Senseonics Holdings, Inc. Income Taxes Disclosure
16. | Income Taxes |
No provision for U.S. federal or state income taxes has been recorded, and therefore no income taxes were paid, as the Company has incurred net operating losses since inception and provides a full valuation allowance against its net deferred income tax assets. The tax effect of temporary differences that give rise to the net deferred income tax assets (liabilities) at December 31, 2025 and 2024 is as follows (in thousands):
December 31, |
| ||||||
Deferred income tax assets (liabilities) | 2025 | | 2024 |
| |||
Deferred Tax Assets: | |||||||
Net operating loss carryforwards | | $ | 174,442 | $ | 152,908 | ||
Capitalized start-up costs |
| 4,294 | 4,999 | ||||
Research and development credit carryforwards |
| 18,108 | 17,057 | ||||
Research and development expenditures | 14,851 | 20,490 | |||||
Stock-based compensation |
| 1,809 | 1,501 | ||||
Other |
| 4,001 | 4,146 | ||||
Gross total deferred tax assets | 217,505 | 201,101 | |||||
Valuation allowance | (216,069) | (199,455) | |||||
Total deferred tax assets | $ | 1,436 | $ | 1,646 | |||
Deferred tax liabilities: | |||||||
Right of use asset amortization | (1,436) | (1,601) | |||||
Amortization of debt discount | — | (45) | |||||
Total deferred tax liabilities | (1,436) | (1,646) | |||||
Net deferred tax assets (liabilities) | $ | — | $ | — | |||
The net change in valuation allowance for the years ended December 31, 2025 and 2024 was a net increase of $16.6 million and $19.9 million, respectively.
The increase in valuation allowance is primarily due to deferred tax assets generated from net operating losses and tax credits carried forward in 2025. This increase in valuation allowance is based on management's assessment that it is not more likely than not that the Company will realize these deferred tax assets. At December 31, 2025, the Company had gross federal and state NOL carryforwards of $791.3 million and $134.9 million, respectively and research and experimental credit carryforwards of $18.1 million. Research and experimental credit carryforwards will expire in varying amounts between 2026 and 2045. Federal NOL carryforwards in the amount of $190.1 million will expire in varying amounts between 2026 and 2037. Federal NOL carryforwards incurred in tax years 2018 and forward have an indefinite carryforward period, although limited to eighty percent of taxable income annually. State NOLs have various expiration dates beginning in 2032. Under the provisions of the Internal Revenue Code, certain substantial changes in the Company’s
ownership may result in a limitation on the amount of NOL carryforwards and research and experimental credit carryforwards which can be available in future years. The Company has not yet determined whether such an ownership change has occurred. In order to make this determination, the Company will need to complete a Section 382/383 analysis regarding the limitation of the carryforwards.
A reconciliation of the Company’s estimated U.S. federal statutory rate to the Company’s effective income tax rate for the years ended December 31, 2025 and 2024 is as follows:
Year Ended December 31, | ||||||||||
2025 | | 2024 | ||||||||
Total | % | Total | % | |||||||
Tax at U.S. Federal Statutory rate | $ | (14,514) | 21.00 | % | $ | (16,509) | 21.00 | % | ||
State and local income taxes⁽¹⁾ |
| (3) | 0.00 |
| — | 0.00 | ||||
Tax credits | ||||||||||
Research credit | (1,314) | 1.90 | (2,164) | 2.75 | ||||||
Changes in valuation allowances | 13,318 | (19.27) | 16,042 | (20.41) | ||||||
Nontaxable or nondeductible items | ||||||||||
Equity based compensation |
| 969 | (1.40) |
| 874 | (1.11) | ||||
Other | 685 | (0.99) | 667 | (0.85) | ||||||
Changes in unrecognized tax benefits | 263 | (0.38) | 433 | (0.55) | ||||||
Other adjustments |
| 592 | (0.86) |
| 657 | (0.84) | ||||
$ | — | 0.00 | % | $ | — | 0.00 | % | |||
| (1) | Although state and local income taxes are a net zero due to the Company's valuation allowance, made up the majority (greater than 50 percent) of the tax effect in this category for the year ended December 31, 2025 with making up the majority for the year ended December 31, 2024. |
Income before income taxes by source for the years ended December 31, 2025 and 2024 was as follows:
| 2025 | | 2024 | |
Domestic | $ | (69,113) | $ | (78,616) |
Foreign | — | — | ||
Income before income taxes | $ | (69,113) | $ | (78,616) |
Deferred income taxes reflect temporary differences in the recognition of revenue and expense for tax reporting and financial statement purposes. Deferred tax assets (liabilities) are adjusted for changes in tax laws or tax rates of the various tax jurisdictions as of the enacted date.
A breakdown of the Company’s uncertain tax positions during 2025 and 2024 is as follows (in thousands):
| 2025 | | 2024 | |
Gross unrecognized tax benefit at beginning of year | $ | 4,264 | $ | 3,832 |
Increase from tax positions taken in prior years | — | — | ||
Increase from tax positions in current year | 331 | 497 | ||
Lapse of statute of limitations / expiration | (68) | (65) | ||
Gross unrecognized tax benefit at end of year | $ | 4,527 | $ | 4,264 |
If recognized, the entire amount of gross unrecognized tax benefit would favorably affect the effective income tax rate, although, due to the Company’s valuation allowance there would be no net impact. The Company does not expect a significant change in its unrecognized tax positions to occur in the next twelve months.
The Company’s U.S. Federal and state income tax returns from 2004 to 2025 remain subject to examination by the tax authorities. The Company’s prior tax years remain open for examination, even though the statute of limitations has expired, due to the net operating losses and credits carried forward for use in prospective years.
.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Mar 1, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 5, 2021 | |
| 2019 | Mar 16, 2020 | |
| 2018 | Mar 15, 2019 | |
| 2017 | Mar 13, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 19, 2016 | |
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.