Outlook Therapeutics, Inc. Income Taxes Disclosure

13.   Income Taxes

Income tax benefit for the years ended September 30, 2025 and 2024 consists of the following:

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A reconciliation of income tax expense (benefit) at the statutory federal income tax rate and income taxes as reflected in the financial statements is as follows:

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The tax effects of the temporary differences that gave rise to deferred taxes were as follows:

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As of September 30, 2025, the Company had approximately $441.0 million and $243.6 million of United States federal and New Jersey NOLs that will begin to expire in 2030 and 2039, respectively. As of September 30, 2025, the Company had federal and state research and development tax credit carryforwards of $11.6 million and $0.8 million, respectively, available to reduce future tax liabilities which will begin to expire in 2032 and 2033, respectively. As of September 30, 2025, the Company has federal foreign tax credit (“FTC”) carryforwards of $0.1 million available to reduce future tax liabilities which began to expire starting in 2023, of which $1.9 million of the FTC carryforward is included in the balance of unrecognized tax benefits. Realization of the deferred tax asset is contingent on future taxable income and based upon the level of historical losses, management has concluded that the deferred tax asset does not meet the more-likely-than-not threshold for realizability. Accordingly, a full valuation allowance continues to be recorded against the Company’s deferred tax assets as of September 30, 2025 and 2024. The valuation allowance increased by $7.1 million and $19.0 million during the year ended September 30, 2025 and 2024, respectively.

When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely-than-not be realized. The determination as to whether the tax benefit will more-likely-than-not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. The Company recognizes interest and penalties accrued on any unrecognized tax benefits within the provision for income taxes in its consolidated statements of operations.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the United States. The legislation includes significant corporate tax reforms, including the permanent reinstatement of the ability to deduct domestic research and development expenditures as incurred beginning in fiscal 2026, replacing the previous requirement to capitalize and amortize such expenditures over five years. The OBBBA also introduces modifications to the international tax framework, including changes to the foreign-derived intangible income (“FDII”) regime. Under the legislation, FDII is renamed foreign-derived deduction-eligible income (“FDDEI”), with the current FDDEI effective tax rate of 13% maintained through fiscal 2026, followed by a permanent adjustment to a 14% rate beginning in fiscal 2027 (compared to 16% under prior law). The legislation contains multiple effective dates, with certain provisions effective in 2025 and others becoming effective in subsequent years. The effects of OBBBA are not expected to have a material impact relative the financials of the Company.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

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The Company expects the remaining $300,000 to be recognized as a tax benefit  in the next 12 months. These unrecognized tax benefits, if recognized, would affect the annual effective tax rate. The Company’s income tax returns for the years from 2011 through 2024 remain open for examination by the Internal Revenue Service as well as various states and municipalities.

Due to the change in ownership provisions of the Code, the availability of the Company’s NOL carryforwards may be subject to annual limitations against taxable income in future periods, which could substantially limit the eventual utilization of such carryforwards. The Company has not analyzed the historical or potential impact of its equity financings on beneficial ownership and therefore no determination has been made whether the net operating loss carry forward is subject to any Code Section 382 limitation. To the extent there is a limitation, there would be a reduction in the deferred tax assets with an offsetting reduction in the valuation allowance.