Phathom Pharmaceuticals, Inc. Income Taxes Disclosure

9. Income Taxes

For the years ended December 31, 2025 and 2024, the Company did not record a provision for income taxes due to a full valuation against its deferred taxes. A reconciliation between the provision for income taxes and income taxes computed using the U.S. federal statutory corporate tax rate for the year ended December 31, 2025 is as follows (in thousands):

Based upon the Company’s history of operating losses, the Company is unable to conclude that it is more likely than not that the benefit of its deferred tax assets will be realized. Accordingly, the Company has provided a full valuation allowance for its deferred tax assets as of December 31, 2025 and 2024.

On July 4, 2025, the One Big Beautiful Bill Act, or OBBBA, was enacted into law. The new tax law contains several key provisions affecting corporations including but are not limited to expensing of domestic specified research or experimental expenditures and one hundred percent bonus depreciation on eligible property after January 19, 2025. In accordance with Accounting Standards Codification (ASC) 740, Income Taxes, the Company is required to recognize the effect of the tax law changes in the period of enactment, such as remeasuring the estimated U.S. deferred tax assets and liabilities. Because of a full valuation allowance, there is no net impact to deferred tax assets and liabilities for the year ended December 31, 2025. The Company will continue to apply OBBBA tax law changes as required or elected in future years.

As of December 31, 2025 and 2024, the Company had federal net operating loss carryforwards of approximately $1.0 billion and $863.2 million, respectively, which are carried over indefinitely. As of December 31, 2025, the Company had approximately $387.1 million of state net operating loss carryforwards that begins to expire in 2033. As of December 31, 2025, the Company has available federal research and development credits of $17.2 million which begin to expire in 2038. The Company has $1.2 million of state research and development credits, some of which, begin to expire in 2026.

The Company has not completed a formal analysis of the potential impact of Section 382 on its deferred tax assets as of December 31, 2025. Until this analysis has been completed, the Company has not adjusted any of its deferred tax assets, including net operating losses or research and development credits. The Company will reassess the amount of net operating losses and credits subject to limitation under Section 382 when a study is complete. Due to the existence of the valuation allowance, future changes in the deferred tax assets related to these tax attributes will not impact the Company’s effective tax rate.

The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes that it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcome of examinations by tax authorities in determining the adequacy of its provision for income taxes.

As of December 31, 2025 and 2024, the Company has gross unrecognized tax benefits of $3.7 million and $3.5 million, respectively, none of which would affect the effective tax rate due to a full valuation allowance. The Company's policy is to recognize the interest expense and/or penalties related to income tax matters as a component of income tax expense. The Company has no accrual for interest or penalties on its balance sheet as of December 31, 2025 and 2024, and has not recognized interest and/or penalties in its statement of operations for the years ended December 31, 2025 and 2024.

The Company is subject to taxation in the United States and various states. The Company is not currently under examination by any taxing authorities. Due to the carryover of tax attributes, the statute of limitations is currently open for tax years since inception.