RECURSION PHARMACEUTICALS, INC.RXRX
RECURSION PHARMACEUTICALS, INC. Income Taxes Disclosure
Income Taxes
The loss from continuing operations before income tax benefit is disaggregated as follows:
| Years ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||
Loss from continuing operations before income tax benefit | |||||||||||
| United States | (537,644) | (422,851) | (314,372) | ||||||||
| Foreign | (107,251) | (41,937) | (17,756) | ||||||||
Total loss from continuing operations before income tax benefit | $ | (644,895) | $ | (464,788) | $ | (332,128) | |||||
The provision for income taxes consisted of the following components:
| Years ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||
| Current | |||||||||||
| Federal | $ | (237) | $ | (24) | $ | — | |||||
| State | (6) | — | |||||||||
| Foreign | 5 | (474) | — | ||||||||
Total current tax benefit (expense) | $ | (232) | $ | (504) | $ | — | |||||
| Deferred | |||||||||||
| Federal | $ | 127,351 | $ | 80,110 | $ | 82,707 | |||||
| State | 10,705 | 11,918 | 54,634 | ||||||||
| Foreign | 55,686 | 9,921 | 4,564 | ||||||||
| Change in valuation allowance | (193,374) | (100,318) | (137,843) | ||||||||
Total deferred benefit | $ | 368 | $ | 1,631 | $ | 4,062 | |||||
Total income tax benefit | $ | 136 | $ | 1,127 | $ | 4,062 | |||||
The benefit for income taxes results in effective rates that differ from the statutory rates. The following is a reconciliation of income tax benefit computed at the statutory federal income tax rate to the total tax benefit computed at the effective tax rate:
| Year ended December 31, 2025 | ||||||||
(in thousands) | Percent | Amount | ||||||
U.S. federal statutory tax rate | 21.0 | % | $ | 135,428 | ||||
State and local income taxes, net of federal income tax effectsA | 0.3 | % | (203) | |||||
| Foreign tax effects | ||||||||
| UK | ||||||||
| Change in valuation allowance | (8.4) | % | (50,648) | |||||
Gain on Exscientia GmbH sale | 1.2 | % | 7,593 | |||||
| Statutory tax rate difference between UK and US | 1.0 | % | 6,682 | |||||
Share-based compensation | 1.0 | % | 6,730 | |||||
Other | 1.2 | % | 7,763 | |||||
| Austria | ||||||||
Loss on Exscientia GmbH sale | (1) | % | (9,210) | |||||
| Other | 0.0 | % | (20) | |||||
| Nontaxable or nondeductible items | ||||||||
Share-based compensation | (1.2) | % | (7,847) | |||||
| Other | (0.1) | % | (534) | |||||
| Effect of cross-border tax laws | (0.9) | % | (6,104) | |||||
Tax credits | ||||||||
| R&D credit - current year generation | 3.9 | % | 25,219 | |||||
| Orphan drug credit - current year generation | 3.2 | % | 20,750 | |||||
| Change in valuation allowance | (19.8) | % | (127,401) | |||||
| Changes in unrecognized tax benefits | (0.7) | % | (4,597) | |||||
Other adjustments | (0.5) | % | (3,465) | |||||
| Effective tax rate | 0.2 | % | $ | 136 | ||||
A State taxes in California and Utah made up the majority (greater than 50%) of the tax effect in this category.
Significant components of deferred tax assets and liabilities were as follows:
| December 31, | ||||||||
| (in thousands) | 2025 | 2024 | ||||||
| Deferred tax assets | ||||||||
| Net operating loss carryforwards | $ | 445,440 | $ | 274,421 | ||||
| Research and development capitalization | 118,160 | 134,363 | ||||||
| Tax credit carryforwards | 117,738 | 68,811 | ||||||
| Unearned revenue | 6,020 | 19,219 | ||||||
| Lease liabilities | 17,622 | 23,510 | ||||||
| Reserves and accruals | 4,093 | 5,133 | ||||||
| Stock-based compensation | 10,015 | 14,730 | ||||||
Other | 508 | 1,175 | ||||||
| Gross deferred tax assets | 719,596 | 541,362 | ||||||
| Valuation allowance | (665,371) | (466,147) | ||||||
| Net deferred tax asset | 54,225 | 75,215 | ||||||
| Deferred tax liabilities | ||||||||
| Right-of-use assets | (14,177) | (19,183) | ||||||
| Definite lived intangibles | (56,303) | (67,140) | ||||||
| Depreciable assets | (7,000) | (5,358) | ||||||
| Deferred tax liabilities | (77,480) | (91,681) | ||||||
| Net deferred tax liability | $ | (23,255) | $ | (16,466) | ||||
The company paid the following income taxes (net of refunds received) during the year:
| December 31, | ||||||||
| (in thousands) | 2025 | 2024 | ||||||
| Federal | $ | 237 | $ | — | ||||
Total income taxes paid (net of refunds received) | $ | 237 | — | |||||
Reserves for uncertain tax positions against the credit carryforwards were as follows:
| December 31, | ||||||||
| (in thousands) | 2025 | 2024 | ||||||
| Balance at the beginning of the period | $ | 6,749 | $ | 5,417 | ||||
| Increases for positions taken in current year | 3,306 | 1,535 | ||||||
| Increase (decrease) for positions taken in prior year | 1,748 | (203) | ||||||
| Balance at the end of the period | $ | 11,803 | $ | 6,749 | ||||
As of December 31, 2025, the Company had federal NOL carryforwards of $1.1 billion available to reduce taxable income, of which $16.3 million expire beginning with 2037 and $1.1 billion do not expire. The Company had state NOL carryforwards of $894.4 million available to reduce future state taxable income, of which $472.8 million expire beginning with 2031 and $421.6 million that begin to expire in 2032.The Company had foreign NOL carryforwards of $174.8 million available to reduce future foreign taxable income, of which $20.6 million expire beginning with 2032 and $154.3 million that do not expire.
As of December 31, 2025, the Company also had federal and state research and development credit carryforwards of $60.3 million and $16.7 million respectively. As of December 31, 2024, the Company also had federal and state research and development credit carryforwards of $35.1 million and $10.2 million respectively. The Company also had federal Orphan Drug credits of $45.5 million and $24.7 million as of December 31, 2025 and December 31, 2024, respectively, which will begin expiring in 2036. The Company had reserves for uncertain tax positions against these credit carryforwards of $11.8 million and $6.7 million as of December 31, 2025 and December 31, 2024, respectively.
The Company files income tax returns in the United States (federal and various state jurisdictions), Canada, and the United Kingdom. The Company is subject to examination by taxing authorities in these jurisdictions. In the normal course of business, the Company may be subject to audits by tax authorities regarding the timing and amount of taxable income and deductions and the allocation of income among jurisdictions. The Company is not currently under examination in any of these jurisdictions. The Company is subject to income tax examinations on all federal returns since the 2016 tax return.
Significant judgment is required in determining the Company’s provision for income taxes, recording valuation allowances against deferred tax assets and evaluating the Company’s uncertain tax positions. Due to net losses since inception and the uncertainty of realizing certain deferred tax assets, the Company records valuation allowances when it is not more-likely-than-not that such deferred tax assets will be realized. Exscientia, Inc., a separate filing wholly owned subsidiary, is a tax paying entity with no history of cumulative losses. Therefore, no valuation allowance has been placed on this entity as of December 31, 2025. If, in a future period, the Company concludes it is more-likely-than-not that additional deferred tax assets will be realized, the Company may release all, or a portion of, the valuation allowance, which would increase net deferred tax assets (or reduce net deferred tax liabilities) and decrease income tax expense in the period such release is recorded. As of December 31, 2025 and 2024, the Company’s valuation allowance was $665.4 million and $466.1 million, respectively, which increased by approximately $199.2 million and $161.5 million during the years ended December 31, 2025 and 2024, respectively.
Net operating losses (NOLs) and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service (“IRS”) and may become subject to annual limitation due to ownership changes that occur under Section 382 of the Internal Revenue Code, as amended and similar state provisions. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain shareholders or public groups in the stock of a corporation by more than 50% over a three-year period. As of December 31, 2025, the Company conducted a Section 382 study through January 31, 2025 and concluded that a deemed ownership change occurred on September 25, 2017. As a result, the Company’s ability to utilize its NOLs and other tax attributes may be limited. The Company will continue to monitor ownership changes for any potential future limitations on its tax attributes.
The OECD released a framework, referred to as Pillar Two, to implement a global minimum corporate tax rate of 15% on certain multinational enterprises. Certain countries have enacted legislation to adopt the Pillar Two framework while several countries are considering or still announcing changes to their tax laws to implement the minimum tax directive. While we do not currently expect Pillar Two to have a material impact on our effective tax rate, our analysis will continue as the OECD continues to release additional guidance and countries implement legislation.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Mar 23, 2022 | |
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.