MICROVISION, INC. Income Taxes Disclosure

14. INCOME TAXES

 

Components of net loss before income taxes are as follows (in thousands):

SCHEDULE OF COMPONENTS OF NET LOSS BEFORE INCOME TAXES  

 

		Year Ended December 31,
		2025				2024				2023
United States		$	(94,627	)		$	(97,893	)		$	(86,730	)
Foreign			(438	)			1,485				5,034
Total		$	(95,065	)		$	(96,408	)		$	(81,696	)

 

Components of income taxes paid, net of refunds received are as follows (in thousands):

SCHEDULE OF COMPONENTS OF INCOME TAX PAID, NET    

		Year Ended December 31,
		2025				2024				2023
Federal			-				-				-
State
Other states			-				-				-
Total state			-				-				-
Foreign
Germany			615				2,855				-
Foreign			615				2,855				-
Other foreign			-				-				-
Total foreign			615				2,855				-
Total income taxes paid			615				2,855				-

 

 

Components of income tax expense (benefit) are as follows (in thousands):

SCHEDULE OF COMPONENTS OF INCOME TAX EXPENSE (BENEFIT)   

		Year Ended December 31,
		2025				2024				2023
Current
Federal		$	-			$	-			$	-
State			-				-				-
International			332				581				2,061
Total current tax expense			332				581				2,061
Deferred
Federal			-				-				-
State			-				-				-
International			(416	)			(74	)			(915	)
Total deferred tax expense			(416	)			(74	)			(915	)
Federal			-				-				-
State			-				-				-
International			(84	)			507				1,146
Total tax (benefit) expense		$	(84	)		$	507			$	1,146

 

The difference between the effective tax rate of the provision (benefit) for income taxes and the Federal statutory rate is as follows (in thousands):

SCHEDULE OF EFFECTIVE INCOME TAX RATE RECONCILIATION   

		Year Ended December 31,
		2025								2024								2023
		Amount				Percent				Amount				Percent				Amount				Percent
U.S. federal statutory rate		$	(19,964	)			21.0	%		$	(20,246	)			21.0	%		$	(17,156	)			21.0	%
State income taxes, net of federal effect			-				-				-				-				-				-
Change in valuation allowance			16,278				(17.1	)			16,508				(17.2	)			17,430				(21.3	)
Nontaxable or nondeductible items:
Share-based compensation			1,325				(1.4	)			2,357				(2.4	)			1,343				(1.7	)
Notes payable related			1,668				(1.8	)			2,621				(2.7	)			-				-
Other nondeductible items			1,073				(1.1	)			39				-				251				(0.3	)
Tax credits
Other tax credits			(453	)			0.5				(964	)			1.0				(811	)			1.0
Other			-				-				2				-				-				-
Foreign tax effects
Other foreign jurisdictions			(11	)			-				190				(0.2	)			89				(0.1	)
Total		$	(84	)			0.1	%		$	507				(0.5	)%		$	1,146				(1.4	)%

 

Components of deferred tax assets are as follows (in thousands):

SCHEDULE OF DEFERRED TAX ASSETS   

		December 31,
		2025				2024
Deferred tax assets
Reserves		$	2,422			$	430
Net operating loss carryforwards			115,405				104,575
R&D credit carryforwards			11,164				11,052
Depreciation/amortization deferred			30,884				29,618
Operating lease liabilities			4,975				5,099
Other			4,662				6,475
Total deferred tax assets			169,512				157,249
Deferred tax liabilities
Operating lease right-of-use assets			(3,355	)			(4,106	)
Total deferred tax liabilities			(3,355	)			(4,106	)
Net valuation allowances			(165,507	)			(152,935	)
Deferred tax assets		$	650			$	208

 

 

As of December 31, 2025, a valuation allowance of $165.5 million was maintained for deferred tax assets which have been deemed not more likely than not to be realized.

 

As of December 31, 2025, the Company has net operating loss carryforwards of approximately $549.5 million for federal income tax reporting purposes. In addition, the Company has research and development tax credits of $11.2 million. During 2025, $16.0 million federal net operating losses and $0.3 million general business credits expired unused. A majority of the net operating loss carryforwards and research and development credits available to offset future taxable income, if any, will expire in varying amounts from 2026 to 2044, if not previously used.

 

Certain net operating losses arise from the deductibility for tax purposes of compensation under nonqualified stock options equal to the difference between the fair value of the stock on the date of exercise and the exercise price of the options. For financial reporting purposes, the tax effect of this deduction, when recognized, is accounted for as an income tax benefit.

 

In certain circumstances, as specified in the Internal Revenue Code, a 50% or more ownership change by certain combinations of shareholders during any three-year period would result in limitations on the ability to use a portion of net operating loss carryforwards.

 

The One Big Beautiful Bill Act (“OBBBA”), which was enacted on July 4, 2025, introduced notable changes to the U.S. Internal Revenue Code, including the option to elect immediate expensing of domestic Section 174 costs. Section 174 costs are expenditures which represent research and development costs that are incident to the development or improvement of a product, process, formula, invention, computer software, or technique. As previously required under the Tax Cuts and Jobs Act, the Company capitalized research and development expenditures during the years ended December 31, 2022 through December 31, 2024. With the enactment of the OBBBA, the Company has continued to capitalize domestic Section 174 costs during the year ended December 31, 2025.

 

The Company had no unrecognized tax benefits as of December 31, 2025 or 2024.

 

Interest accrued and penalties related to unrecognized tax benefits are recognized in tax expense. During the years ended December 31, 2025, 2024 and 2023, no interest or penalties were recognized.

 

Income tax returns are filed in the U.S. federal jurisdiction, certain U.S. states, and in Germany. Due to the Company’s operating loss and credit carryforwards, the U.S. federal statute of limitations remains open for 2006 and onward. Tax years 2022 and forward remain open in Germany.