Revolution Medicines, Inc. Income Taxes Disclosure

14. Income taxes

The Company recorded no income tax expense or benefit for the year ended December 31, 2025. The Company recorded an income tax benefit of $0.8 million and $3.5 million for the years ended December 31, 2024 and 2023, respectively, for certain state taxes on the indefinite lived intangibles recorded as part of the Company’s acquisition of Warp Drive Bio in 2018. The Company has incurred net pre-tax losses in the United States for all periods presented. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the carrying amounts of existing assets and liabilities in the financial statements and their respective tax bases using tax rates expected to be in effect during the years in which the basis differences reverse.

On July 4, 2025, bill H.R. 1, commonly referred to as the "One Big Beautiful Bill Act" or "OBBBA," was signed into law, with certain provisions effective in 2025 and others in 2026. The OBBBA significantly revises U.S. corporate income tax laws by, among other things, restoring the option for immediate expense recognition for U.S.-based research and development expenditures and making permanent the ability to claim first-year bonus depreciation on qualified property. The Company was not materially impacted by OBBBA tax law changes of taxation of foreign operations. Pursuant to ASC 740, changes in tax rates and tax law are required to be recognized in the period in which the legislation is enacted. The Company evaluated the impact of this Act on its annual consolidated financial statements and related disclosures and concluded that the Act does not have a material impact on its 2025 consolidated financial statements, as any impact was offset by a valuation allowance.

As further described in Note 2, Summary of Significant Accounting Policies, the Company has elected to prospectively adopt the guidance in ASU 2023-09. The following table is a reconciliation of the Company’s effective income tax rate to the statutory federal income tax rate for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09:

Deferred income tax reflects the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The categories that give rise to significant components of the deferred tax assets are as follows (in thousands):

The realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Due to the lack of earnings history, the net deferred tax assets have been offset by a valuation allowance excluding certain indefinite lived intangibles. The valuation allowance increased by $364.6 million, $187.2 million, and $152.6 million during the years ended December 31, 2025, 2024, and 2023, respectively. The valuation allowance increased primarily due to additional net operating loss carryforward and research tax credits generated during the year.

The Company had federal and state net operating loss carryforwards deferred tax assets of $315.4 million and $120.1 million, respectively, as presented in the table above, as of December 31, 2025. The federal net operating loss carryforwards, if not utilized, will expire beginning in 2035, with the exception of $295.8 million in federal net operating loss carryforwards deferred tax asset, which can be carried forward indefinitely. State net operating loss carryforwards, if not utilized, will expire beginning in 2035.

The Company also had federal and state research and development credit carryforwards of $102.2 million and $27.4 million, respectively, as of December 31, 2025. The federal research credits will expire beginning in 2034 if not utilized and the state research credits will expire beginning in 2031, with the exception of $25.2 million in California research credits, which can be carried forward indefinitely.

Federal and state tax laws impose significant restrictions on the utilization of net operating loss carryforwards and other tax attributes in the event of a change in ownership of the Company, as defined by Internal Revenue Code Section 382 and 383 (Section 382 and 383). The Company's deferred tax assets have been reduced by the amount of net operating loss carryforwards and other tax attributes limited by Section 382 and 383 from ownership changes that have occurred in prior years. In addition, in the future the Company may experience ownership changes, which may limit the utilization of net operating loss carryforwards or other tax attributes.

The Company has unrecognized tax benefits of $51.1 million, $198.1 million, and $184.2 million as of December 31, 2025, 2024 and 2023 which would affect the effective tax rate if recognized; however, recognition would be in the form of a deferred tax attribute which would likely be offset by a valuation allowance. Based on the Company’s expectations of applicable 382 and 383 limitations as of December 31, 2025, the Company reduced the unrecognized tax benefits by $152.3 million related to acquired tax attributes as a part of the EQRx transaction, the reduction does not impact the Company’s deferred tax assets or effective tax rate. The Company does not anticipate any significant changes to unrecognized tax benefits over the next 12 months. The Company has recognized no interest or penalties related to uncertain tax positions for the periods presented.

Income tax returns are filed in the United States. The years 2010 through 2025 remain open to examination by the domestic taxing jurisdictions to which the Company is subject on its net operating losses.