Nautilus Biotechnology, Inc.NAUT
Nautilus Biotechnology, Inc. Income Taxes Disclosure
Income Taxes
The Company is liable for income taxes in the United States. For the years ended December 31, 2025 and 2024, the Company did not have any income for income tax purposes and therefore, no tax liability or expense has been recorded in these financial statements. The difference between the tax at the statutory federal tax rate and no tax provision recorded by the Company is primarily due to the Company’s full valuation allowance against its deferred tax assets.
The following table presents the required disclosures prior to our adoption of ASU 2023-09 and reconciles the U.S. federal statutory income tax amount to the effective income tax amount for the year ended December 31, 2024:
| (in thousands) | Year Ended December 31, 2024 | |||||||
| Federal income tax at statutory rate | $ | (14,864) | ||||||
| State income tax, net of federal benefit | (4,816) | |||||||
Equity-based Compensation | 1,566 | |||||||
| Tax credits generated in current year | (2,091) | |||||||
| Valuation allowance change | 20,167 | |||||||
| Other | 38 | |||||||
| Total | $ | — | ||||||
The Company adopted ASU 2023-09 "Income Taxes (Topic 740): Improvements To Income Tax Disclosures" on a prospective basis beginning with the year ended December 31, 2025. The following table presents required disclosure pursuant to ASU 2023-09 and reconciles the U.S. federal statutory tax amount and rate to our effective amount and rate for the year ended December 31, 2025:
| Year Ended December 31, 2025 | |||||||||||
(in thousands) | $ | % | |||||||||
At US Federal Statutory Tax Rate | $ | (12,390) | 21.0 | % | |||||||
| State Income Taxes, net of Federal Effect | — | — | % | ||||||||
| Change in Valuation Allowance | 11,826 | (20.0) | % | ||||||||
| Nontaxable or Nondeductible Items | |||||||||||
Equity Compensation | 652 | (1.1) | % | ||||||||
Other Nondeductible Items | 23 | — | % | ||||||||
Tax Credits | |||||||||||
R&D Credits | (139) | 0.2 | % | ||||||||
Changes in Unrecognized Tax Benefits | 28 | (0.1) | % | ||||||||
| $ | — | — | % | ||||||||
The "One Big Beautiful Bill Act" (OBBBA) enacted on July 4, 2025, introduced notable changes to the U.S. Internal Revenue Code, including 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 in the years ended December 31, 2022 through December 31, 2024. With the enactment of OBBBA, the Company began deducting domestic Section 174 costs in 2025.
As of December 31, 2025, the Company had federal net operating loss carryforwards of $0.5 million that begin to expire in 2037 and federal net operating loss carryforwards of $203.2 million that arose after the 2017 tax year that will carryforward indefinitely and will be subject to the 80% of taxable income limitation. The Company has state net operating loss carryforwards of $197.9 million that will begin to expire in 2037.
As of December 31, 2025, the Company had research and development tax credit carryover of $9.6 million and $6.5 million for federal and state tax purposes, respectively. If not utilized, the federal carryforward will expire in various amounts beginning in 2039. The California credits can be carried forward indefinitely.
The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of revenue since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, the Company has provided a full valuation allowance against the net deferred tax assets. The valuation allowance increased by $15.0 million during the year ended December 31, 2025. Management reevaluates the positive and negative evidence at each reporting period.
Deferred income taxes reflect the net tax effects of loss and credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Components of the Company’s deferred tax assets are as follows:
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Deferred tax assets | |||||||||||
| Depreciation and amortization | $ | 5,927 | $ | 4,287 | |||||||
| Capitalized research and development | 11,878 | 23,844 | |||||||||
| Loss carryforwards | 56,649 | 32,740 | |||||||||
| Lease liabilities | 8,021 | 8,158 | |||||||||
| Tax credit carryforwards | 11,748 | 11,526 | |||||||||
| Equity-based compensation | 6,305 | 5,330 | |||||||||
| Other accruals and reserves | 356 | 59 | |||||||||
| Total deferred tax assets | 100,884 | 85,944 | |||||||||
| Valuation allowance for deferred tax assets | (93,398) | (78,381) | |||||||||
| Total deferred tax assets, net of valuation allowance | $ | 7,486 | $ | 7,563 | |||||||
| Deferred tax liability | |||||||||||
| Right-of-use assets | (7,421) | (7,563) | |||||||||
Unrealized loss on investment | (65) | — | |||||||||
| Net deferred tax assets (liability) | $ | — | $ | — | |||||||
The Company began to file income tax returns in the United States in 2017. All tax years are open to examination.
A valuation allowance of $93.4 million and $78.4 million at December 31, 2025 and 2024, respectively, has been recognized to offset net deferred tax assets where realization of such net deferred tax assets is determined to be more likely than not to not be realized. The valuation allowance increased by $15.0 million in 2025 and increased by $20.2 million in 2024, which was primarily due to changes in our deferred tax asset balances. The increases in the valuation allowance in 2025 and 2024 was primarily due to the net operating loss and tax credit generation, capitalized research and development expense and stock-based compensation expense.
As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the "change in valuation allowance" line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance (in thousands):
| Year Ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Beginning balance | $ | (78,381) | $ | (58,215) | |||||||
Change charged to income tax expense | (15,082) | (20,166) | |||||||||
Change charge to OCI | 65 | — | |||||||||
| Ending balance | $ | (93,398) | $ | (78,381) | |||||||
The Company had an unrecognized tax benefit balance of $3.2 million and $3.1 million related to research and development credits and California net operating loss carryforward as of December 31, 2025 and 2024, respectively. No amount of unrecognized tax benefits as of December 31, 2025, if recognized, would reduce the Company’s effective tax rate because the benefits would be in the form of tax credit carryforwards, which would be reduced to $0 by a full valuation allowance. Because the statute of limitations does not expire until after the net operating loss
and credit carryforwards are actually used, the statutes are still open on calendars years ending 2017 forward for federal and state purposes.
A reconciliation of the beginning and ending amount of the liability for uncertain tax positions, excluding potential interest and penalties, is as follows:
| (in thousands) | December 31, 2025 | December 31, 2024 | |||||||||
| Beginning balance | $ | 3,146 | $ | 2,365 | |||||||
| Increase based on current year tax positions | 484 | 838 | |||||||||
Decrease for prior year tax positions | (421) | (57) | |||||||||
| Ending balance | $ | 3,209 | $ | 3,146 | |||||||
Net operating loss and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service (the “IRS”) and may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50% as defined under Sections 382 and 383 in the Code, which could limit the amount of tax attributes that can be utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the Company’s value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has not, as yet, conducted a study to determine if any such changes have occurred that could limit its ability to use the net operating loss and tax credit carryforwards.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 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.