D-Wave Quantum Inc.QBTS
D-Wave Quantum Inc. Income Taxes Disclosure
10. INCOME TAXES
Income tax expense
The following table presents domestic and foreign components of loss before income taxes for the years ended December 31, 2025 and 2024 (in thousands):
| Years ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Domestic | $ | (294,554) | $ | (113,553) | |||||||
| Foreign | (60,508) | (30,326) | |||||||||
| Total net loss before income taxes | $ | (355,062) | $ | (143,879) | |||||||
Significant components of the Company’s deferred income tax assets and liabilities as of December 31, 2025 and 2024 are as follows:
| Years ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 80,603 | $ | 64,583 | |||||||
| Research and development credit carryforward | 22,205 | 18,531 | |||||||||
| Scientific research and experimental development deductions | 39,771 | 36,155 | |||||||||
| Depreciation and amortization | 7,286 | 6,684 | |||||||||
| Deferred revenue | 37 | — | |||||||||
| Start-up costs | 744 | 809 | |||||||||
| Stock-based compensation | 3,781 | 1,939 | |||||||||
| Loan payable | 1,775 | 0 | |||||||||
| Other accruals and reserves | 669 | 1,431 | |||||||||
| Total deferred tax assets | 156,871 | 130,132 | |||||||||
| Valuation Allowance | (156,225) | (129,107) | |||||||||
| Total deferred tax assets, net | $ | 646 | $ | 1,025 | |||||||
| Deferred tax liabilities: | |||||||||||
| Marketable securities | (646) | (695) | |||||||||
| Loan payable | 0 | (330) | |||||||||
| Total deferred tax liabilities | (646) | (1,025) | |||||||||
| Net deferred tax assets (liabilities) | $ | — | $ | — | |||||||
The effective tax rate differs from the statutory rate, primarily due to the Company’s history of incurring losses, which have not been utilized, the foreign rate differential related to subsidiary earnings, and other permanent differences.
A summary reconciliation of the effective tax rate calculated at the U.S. federal rate for the year ended December 31, 2025 is as follows:
| Year ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| U.S. Federal Statutory Tax Rate | $ | (74,563) | 21.0 | % | |||||||
State and Local Income Taxes, Net of Federal Income Tax Effect (1) | 888 | (0.3) | % | ||||||||
| Foreign Tax Effects: | |||||||||||
| Canada | |||||||||||
| Statutory tax rate difference between Canada and United States | (4,147) | 1.2 | % | ||||||||
| Changes in valuation allowance | 17,510 | (4.9) | % | ||||||||
| Research and development tax credits | (3,942) | 1.1 | % | ||||||||
| Other | 2,077 | (0.6) | % | ||||||||
| Other foreign jurisdictions | (49) | — | % | ||||||||
| Changes in Valuation Allowances | 9,884 | (2.8) | % | ||||||||
| Nontaxable or Non-deductible Items: | |||||||||||
| Share-based payment awards | (25,182) | 7.1 | % | ||||||||
| Fair market value adjustments to warrant liabilities | 56,813 | (16.0) | % | ||||||||
| Non-deductible compensation | 25,770 | (7.3) | % | ||||||||
| Other | 2,460 | (0.7) | % | ||||||||
| Other adjustments | (533) | 0.2 | % | ||||||||
| Share-based payment prior year true-up | (6,986) | 2.0 | % | ||||||||
| Effective Tax Rate | $ | — | — | % | |||||||
(1) The states that contribute to the majority (greater than 50%) of the tax effect in this category include California, Florida, and Tennessee for 2025, and Florida for 2024.
A summary reconciliation of the effective tax rate calculated at the U.S. federal rate for the year ended December 31, 2024 is as follows:
| Year ended December 31, | |||||
| 2024 | |||||
| US federal tax rate | 21 | % | |||
| Foreign losses taxed at different rates | 1 | % | |||
| Return to provision adjustments | 1 | % | |||
| Stock-based compensation | (2) | % | |||
| Research and development credits | 2 | % | |||
| Permanent differences | (11) | % | |||
| Change in valuation allowance | (12) | % | |||
| Effective tax rate | — | % | |||
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and the amount of which are uncertain.
As of December 31, 2025, the Company maintained a valuation allowance with respect to its subsidiaries’ net operating losses that it believes is more likely than not that the deferred tax asset will not be realized. The Company will continue to reassess the valuation allowance annually and if future evidence allows for a partial or full release of the valuation allowance, a tax benefit will be recorded accordingly.
As of December 31, 2025, the Company has Canadian tax loss carryforwards of approximately $159.8 million expiring between 2033 and 2045 as well as Scientific Research and Experimental Development expenditures of approximately $147.4 million that can be carried forward indefinitely, which are available to be applied against future taxable income. In addition, the Company has investment tax credits of approximately $21.9 million expiring between 2028 and 2045 that are available to be applied against future Canadian federal income taxes payable. The Company has provincial investment tax credits of approximately $6.1 million expiring between 2032 and 2035 that are available to be applied against future Canadian provincial income taxes payable.
The Company also has U.S. tax loss carryforwards of approximately $131.1 million which may be applied against future taxable income, of which $15.6 million will expire between 2032 and 2037, while $115.5 million can be carried forward indefinitely. Future utilization of US tax loss carryforwards is subject to certain limitations under the Internal Revenue Code ("IRC"), including limitations under IRC section 382. The Company's U.S. tax loss carryforwards may be limited by IRC section 382. However, those limitations do not have a significant impact to the financial statements since there is no utilization of the tax loss carryforwards and a full valuation allowance exists against the net operating losses.
The Company files income tax returns in the U.S., Canada, and various foreign and state jurisdictions. The 2013 to 2025 tax years remain subject to examination by the U.S. federal and state tax authorities. The 2021 to 2025 tax years remain subject to examination by Canadian tax authorities.
The Company has unrecognized tax benefits of 0.7 million as of December 31, 2025. No amount of the unrecognized tax benefits would affect the effective tax rate because any tax benefits would result in adjustments to a related deferred tax asset that are offset by a valuation allowance. The Company has not accrued for any interest or penalties as of December 31, 2025.
The total gross unrecognized tax benefits remained unchanged throughout the year ended December 31, 2025.
Cash taxes paid by the Company, presented by geography, for the years ended December 31, 2025 and 2024 are as follows:
| Years ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Germany | $ | 18 | $ | — | |||||||
| Ireland | 2 | 20 | |||||||||
| Japan | 6 | 2 | |||||||||
| United Kingdom | — | 14 | |||||||||
| Total income taxes paid, net of refunds | $ | 26 | $ | 37 | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Mar 14, 2025 | |
| 2023 | Mar 29, 2024 | |
| 2022 | Apr 18, 2023 | |
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.