Ocugen, Inc.OCGN
Ocugen, Inc. Income Taxes Disclosure
Income Taxes
The Company's losses before income taxes and provision (benefit) for income taxes is as follows (in thousands):
| Year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Loss before income taxes | |||||||||||
Domestic | $ | (66,031) | $ | (53,638) | |||||||
Foreign | (1,815) | (416) | |||||||||
Total | $ | (67,846) | $ | (54,054) | |||||||
| Provision (benefit) for income taxes | — | — | |||||||||
A reconciliation of the federal statutory income tax rate to the Company's effective income tax rate after the adoption of ASU 2023-09 is as follows:
| Year ended December 31, | |||||||||||
| 2025 | |||||||||||
| Amount | Percent | ||||||||||
| U.S. Federal Statutory Tax Rate | (14,248) | 21.0 | % | ||||||||
| State and Local Income Tax, Net of Federal (National) Income Tax Effect | — | — | % | ||||||||
| Foreign Tax Effects | 381 | (0.6) | % | ||||||||
| Effect of Changes in Tax Laws or Rates Enacted in the Current Period | — | — | % | ||||||||
| Effect of Cross-Border Tax Laws | — | — | % | ||||||||
| Tax Credits | |||||||||||
| Research & Development Tax Credits | (822) | 1.2 | % | ||||||||
| Orphan Drug Credits | (1,649) | 2.4 | % | ||||||||
| Changes in valuation allowances | 14,355 | (21.2) | % | ||||||||
| Nontaxable or Nondeductible Items | |||||||||||
| Stock-Based Compensation | 1,685 | (2.5) | % | ||||||||
| Others | 345 | (0.5) | % | ||||||||
| Changes in Unrecognized Tax Benefits | — | — | % | ||||||||
| Other Adjustments | (47) | 0.2 | % | ||||||||
| Total | — | — | |||||||||
A reconciliation of the federal statutory income tax rate to the Company's effective income tax rate prior to the adoption of ASU 2023-09 is as follows:
| Year ended December 31, | |||||||||||
| 2024 | |||||||||||
| Expected provision at statutory rate | $ | (11,606) | 21.0 | % | |||||||
| State income tax, net of federal benefit | $ | (3,265) | 5.9 | % | |||||||
| Tax credits | $ | (2,055) | 3.7 | % | |||||||
| Permanent Differences | $ | 1,242 | (2.2) | % | |||||||
| Change in state tax rate | $ | 1,346 | (2.4) | % | |||||||
| Expired Capital Loss | $ | 7,298 | (13.2) | % | |||||||
| Other, net | $ | (163) | 0.3 | % | |||||||
| Change in valuation allowance | $ | 7,203 | (13.0) | % | |||||||
| Effective tax rate | $ | — | — | % | |||||||
The Company's deferred tax assets (liabilities) are comprised of the following (in thousands):
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 89,858 | $ | 67,818 | |||||||
| Start-up costs | 9,699 | 9,699 | |||||||||
| Accruals and reserves | 1,085 | 672 | |||||||||
| Intellectual property | 3,582 | 4,074 | |||||||||
| Stock-based compensation | 3,005 | 3,063 | |||||||||
| Capitalization of research and development expense | 13,658 | 20,800 | |||||||||
| Deferred revenue | 1,236 | 1,784 | |||||||||
| Tax credits | 13,853 | 11,641 | |||||||||
| Lease liabilities | 842 | 966 | |||||||||
| Total deferred tax assets | 136,818 | 120,517 | |||||||||
| Valuation allowance | (136,045) | (119,616) | |||||||||
| Deferred tax assets, net of valuation allowance | $ | 773 | $ | 901 | |||||||
| Deferred tax liabilities: | |||||||||||
| Lease right-of-use assets | (773) | (901) | |||||||||
| Net deferred tax assets | $ | — | $ | — | |||||||
The Company's valuation allowance increased during 2025 by approximately $16.4 million primarily due to current year net operating losses and Section 174 expenditure capitalization. The Company has evaluated both positive and negative evidence when assessing the realizability of its deferred tax assets. Management has considered the Company's history of cumulative net losses, estimated future taxable income as well as tax planning strategies and has concluded that it is more likely than not that the Company will not realize the benefits of its deferred tax assets. Accordingly, a full valuation allowance has been established against these net deferred tax assets as of December 31, 2025 and 2024, respectively.
As of December 31, 2025 and 2024, the Company had United States federal net operating loss ("NOL") carryforwards of $350.3 million and $263.9 million, respectively, which may be available to offset future income tax liabilities. The 2017 Tax Cut and Jobs Act generally allows federal losses generated after 2017 to be carried forward indefinitely, but also limits the NOL deduction to the lesser of the NOL carryover or 80% of a corporation's taxable income (subject to Section 382 of the Internal Revenue Code of 1986, as amended ("IRC")). Additionally, there is no carryback for losses generated after 2017. Losses generated prior to 2018 are deductible using the lesser of a corporation's NOL carryover or 100% of a corporation's taxable
income and have a 20 year carryforward period. The Company has federal NOLs generated after 2017 of $297.6 million, which do not expire. The federal NOLs generated prior to 2018 of $52.7 million will expire at various dates through 2037.
As of December 31, 2025 and 2024, the Company had United States state NOL carryforwards of $348.6 million and $262.2 million, respectively, which may be available to offset future income tax liabilities and expire at various dates through 2045. As of December 31, 2025 and 2024, the Company had federal tax credit carryforwards of approximately $13.7 million and $11.5 million, respectively, which are available to offset future federal tax liabilities which expire at various dates through 2045. As of December 31, 2025 and 2024, the Company had state tax credit carryforwards of approximately $0.2 million and $0.2 million, respectively, which are available to reduce future tax liabilities and expire at various dates through 2034.
NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and relevant state tax authorities. Utilization of NOL and tax credit carryforwards may be subject to a substantial annual limitation under Section 382 and Section 383 of the IRC and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL and tax credit carryforwards that can be utilized annually to offset future federal and state tax liabilities.
The Company has not yet conducted a comprehensive study to assess whether any ownership change has occurred since its inception. A limitation may result in the expiration of a portion of the NOL or tax credit carryforwards before utilization, which would be offset by a change in the Company's valuation allowance. Until a study is completed by the Company, no NOL carryforward amounts will be offset by an unrecognized tax benefit related to Section 382.
A full valuation allowance has also been recorded against the deferred tax assets related to the Company's NOL's and tax credits carryforwards and if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| Year ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Gross unrecognized tax benefits at beginning of year | $ | 303 | $ | 303 | |||||||
| Additions for tax positions taken in a prior year | — | — | |||||||||
| Additions for tax positions taken in the current year | — | — | |||||||||
| Reductions for tax positions taken in the prior year due to settlement | — | — | |||||||||
| Reductions for tax positions taken in the prior year due to statutes lapsing | — | — | |||||||||
| Gross unrecognized tax benefits at end of year | $ | 303 | $ | 303 | |||||||
The uncertain tax positions giving rise to the unrecognized tax benefits of $0.3 million at December 31, 2025 and 2024 relate to the timing of certain income and deductions for federal income tax purposes taken by Histogenics prior to the Company's reverse merger with Histogenics. The reversal of unrecognized tax benefits would not have any impact on the effective tax rate in the future and is not expected to create cash liability.
The Company files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In a normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The Company's tax years are still open from 2020 to present.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted, introducing amendments to U.S. tax laws with various effective dates beginning in 2025 and extending through 2027. The Company considered the legislation's potential effects and concluded that the changes did not have a material effect on its financial statements, as the Company is currently in a loss position and maintain a full valuation allowance against its deferred tax assets.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 4, 2026 | Showing above |
| 2024 | Mar 5, 2025 | |
| 2023 | Apr 16, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 19, 2021 | |
| 2019 | Mar 27, 2020 | |
| 2018 | Mar 22, 2019 | |
| 2017 | Mar 15, 2018 | |
| 2016 | Mar 16, 2017 | |
| 2015 | Mar 10, 2016 | |
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.