OMEROS CORP Income Taxes Disclosure

Note 14—Income Taxes 

 

The components of income tax benefit from continuing and discontinued operations were as follows:

 

		December 31,
		2025				2024				2023
		(In thousands)
Continuing operations:
Current income tax expense:
Federal		$	—			$	—			$	—
State			2,012				2,305				—
Total current income tax expense			2,012				2,305				—
Deferred income tax benefit:
Federal			—				—				—
State			—				—				—
Total deferred income tax benefit			—				—				—
Income tax expense in continuing operations		$	2,012			$	2,305			$	—
Income tax expense as a component of discontinued operations		$	556			$	288			$	462

 

Our income is wholly derived from domestic U.S. operations, and we have no income from foreign subsidiaries for all years presented. For the years ended December 31, 2025, 2024 and 2023, we have net losses from continuing operations before income tax expense of $2.8 million, $180.3 million and $174.9 million, respectively. For the years ended December 31, 2025, 2024 and 2023, we have net pre-tax income from discontinued operations of $2.0 million, $26.1 million and $57.6 million, respectively. In 2025 and 2023, we had net losses for federal income tax purposes and no federal tax liability. In 2024, we had net income for federal income tax purposes; therefore, we utilized existing net operating losses (“NOLs”) of $62.5 million, to fully offset our federal tax liability for the period.

 

We recorded state income tax expense in continuing operations of $2.0 million and $2.3 million in 2025 and 2024, and $0.6 million, $0.3 million and $0.5 million in discontinued operations in 2025, 2024 and 2023, respectively, as we did not have adequate NOLs and tax credits to fully offset our state tax liability. 

 

The Tax Cuts and Jobs Act was enacted on December 22, 2017 and includes the requirement to capitalize and amortize research and development expenditures beginning in 2022. The U.S. government enacted the OBBBA on July 4, 2025, which includes new Section IRC 174A. This section allows for immediate expensing of domestic research and development expenditures for tax years beginning after December 31, 2024, reversing the prior requirement under the 2017 Tax Cuts and Jobs Act which capitalized domestic research and development costs over five years. As a result of the most recent OBBBA legislation, we have chosen to accelerate the previously capitalized and unamortized U.S. research and development expenditures as a current year deduction which allows us to reduce our federal tax liability in the current year to zero. We plan to expense our U.S. research and development expenditures moving forward. Foreign research and development expenditures continue to be subject to capitalization and amortization requirements. State income tax treatment of research and development expenditures continues to vary, as not all states conform to federal provisions, which may result in differences between federal and state taxable income.

 

At December 31, 2025, 2024, and 2023, we had federal NOL carryforwards of $386.5 million, $331.7 million and $398.6 million, respectively.   Pre-2018 federal NOL carryforwards of $45.4 million expire between 2036 and 2037. Post-2018 federal NOL carryforwards of $340.9 million do not expire. Research and development tax credit carryforwards of $111.8 million expire between 2026 and 2044. At December 31, 2025, 2024 and 2023, we had state NOL carryforwards of $229.8 million, $233.2 million and $245.8 million, respectively. We file federal and certain state income tax returns, which provides varying statutes of limitations on assessments. However, because of NOL carryforwards, substantially all of our tax years remain open to federal and state tax examination.

 

Deferred income tax assets and liabilities reflect the tax effect of NOL and tax credit carryforwards and the net temporary difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

 

Significant components of deferred income taxes were as follows:

 

		December 31,
		2025				2024
		(In thousands)
Deferred tax assets:
Research and development tax credits		$	111,757			$	104,772
Net operating loss carryforwards			91,713				80,414
OMIDRIA royalty obligation			38,820				50,446
Debt derivative			36,332				—
Capitalized research and development			19,448				52,388
Stock-based compensation			8,183				9,573
Inventory			6,933				6,993
Intangibles			5,436				5,903
Other			6,681				13,085
Total deferred tax assets			325,303				323,574
Deferred tax liabilities:
OMIDRIA contract royalty asset			(28,163	)			(35,772	)
Other			(6,613	)			(3,839	)
Total deferred tax liabilities			(34,776	)			(39,611	)
Net deferred tax assets before valuation allowance			290,527				283,963
Less valuation allowance			(290,527	)			(283,963	)
Net deferred tax liabilities		$	—			$	—

 

The valuation allowance relates primarily to net U.S. deferred tax assets from research tax credit carryforwards, operating losses, the OMIDRIA royalty obligation, the 2029 Notes derivative, capitalized research and development, and amounts paid and accrued for which the tax treatment requires capitalization and amortization. 

 

The Company maintains a full valuation allowance on its net U.S. deferred tax assets. The assessment regarding whether a valuation allowance is required considers both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. In making this assessment, significant weight is given to evidence that can be objectively verified. In its evaluation, the Company considered its cumulative losses and its forecasted losses in the near term as significant negative evidence. Based upon a review of the four sources of income identified within ASC 740, Accounting for Income Taxes, the Company determined that the negative evidence outweighed the positive evidence, and a full valuation allowance on its net deferred tax assets should be maintained. The Company will continue to assess the realizability of its deferred tax assets going forward and will adjust the valuation allowance as needed.

 

The following table summarizes the activities related to the Company's gross unrecognized tax benefits (in thousands):  

 

Balance at December 31, 2023		$	1,966
Increase in balance related to tax positions taken during prior years			2,509
Decrease in balance as a result of a lapse of the applicable statute of limitations			(12	)
Balance at December 31, 2024			4,463
Decrease in balance related to tax positions taken during current year			(52	)
Decrease in balance as a result of a lapse of the applicable statute of limitations			(34	)
Balance at December 31, 2025		$	4,377

 

As of December 31, 2025, 2024 and 2023, the total amount of gross unrecognized tax benefits was $4.4 million, $4.5 million and $2.0 million, respectively. Accrued interest and penalties of $1.5 million, $0.5 million and $0.3 million, respectively, were included within our unrecognized tax benefits as of December 31, 2025, December 2024 and December 2023, which are excluded from the table above. As of December 31, 2025, $4.4 million of the total unrecognized tax benefits, if recognized, would have an impact on the Company's effective tax rate. The Company's policy is to recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.

 

Rate Reconciliation

 

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 Company's U.S. federal statutory tax amount and rate to its actual effective amount and rate:

 

		December 31, 2025
		(In thousands)				Percent
U.S. federal tax at statutory rate		$	(587	)			(21.0	)%
State tax, net of federal benefit (1)			1,289				46.1	%
Change in valuation allowance			6,122				219.0	%
Changes in unrecognized tax benefits			625				22.4	%
Tax credits
Research and development credit			(1,243	)			(44.5	)%
Orphan drug credit			(5,779	)			(206.7	)%
Non-deductible items
Stock based compensation awards			295				10.5	%
Section 162(m) limitations			1,405				50.2	%
State taxes			(250	)			(8.9	)%
Other items			135				4.9	%
Effective tax rate		$	2,012				72.0	%

 

(1)	The states and local jurisdiction that contribute to the majority (greater than 50%) of the tax effect in this category include California, Michigan and Minnesota

 

The following table presents the required disclosures prior to the Company's adoption of ASU 2023-09 and reconciles the U.S. federal statutory income tax rate to the actual global effective income tax rate for the years ended December 31, 2024 and December 31, 2023:

 

		Year ended December 31,
		2024				2023
U.S. federal statutory rate on net loss			(21.0	)%			(21.0	)%
State tax, net of federal tax benefit			(2.3	)%			(2.1	)%
Change in valuation allowance			28.2	%			27.7	%
Tax credits			(6.6	)%			(8.0	)%
Nondeductible items			0.1	%			0.0	%
Stock compensation			1.7	%			1.5	%
Other			1.2	%			1.9	%
Effective tax rate			1.3	%			0.0	%

 

Income taxes paid, net of refunds received for the year ended December 31, 2025 are shown as follows (in thousands):

 

		December 31, 2025
New York		$	111
Texas			21
Massachusetts			18
All other states			3
Income tax, net of amounts refunded		$	153

 

We did not pay any federal or foreign income taxes during 2025. The amount of cash income taxes paid by the Company during the years ended December 31, 2025, December 31, 2024 and December 31, 2023 was $0.2 million, $0.2 million and $3.3 million, respectively.