Nuwellis, Inc.NUWE
Nuwellis, Inc. Income Taxes Disclosure
Note 7—Income Taxes
Domestic and foreign income (loss) before income taxes consists of the following for the years ended December 31:
|
(in thousands)
|
2024
|
2023
|
||||||
|
Domestic
|
$
|
(11,190
|
)
|
$
|
(20,233
|
)
|
||
|
Foreign
|
30
|
32
|
||||||
|
Loss before income taxes
|
$
|
(11,160
|
)
|
$
|
(20,201
|
)
|
||
The components of income tax expense consist of the following for the years ended December 31:
|
(in thousands)
|
2024
|
2023
|
||||||
|
Current:
|
||||||||
|
United States and state
|
$
|
—
|
$
|
—
|
||||
|
Foreign, net
|
(5
|
)
|
(8
|
)
|
||||
|
Deferred:
|
||||||||
|
United States and state
|
—
|
—
|
||||||
|
Foreign
|
—
|
—
|
||||||
|
Total income tax expense
|
$
|
(5
|
)
|
$
|
(8
|
)
|
||
Actual income tax expense differs from statutory federal income tax expense as follows for the years ended December 31:
|
(in thousands)
|
2024
|
2023
|
||||||
|
Statutory federal income tax benefit
|
$
|
2,343
|
$
|
4,242
|
||||
|
State tax benefit, net of federal taxes
|
321
|
531
|
||||||
|
Foreign tax
|
(1
|
)
|
(1
|
)
|
||||
|
Nondeductible/nontaxable items
|
(297
|
)
|
(694
|
)
|
||||
|
Other
|
(418
|
)
|
(295
|
)
|
||||
|
Valuation allowance (increase) decrease
|
(1,953
|
)
|
(3,791
|
)
|
||||
|
Total income tax expense
|
$
|
(5
|
)
|
$
|
(8
|
)
|
||
Deferred taxes consist of the following as of December 31:
|
(in thousands)
|
2024
|
2023
|
||||||
|
Deferred tax assets:
|
||||||||
|
Noncurrent:
|
||||||||
|
Accrued compensation
|
$
|
90
|
$
|
25
|
||||
|
Stock based compensation
|
84
|
285
|
||||||
|
Net operating loss carryforward
|
50,749
|
48,818
|
||||||
|
Other
|
119
|
26
|
||||||
|
Intangibles
|
2,692
|
2,627
|
||||||
|
R&D credit carryforward
|
531
|
531
|
||||||
|
Total deferred tax assets
|
54,265
|
52,312
|
||||||
|
Less: valuation allowance
|
(54,265
|
)
|
(52,312
|
)
|
||||
|
Total
|
$
|
—
|
$
|
—
|
||||
As of December 31, 2024, the Company had federal net operating loss (“NOL”)
carryforwards of approximately $220.2 million and state NOL carryforwards of $66.2 million. Approximately $119.2 million of federal NOL
carryforwards will expire between and . Pursuant to the Tax Cuts and Jobs Act of 2017, NOLs generated after 2017 of approximately $101.0
million do not expire. The expiration of state NOL carryforwards will vary by jurisdiction. In addition, future utilization of NOL carryforwards in the U.S. may be subject to certain limitations under Section 382 of the Internal Revenue Code.
The Company does not have any foreign loss carryovers.
The Company provides for a valuation allowance when it is more likely than not that it will not realize a portion of the deferred tax assets. The Company has established a valuation
allowance for U.S. and foreign deferred tax assets due to the uncertainty that enough taxable income will be generated in those taxing jurisdictions to utilize the assets. Therefore, the Company has not reflected any benefit of such deferred
tax assets in the accompanying consolidated financial statements. For the years ended December 31, 2024 and 2023, the valuation allowance increased by $2.0 million and $3.8 million, respectively. The current year increase was primarily due to the
federal and state net operating losses generated.
During 2024 and 2023, the Company believes it experienced an ownership change as defined in Section 382 of the Internal Revenue Code, which will limit the ability to utilize the
Company’s net operating losses (NOLs). The Company may have experienced additional ownership changes in earlier years further limiting the NOL carryforwards that may be utilized. The Company has not yet completed a formal Section 382
analysis. The general limitation rules allow the Company to utilize its NOLs subject to an annual limitation that is determined by multiplying the federal long-term tax-exempt rate by the Company’s value immediately before the ownership
change.
The accounting guidance related to uncertain tax positions prescribes a recognition threshold and measurement attribute for recognition and measurement of a tax position taken or
expected to be taken in a tax return. It also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company had no material uncertain tax positions as of December 31, 2024 or 2023.
The Company recognizes interest and penalties on unrecognized tax benefits as well as interest received from favorable tax settlements within income tax expense. At December 31, 2024
and 2023, the Company recorded no accrued interest or penalties related to uncertain tax positions.
The tax years ended December 31, 2021 through December 31, 2024 remain open to examination by the Internal Revenue Service and by the various states where the Company is subject to
taxation. Additionally, the returns of the Company’s Irish subsidiary are subject to examination by tax authorities for the tax years ended December 31, 2021 and subsequent years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 11, 2025 | Showing above |
| 2018 | Feb 21, 2019 | |
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.