolution of an issue with the taxing authorities or expiration of a statute of limitations barring an assessment for an issue. The Company
recognizes a tax benefit from an uncertain tax position when it is more-likely-than-not that it will be sustained upon examination by tax authorities.
As of December 31, 2025 and 2024, the Company had $6.5 million and $4.5 million, respectively, in unrecognized tax benefits, which would not affect the effective tax rate if recognized due to the valuation allowance against deferred tax assets. The Company’s policy is to recognize interest expense and penalties related to income tax matters in income tax expense. As of December 31, 2025 and 2024, the Company had no accrued interest or penalties related to uncertain tax positions.
The following table summarizes the changes to the Company’s unrecognized tax benefits for the years ended December 31, 2025 and 2024 (in thousands):
| Year Ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Beginning balance | $ | 4,505 | $ | 1,076 | |||||||
| Additions related to current year positions | 2,540 | 2,921 | |||||||||
| Additions (reductions) related to prior year positions | (557) | 508 | |||||||||
| Ending balance | $ | 6,488 | $ | 4,505 | |||||||
On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The CARES Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the U.S. economy and fund a nationwide effort to curtail the effects of COVID-19. The CARES Act provides sweeping tax changes in response to the COVID-19 pandemic. Some of the more significant provisions include the removal of certain limitations on the utilization of net operating losses, an increase in the loss carryback period for certain losses to five years, and an increase in the ability to deduct interest expense. Additionally, the CARES Act amends certain provisions of the previously enacted Tax Cuts and Jobs Act of 2017.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, which enacted significant changes to U.S. tax and related laws, including the immediate expensing of domestic research and development costs, while foreign expenditures will continue to be capitalized and amortized over 15 years. The impact of the tax law changes from the OBBBA is included in the Company’s income tax provision beginning in the year ended December 31, 2025.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Feb 12, 2025 | |
| 2023 | Mar 21, 2024 | |
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.