PTC THERAPEUTICS, INC. Income Taxes Disclosure

13. Income taxes

The income (loss) from operations before tax (expense) benefit consisted of the following for the years ended December 31, 2025, 2024, and 2023:

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The Income Tax Provision consisted of the following for the years ended December 31, 2025, 2024 and 2023:

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The difference between income tax expense and effective tax rate and the amounts resulting from applying the federal statutory rate of 21% to Income before income taxes in 2025 after the adoption of ASU 2023-09 is as follows:

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A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for years prior to the adoption of ASU 2023-09 is as follows:

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Accounting for income taxes under U.S. GAAP requires that individual tax-paying entities of the company offset all deferred tax liabilities and assets within each particular tax jurisdiction and present them as a noncurrent deferred tax liability or asset. Amounts in different tax jurisdictions cannot be offset against each other. The Company did not have any amounts related to deferred income taxes.

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The significant components of the Company’s deferred tax assets and liabilities at December 31, 2025 and 2024 are as follows:

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For the year ended December 31, 2025, the Company generated taxable income in the U.S. of $277.8 million. The Company has recorded a current federal income tax provision expense of $14.2 million and a current state income tax provision expense of $4.7 million which are driven by the income related to the Novartis Agreement.

At December 31, 2025 and 2024, the Company recorded a valuation allowance against its net deferred tax assets of $816.5 million and $857.6 million, respectively. The change in the valuation allowance during the years ended December 31, 2025 and 2024 was $41.1 million and $23.8 million, respectively. A valuation allowance has been recorded since, in the judgment of management, these assets are not more likely than not to be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences and carryforwards become deductible or are utilized. As of December 31, 2025, the Company had $13.0 million, and $43.9 million of state and foreign net operating loss carryforwards, respectively. The Company utilized its remaining federal net operating loss carryforwards in the 2024 tax year and no carryforwards to the current year to offset taxable income.

As of December 31, 2025, the combined Research and Development and Orphan Drug Credit carryforward for federal purposes is $164.6 million.

The income tax (expense) benefit for the year ended December 31, 2025 differed from the amounts computed by applying the U.S. federal income tax rate of 21% to income before tax expense as a result of nontaxable dividend income related to the Translarna IP transfer, the deduction of unamortized domestic section 174 capitalized costs following the

enactment of the One Big Beautiful Bill Act,  US tax effects of foreign items, including “global intangible low-taxed income” (“GILTI”), tax credits generated, and a decrease in the Company’s valuation allowance.

The income tax (expense) benefit for the years ended December 31, 2024 and 2023 differed from the amounts computed by applying the U.S. federal income tax rate of 21% to loss before tax expense as a result of the recognition of royalty income for income tax purposes related to the A&R Royalty Purchase Agreement, foreign taxes, section 174 capitalized costs prior to the One Big Beautiful Bill Act,  the impact of permanent differences, including “global intangible low-taxed income” (“GILTI”), tax credits generated, true up of net operating loss carryforwards, and increase in the Company’s valuation allowance.

Under the 2017 Tax Cuts and Jobs Act, the ability to currently deduct qualifying research and experimental costs under section 174, as well as software development costs, are eliminated for tax years beginning after December 31, 2021. Under the new rule, these costs must be capitalized and amortized over a five-year or fifteen-year period, depending on whether the research is conducted in the U.S. or abroad, respectively. The rule became effective for the Company during the 2022 tax year.  On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted into law. The OBBBA includes changes to U.S. tax law that were applicable to the Company beginning in tax year 2025, with additional provisions applying in subsequent years. Included in these changes are favorable adjustments to deductions for qualified property and research and development expenditures which were previously capitalized under the Tax Cuts and Jobs Act, as well as reforms to the international tax framework.

The Company applies the elements of FASB ASC 740-10 regarding accounting for uncertainty in income taxes. This clarifies the accounting for uncertainty in income taxes recognized in financial statements and required impact of a tax position to be recognized in the financial statements if that position is more likely than not of being sustained by the taxing authority. As of December 31, 2025, the Company recorded unrecognized tax benefits in the amount of $15.1 million including interest and penalties through 2025. The Company’s policy is to recognize interest and penalties related to tax matters within the income tax provision. Tax years beginning in 2014 are generally subject to examination by taxing authorities, although net operating losses from all years are subject to examinations and adjustments for at least three years following the year in which the attributes are used. The Company is currently under a corporate business tax audit in New Jersey for tax years 2020 through 2022. Although the outcome of tax audits is always uncertain, the company does not expect any adjustment to result for these years as of December 31, 2025.

For all years through December 31, 2016, the Company generated research credits but has not conducted a study to document the qualified activities. This study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against the Company’s research and development credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the deferred tax asset established for the research and development credit carryforwards and the valuation allowance.

As a result of U.S. tax reform legislation, distributions of profits from non-U.S. subsidiaries are not expected to cause a significant incremental U.S. tax impact in the future. However, distributions may be subject to non-U.S. withholding taxes if profits are distributed from certain jurisdictions. As of December 31, 2025, for purposes of ASC 740-10-25-3, the Company had $654.3 million of undistributed earnings from non-U.S. subsidiaries that it intends to reinvest permanently in its non-U.S. operations. As these ASC 740-10-25-3 earnings are considered permanently reinvested, no tax provision has been accrued. It is not feasible to estimate the amount of tax that might be payable on the eventual remittance of such earnings.

Unrecognized Tax Benefits

A reconciliation of the gross amount of unrecognized tax benefits, excluding accrued interest and penalties, is as follows:

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Uncertain tax positions, for which management's assessment is that there is a more than 50% probability of sustaining the position upon challenge by a taxing authority based upon its technical merits, are subject to certain recognition and measurement criteria. The nature of the uncertain tax positions is often very complex and subject to change, and the amounts at issue can be substantial. The Company develops its cumulative probability assessment of the measurement of uncertain tax positions using internal experience, judgment, and assistance from professional advisors. The Company re-evaluates these uncertain tax positions on a quarterly basis based on a number of factors including, but not limited to, changes in facts or circumstances, changes in tax law, and effectively settled issues under audit and new audit activity. Any change in these factors could result in the recognition of a tax benefit or an additional charge to the tax provision.

The Company records penalties and tax-related interest expense on unrecognized tax benefits as a component of the provision for income taxes in the accompanying consolidated statement of operations. The Company has recorded interest related to uncertain tax positions for the year ended December 31, 2025, in the accompanying consolidated balance sheet.  Future changes in the Company’s unrecognized tax benefits will affect the Company’s annual effective tax rate.