Minerva Neurosciences, Inc. Income Taxes Disclosure
NOTE 8 — INCOME TAXES
The provision for federal, foreign and state income taxes for the years ended December 31, 2024 and 2023 are as follows:
|
|
Year Ended December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Current income tax provision (benefit) |
|
|
|
|
|
|
||
Federal |
|
$ |
— |
|
|
$ |
— |
|
Foreign |
|
|
— |
|
|
|
— |
|
State |
|
|
— |
|
|
|
— |
|
Deferred income tax provision (benefit) |
|
|
|
|
|
|
||
Federal |
|
|
— |
|
|
|
— |
|
Foreign |
|
|
— |
|
|
|
— |
|
State |
|
|
— |
|
|
|
— |
|
Total income tax provision (benefit) |
|
$ |
— |
|
|
$ |
— |
|
Net deferred tax assets (liabilities) as of December 31, 2024 and 2023 consist of the following:
|
|
Year Ended December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Deferred tax assets: |
|
|
|
|
|
|
||
Net operating loss carryforwards |
|
$ |
42,922,972 |
|
|
$ |
34,490,808 |
|
Research and development tax credits |
|
|
145,115 |
|
|
|
145,115 |
|
Capitalized research and development costs |
|
|
25,269,520 |
|
|
|
27,901,874 |
|
Stock-based compensation |
|
|
8,860,595 |
|
|
|
8,911,005 |
|
Deferred start-up and license costs |
|
|
2,464,112 |
|
|
|
3,011,692 |
|
Sale of royalties |
|
|
16,392,000 |
|
|
|
22,406,996 |
|
Depreciation |
|
|
39 |
|
|
|
— |
|
Total deferred tax assets |
|
|
96,054,353 |
|
|
|
96,867,490 |
|
Deferred tax asset valuation allowance |
|
|
(96,054,353 |
) |
|
|
(96,867,059 |
) |
Net deferred tax assets |
|
|
— |
|
|
|
431 |
|
Deferred tax liabilities: |
|
|
|
|
|
|
||
Depreciation |
|
|
— |
|
|
|
(431 |
) |
Total deferred tax liabilities |
|
|
— |
|
|
|
(431 |
) |
Total |
|
$ |
— |
|
|
$ |
— |
|
A reconciliation between the Company’s effective tax rate and the federal statutory rate for the years ended December 31, 2024 and 2023 are as follows:
|
|
Year Ended December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Federal statutory rate |
|
|
21.00 |
% |
|
|
21.00 |
% |
Permanent differences |
|
|
14.99 |
% |
|
|
(0.57 |
%) |
State income taxes, net of federal benefit |
|
|
0.00 |
% |
|
|
0.00 |
% |
Valuation allowance |
|
|
(35.99 |
%) |
|
|
(20.44 |
%) |
Effective tax rate |
|
|
0.00 |
% |
|
|
(0.00 |
%) |
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical losses and the uncertainty of future taxable income over the periods which the Company will realize the benefits of its net deferred tax assets, management believes it is more likely than not that the Company will not realize the benefits on the balance of its net deferred tax asset and, accordingly, the Company has established a full valuation allowance on its net deferred tax assets. The valuation allowance decreased by approximately $0.8 million and increased by approximately $6.8 million during the years ended December 31, 2024 and 2023, respectively.
As of December 31, 2024, the Company had approximately $156.8 million of federal net operating losses that will begin to expire in 2036, if not utilized. Of the total federal net operating loss, approximately $135.4 million has an unlimited carryforward and therefore will not expire. As of December 31, 2024, the Company had approximately $7.7 million of New Jersey and approximately $148.1 million of Massachusetts operating losses that will begin to expire in 2029 and 2037, respectively, if not utilized. As of December 31, 2024, the Company had approximately $0.1 million of federal research and development credits that will begin to expire in 2027, if not utilized.
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. There are currently no pending income tax examinations. The Company’s tax years are still open under statute from 2021 to present.
As of December 31, 2024 and 2023, the Company had no liability recorded for unrecognized tax benefit. The Company classifies penalties and interest expense related to income tax liabilities as an income tax expense. There were no interest and penalties recognized in the statements of operations for the years ended December 31, 2024 and 2023, or accrued on the balance sheets as of December 31, 2024 and 2023.
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.