PLIANT THERAPEUTICS, INC.PLRX
PLIANT THERAPEUTICS, INC. Income Taxes Disclosure
Income Taxes
The Company had a pre-tax U.S. book loss of $210.3 million, $161.3 million, and $123.3 million, for the years ended December 31, 2024, 2023 and 2022, respectively. During the years ended December 31, 2024, 2023 and 2022, the Company did not record an income tax provision. The Company will continue to maintain a 100% valuation allowance on total deferred tax assets. The Company believes it is more likely than not that the related deferred tax assets will not be realized.
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:
| Year Ended December 31, | |||||||||||||||||
| 2024 | 2023 | 2022 | |||||||||||||||
| Income tax computed at federal statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| State taxes, net of federal tax benefit | (0.6) | % | 6.7 | % | 7.3 | % | |||||||||||
| General business credit—federal | 3.3 | % | 5.3 | % | 3.6 | % | |||||||||||
| Stock-based compensation | (1.6) | % | 0.9 | % | (1.0) | % | |||||||||||
| Other permanent differences | (0.2) | % | 0.1 | % | (0.4) | % | |||||||||||
| Section 162(m) | (0.7) | % | (3.8) | % | — | % | |||||||||||
| Change in valuation allowance | (21.2) | % | (30.2) | % | (30.5) | % | |||||||||||
| Effective income tax rate | — | % | — | % | — | % | |||||||||||
Net deferred tax assets and liabilities consisted of the following (in thousands):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating losses | $ | 94,882 | $ | 78,452 | |||||||
| Research and development credits | 37,740 | 29,559 | |||||||||
| Accrued expenses | 1,862 | 2,211 | |||||||||
| Other | 757 | 1,350 | |||||||||
| Capitalized research and development | 55,291 | 34,769 | |||||||||
| Lease liability | 6,300 | 369 | |||||||||
| Stock based compensation | 7,722 | 8,291 | |||||||||
| Total deferred tax assets | 204,554 | 155,001 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Fixed asset basis | — | (123) | |||||||||
| Prepaid expenses | (331) | (598) | |||||||||
| Right of use asset | (5,725) | (339) | |||||||||
| Total deferred tax liabilities | (6,056) | (1,060) | |||||||||
| Valuation allowance | 198,498 | 153,941 | |||||||||
| Net deferred taxes | $ | — | $ | — | |||||||
Net operating losses and tax credit carryforwards were as follows (in thousands):
| December 31, 2024 | Expiration Year | ||||||||||
| Net operating losses, federal (starting from January 1, 2018) | $ | 289,189 | Does not expire | ||||||||
| Net operating losses, federal (before January 1, 2018) | $ | 29,486 | 2035-2037 | ||||||||
| Net operating losses, state | $ | 397,900 | 2035-2044 | ||||||||
| Tax credits, federal | $ | 40,517 | 2036-2044 | ||||||||
| Tax credits, state | $ | 9,077 | Does not expire | ||||||||
Utilization of the net operating loss carryforwards and research credit carryforwards may be subject to an annual limitation due to the ownership percentage change limitations provided by the Internal Revenue Code (“IRC”) and similar state provisions. Annual limitations may result in the expiration of the net operating losses and tax credit carryforwards before they are utilized. The Company performed a IRC Section 382 analysis through December 31, 2024 and does not expect any previous ownership changes to result in a limitation that will reduce the total amount of net operating loss and tax credit carryforwards disclosed that can be utilized. Subsequent ownership changes may affect the limitation in future years.
During the years ended December 31, 2024 and 2023, the Company recorded a full valuation allowance on federal and state deferred balances since management does not forecast the Company to be in a profitable position in the near
future. Changes in the valuation allowance for deferred tax assets during the years ended December 31, 2024 and 2023 related primarily to the increases in net operating loss carryforwards and research and development tax credit carryforwards and were as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Valuation allowance at the beginning of the year | $ | 153,941 | $ | 105,684 | |||||||
| Increases recorded to income tax provision | 44,557 | 48,257 | |||||||||
| Valuation allowance at the end of the year | $ | 198,498 | $ | 153,941 | |||||||
The Company’s U.S. federal and state income tax returns are generally subject to tax examinations for the tax years ended December 31, 2018 through December 31, 2023. There are currently no pending income tax examinations. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state tax authorities to the extent utilized in a future period.
The entire amount of the unrecognized tax benefits would not impact the Company’s effective tax rate if recognized. The Company's accounting policy is to include interest and penalties as a component of tax expense. During the years ended December 31, 2024 and 2023, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next 12 months.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| January 1 | $ | 7,974 | $ | 5,196 | |||||||
| Additions based on tax positions related to current year | 2,505 | 2,475 | |||||||||
| (Reductions) additions for tax positions of prior year | (240) | 303 | |||||||||
| December 31 | $ | 10,239 | $ | 7,974 | |||||||
Effective January 1, 2022, we are subject to mandatory capitalization of Section 174 research and development expenditures. The capitalized expenses are subject to amortization over five and fifteen years for expenses incurred within the U.S. and outside of U.S., respectively.
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.