10. Income Taxes

Income tax expense (benefit) consists of the following:


	Year Ended December 31,
(in thousands)	2025		2024
Current expense (benefit):
Federal	$	—	$	(364)
State	14		26
Total current expense (benefit):	14		(338)
Deferred expense (benefit):
Federal	(1,507)		(8,929)
State	(22)		(111)
Total deferred expense (benefit):	(1,529)		(9,040)
Total income tax expense (benefit)	$	(1,515)	$	(9,378)

In accordance with the updated disclosure requirements of ASU 2023‑09 for 2025, the reconciliation of the income tax benefit at the U.S. federal statutory rate to the provision for income taxes is as follows:


(in thousands)	2025
Tax at federal statutory rate	$	(13,922)	21.0	%
State and local income tax, net of federal income tax effect(1)	12		0.0	%
Tax credits
Research and development credits	(1,035)		1.6	%
Changes in valuation allowances	11,869		(17.9)	%
Nontaxable and nondeductible items
Share-based compensation	1,104		(1.7)	%
Executive compensation limitation	467		(0.7)	%
Other	(10)		0.0	%
Total income tax benefit and effective tax rate	$	(1,515)	2.3	%

_____________

(1)California state taxes comprised the majority (greater than 50 percent) of the tax effect in this category.

As previously disclosed for the year ended December 31, 2024 and prior to the adoption of ASU 2023‑09, the reconciliation of income tax benefit at the U.S. federal statutory rate to the provision for income taxes is as follows:


(in thousands)	2024
Tax at federal statutory rate	$	(14,996)	21.0	%
State, net of federal benefit	(1,376)		1.9	%
Share-based compensation	1,207		(1.8)	%
Executive compensation limitation	566		(0.8)	%
Research and development credits	(904)		1.3	%
Return to provision	247		(0.3)	%
Change in uncertain tax positions	90		(0.1)	%
State tax rate change	1,092		(1.5)	%
Change in valuation allowance	4,688		(6.6)	%
Other	8		—	%
Total income tax benefit and effective tax rate	$	(9,378)	13.1	%

The Company remeasured certain deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 are shown below. The Company assesses the positive and negative evidence to determine if sufficient future taxable income will be generated to realize the existing deferred tax assets. The Company’s evaluation of evidence resulted in management concluding that the majority of the Company’s deferred tax assets will be realized.

The Company offsets all deferred tax assets and liabilities by jurisdiction, as well as any related valuation allowance, and presents them on its consolidated balance sheet as a non-current deferred income tax asset or liability (as applicable). For the year ended December 31, 2025, the valuation allowance increased by $13.3 million.

Deferred tax assets (liabilities) are comprised of the following:


	December 31,
(in thousands)	2025		2024
Deferred tax assets:
Net operating loss carryforwards	$	26,578	$	13,302
Research credit carryforwards	4,044		2,517
Share-based compensation	7,042		7,337
Deferred revenue	29		176
Operating lease liabilities	5,026		5,388
Contingent liabilities	243		153
Capitalized research and experimental expenditures	6,741		7,956
Accrued liabilities	1,122		1,222
Other	16		544
Total deferred tax assets before valuation allowance	50,841		38,595
Valuation allowance for deferred tax assets	(18,841)		(5,526)
Net deferred tax assets	$	32,000	$	33,069

Deferred tax liabilities:
Identified intangibles	$	(27,317)	$	(28,200)
Operating lease right-of-use assets	(3,844)		(4,140)
Property and equipment, net	(1,624)		(3,043)
Total deferred tax liabilities	$	(32,785)	$	(35,383)

Deferred income taxes, net	$	(785)	$	(2,314)

The following table presents the Company's U.S. federal and state NOL and tax credit carryforwards, net of unrecognized tax benefits, which may be available to offset future income tax liabilities:


(in thousands)	December 31, 2025		Expiration Date (if not utilized)
U.S. federal NOL carryforwards	$	111,409	Indefinite
U.S. state NOL carryforwards	$	44,210	Various dates between 2031 and 2045
U.S. federal research and development credit carryforwards	$	2,230	Various dates between 2032 and 2045
California research and development credit carryforwards	$	3,076	Indefinite

Pursuant to Section 382 and 383 of the Internal Revenue Code of 1986, as amended, utilization of the Company’s net operating losses and credits may be subject to annual limitations in the event of any significant future changes in its ownership structure. These annual limitations may result in the expiration of net operating losses and credits prior to utilization. The deferred tax assets as of December 31, 2025 are net of any previous limitations due to Section 382 and 383.

The Company accounts for income taxes by evaluating a probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position.

A reconciliation of the amount of unrecognized tax benefits at December 31, 2025 and 2024 is as follows:


	December 31,
(in thousands)	2025		2024
Balance at beginning of year	$	638	$	569
Additions based on tax positions related to the current year	125		99
Additions (reductions) for tax positions of prior years	59		(30)
Balance at end of year	$	822	$	638

Included in the balance of unrecognized tax benefits at December 31, 2025 is $0.4 million of tax benefits that, if recognized would impact the effective rate. There are no positions for which it is reasonably possible that the uncertain tax benefit will significantly increase or decrease within twelve months.

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2025 and December 31, 2024, the Company recognized no interest and penalties. The Company files income tax returns in the United States and various state jurisdictions with varying statutes of limitations. The federal statute of limitation remains open for the 2022 tax year through the present. The state income tax returns generally remain open for the 2021 tax year through the present. Net operating loss and research credit carryforwards arising prior to these years are also open to examination if and when utilized.

Income taxes paid for the years ended December 31, 2025 and 2024 were negligible.

Historical Timeline

Fiscal Year	Filed
2025	Mar 4, 2026	Showing above
2024	Mar 18, 2025

2023	Mar 25, 2024

2022	Mar 30, 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.

OmniAb, Inc. Income Taxes Disclosure

Historical Timeline

About Income Taxes Disclosures

Other Available Disclosures