Serve Robotics Inc. /DE/SERV
Serve Robotics Inc. /DE/ Income Taxes Disclosure
INCOME TAXES
The Company’s net loss before income taxes on which the benefit from income taxes was computed for the year ended December 31, 2025 is as follows (in thousands):
| Year Ended December 31, 2025 | |||||
| Domestic | $ | (103,169) | |||
| Foreign | (1,848) | ||||
| Total net loss before income taxes | $ | (105,017) | |||
| Note: Amounts for the year ended December, 31, 2024 were immaterial. | |||||
The Company’s benefit from income taxes for the year ended December 31, 2025 is as follows (in thousands):
| Year Ended December 31, 2025 | |||||
| Current: | |||||
| Federal | $ | 568 | |||
| State | 478 | ||||
| Foreign | — | ||||
| Total current tax expense | 1,046 | ||||
| Deferred: | |||||
| Federal | (4,175) | ||||
| State | (443) | ||||
| Foreign | (84) | ||||
| Total deferred tax benefit | (4,702) | ||||
| Total income tax benefit | $ | (3,656) | |||
| Note: Amounts for the year ended December, 31, 2024 were immaterial. | |||||
The reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the year ended December 31, 2025 is as follows (amounts in thousands):
| Year Ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| Income tax benefit at U.S. federal statutory rate | $ | (22,054) | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect(1) | (436) | 0.4 | % | ||||||||
| Foreign tax effects | 305 | (0.3) | % | ||||||||
| Tax credits | (800) | 0.8 | % | ||||||||
| Changes in valuation allowances | 18,641 | (17.8) | % | ||||||||
| Non taxable or nondeductible items | |||||||||||
| Stock-based compensation | (2,867) | 2.7 | % | ||||||||
| Section 162(m) executive compensation limitation | 2,120 | (2.0) | % | ||||||||
| Other | 85 | (0.1) | % | ||||||||
| Changes in unrecognized tax benefits | 1,039 | (1.0) | % | ||||||||
| Other adjustments | 311 | (0.3) | % | ||||||||
| Income tax benefit at effective tax rate | $ | (3,656) | 3.5 | % | |||||||
(1) In 2025, the state that contributed to the majority (greater than 50%) of the tax effect in this category is California. | |||||||||||
| Note: Amounts for the year ended December, 31, 2024 were immaterial. | |||||||||||
The lower effective tax rate for the year ended December 31, 2025 when compared to the U.S. federal statutory rate was primarily related to the impact of our valuation allowance. The Company has historically been in a full valuation allowance position. The acquisition of Vayu resulted in net deferred tax liabilities being recorded through acquisition accounting. Post acquisition and in consolidation, this deferred tax liability resulted in a partial release of our valuation allowance which is driving our current year tax benefit of $3.7 million.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted. The OBBBA contains provisions to enhance and expand bonus depreciation, allow immediate expensing of domestic research costs, accelerate deductions of previously deferred domestic research costs, and modify the international tax framework. The impact of OBBBA was not material to the Company’s financial statements for the year ended December 31, 2025.
The components of deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net operating loss and credit carryforwards | $ | 57,660 | $ | 15,004 | |||||||
| Capitalized research and development costs | 5,092 | 5,988 | |||||||||
| Stock-based compensation | 1,631 | — | |||||||||
| Lease obligations | 1,114 | — | |||||||||
| Other deferred tax assets | 34 | 411 | |||||||||
| Gross Deferred tax assets | 65,531 | 21,403 | |||||||||
| Less: Valuation Allowance | (55,620) | (21,403) | |||||||||
| Total deferred tax assets | $ | 9,911 | $ | — | |||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets | $ | (7,764) | $ | — | |||||||
| Operating lease right-of-use assets | (1,141) | — | |||||||||
| Property and equipment | (138) | — | |||||||||
| Total deferred tax liabilities | (9,043) | — | |||||||||
| Net deferred tax asset | $ | 868 | $ | — | |||||||
The Company’s ability to utilize net operating loss carryforwards will depend on its ability to generate adequate future taxable income. As of December 31, 2025, we have deferred tax assets for U.S. federal credit carryforwards and state tax losses and credit carryforwards that begin to expire in 2041 of $2.8 million and $14.8 million, respectively. The company also has U.S. Federal tax losses that may be carried forward indefinitely of $38.1 million. The majority of our loss and credit carryforwards are offset by a valuation allowance.
We recognize valuation allowances on deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. We had valuation allowances against net deferred tax assets of $55.6 million and $21.4 million as of December 31, 2025 and 2024, respectively. In 2025, the increase in the valuation allowance was primarily attributable to a net increase in our deferred tax assets resulting from the loss from operations.
The following table presents our net deferred tax assets as of December 31, 2025 (in thousands):
| December 31, 2025 | |||||
| Domestic deferred tax assets | $ | 784 | |||
| Foreign deferred tax assets | 84 | ||||
| Net deferred tax assets | $ | 868 | |||
The total foreign deferred tax assets above are presented within other non-current assets on the consolidated balance sheets. The domestic deferred tax assets excluded $1.0 million of unrecognized tax benefits that have been recorded as a reduction of deferred tax assets, which was presented within deferred tax liabilities on the consolidated balance sheets.
The Company files income tax returns in the United States, Canada, Sweden, and various state jurisdictions. Calendar years 2021 through 2024 remain open to tax examination by U.S. federal authorities and calendar years 2021 through 2024 remain open to tax examination by state tax authorities. The Company regularly assesses the likelihood of an adverse outcome resulting from examinations to determine the adequacy of its tax reserves.
The Company’s beginning and ending unrecognized tax benefits as of December 31, 2025 are reconciled as follows (in thousands):
| December 31, 2025 | |||||
| Balance at beginning of year | $ | — | |||
| Additions for tax positions in prior year | 789 | ||||
| Additions for tax positions in current year | 250 | ||||
| Settlements | — | ||||
| Release due to statute expirations | — | ||||
| Balance at end of year | $ | 1,039 | |||
| Note: Amounts for the year ended December, 31, 2024 were immaterial. | |||||
As of December 31, 2025, the Company’s total amount of unrecognized tax benefits was $1 million, none of which would impact the Company’s effective tax rate, if recognized.
The Company paid an immaterial amount of income taxes as of December 31, 2025.Free Sentinel
Track for freeWant the next Serve Robotics Inc. /DE/ income taxes disclosure the moment it drops?
Set a Sentinel and we'll alert you the moment Serve Robotics Inc. /DE/'s next filing hits EDGAR. No credit card, your email never gets sold.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 6, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 31, 2022 | |
| 2020 | Apr 28, 2021 | |
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.