Protagonist Therapeutics, Inc Income Taxes Disclosure

Note 13.    Income Taxes

The Company adopted ASU 2023-09 retrospectively beginning January 1, 2025. See Note 2. Summary of Significant Accounting Policies – Recently Adopted Accounting Pronouncements for additional details on the adoption of ASU 2023-09.

The following table presents domestic and foreign components of net loss before income taxes (in thousands):

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The federal, state and foreign components of the income tax expense are summarized as follows (in thousands):

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The effective tax rate for the provision for income taxes differs from the federal statutory rate as follows (in thousands, except percentages):

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⁽¹⁾ State taxes to New Jersey, Michigan and Oregon made up the majority (greater than 50 percent) of the tax effect in this category.

Cash paid for income taxes, net of refunds received, by jurisdiction was as follows (in thousands):

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The components of the deferred tax assets are follows (in thousands):

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Accounting Standards Codification Topic 740, Income Taxes, requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. The valuation allowance increased by approximately $51.7 million during the year ended December 31, 2025 and decreased by $50.9 million and increased by $28.1 million during the years ended December 31, 2024 and 2023, respectively.

Federal and state laws impose substantial restrictions on the utilization of net operating loss and tax credit carryforwards in the event of an ownership change for tax purposes, as defined in Section 382 of the Internal Revenue Code. As a result of such ownership changes, the annual limitation may result in the expiration of net operating losses and credits before utilization. The Company performed a Section 382 analysis through December 31, 2025. The Company has experienced ownership changes in the past. The ownership changes will not result in a limitation that will materially reduce the total amount of net operating loss carryforwards and credits that can be utilized. Subsequent ownership changes may affect the limitation in future years.

As of December 31, 2025, the Company had $238.1 million of federal net operating loss carryforwards and $240.0 million of state net operating loss carryforwards. $10.8 million of the federal net operating loss carryforwards will begin to expire in 2035, if not utilized, and the remaining $227.3 million have no expiration date. The state net operating loss carryforwards will begin to expire in 2035, if not utilized.

As of December 31, 2025, the Company had $37.7 million of federal and $14.0 million of state research and development tax credit carryforwards available to reduce future income taxes. The federal research and development tax credits will begin to expire in 2035, if not utilized. The state research and development tax credits have no expiration date.

As of December 31, 2025, the Company had AUD 4.8 million ($3.2 million) of Australian research and development tax credit carryforwards available to reduce future income taxes. The Australian research and development tax credits have no expiration date.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

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At December 31, 2025, the Company had unrecognized tax benefits of $37.0 million, which are subject to a valuation allowance and would not affect the effective tax rate if recognized. The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes, as necessary. Management determined that no accrual for interest or penalties was required as of December 31, 2025, 2024 and 2023.

The Company files income tax returns in the United States federal jurisdiction, various states and Australia. The Company is not currently under examination by income tax authorities in federal, state or other jurisdictions.

Protagonist Australia had an accumulated deficit at December 31, 2025 and, accordingly, no provision has been provided thereon for any unremitted earnings.

The Company has received orphan drug designation from the FDA for its clinical asset rusfertide for the treatment of PV and beta-thalassemia and may qualify for a related 25% U.S. Federal income tax credit on qualifying clinical trial expenditures.

Tax Legislation Updates

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted, which includes a broad range of tax reform provisions affecting businesses, including extending and modifying certain key Tax Cuts & Jobs Act provisions (both domestic and international). Key aspects of the bill include:

The Company assessed the impact of the OBBBA on its financial statements and concluded that it did not have a material impact on the Company’s tax provision for the year ended December 31, 2025 due to the Company’s historical losses and full valuation allowance.