Shuttle Pharmaceuticals Holdings, Inc. Income Taxes Disclosure

Note 11 – Income Taxes

 

Loss before the provision for incomes taxes consists of the following:

 

Schedule of Loss Before Provision for Incomes Taxes

		2025				2024
		Years Ended December 31,
		2025				2024
United States		$	11,431,788			$	9,144,797
Canada			289,881				—
Loss Before Provision for Incomes Taxes		$	11,721,669			$	9,144,797

 

 

The components of income tax expense are as follows:

 

Schedule of Components of Income Tax Expense

		2025				2024
		Years Ended December 31,
		2025				2024
Deferred:
Federal tax benefit		$	(2,251,330	)		$	—
Canada tax benefit			(78,268	)			—
State tax benefit			(400,866	)			—
Valuation allowance change			2,730,464				—
Total deferred income tax			—				—
Total income tax expense		$	—			$	—

 

The table below provides the updated requirements of ASU 2023-09 for 2025. See Notes to Consolidated Financial Statements - Income Taxes for additional details on the adoption of ASU 2023-09. The effective tax rate differs from the federal statutory income tax rate applied to the loss before provision for income taxes and tax due to the following:

 

Schedule of Reconciliation of Income Tax Benefit

		$				%
		Year Ended December 31, 2025
		$				%
Expected tax benefit at U.S. federal statutory rate		$	(2,461,561	)			21.0	%
State income tax benefit, net of federal tax effect			(616,671	)			5.3	%
Foreign tax effects:
Canada
Tax rate differential			2,401				—	%
Effect of changes in tax laws or rates			99,039				(0.8	)%
R&D tax credits			—				—	%
Return to provision adjustments:			83,835				(0.7	)%
Permanent differences:
Meals & entertainment and penalties and interest			2,775				—	%
Equity-linked financing			36,895				(0.3	)%
Windfall of stock compensation expense			(15,146	)			0.1	%
Change in valuation allowance			2,730,464				(23.3	)%
Other adjustments
Shortfall of stock compensation expense			16,012				(0.1	)%
Accrued expenses & NOL true up adjustments			117,052				(1.0	)%
Miscellaneous adjustments			4,905				—	%
Total income tax expense		$	—				—	%

  

As previously disclosed for the year ended December 31, 2024, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:

  

		2024
		Year Ended December 31,
		2024
Federal income tax benefit at statutory rate			21.0	%
State income tax benefit, net of federal tax effect			6.9	%
Change in tax rate			—	%
R&D tax credits			—	%
Return to provision adjustments			(4.9	)%
Permanent differences
Change in FMV of Warrant Liability			2.1	%
Loss on convertible note conversion			(2.5	)%
Disqualified debt interest expense			(3.7	)%
Change in valuation allowance			(18.3	)%
Shortfall of stock compensation expense			(0.6	)%
Other adjustments			—	%
Total income tax expense			—	%

 

The principal components of deferred tax assets consist of the following:

Schedule of Components of Deferred Tax Assets  

		2025				2024
		December 31,
		2025				2024
Deferred tax asset:
Net operating loss carryforwards - U.S.		$	7,318,322			$	2,996,460
Net operating loss carryforwards - Canada			491				—
Intangibles assets - U.S.			63,404				1,834,368
Intangibles assets - Canada			77,777
R&D tax credits			190,835				189,232
Equity based compensation			102,369				1,523
Interest & other accrued expenses			—				45,424
Accrued expenses			3,956				—
Lease asset/(liability)			34,334				6,435
Total		$	7,791,488			$	5,073,442

 

 

		December 31,
Deferred tax Liabilities:		2025				2024
Prepaid expenses			(3,263	)		$	(16,188	)
State income tax deferred			—				—
Fixed assets			(2,485	)			(1,975	)
Total		$	(5,748	)		$	(18,163	)
Total deferred tax asset		$	7,785,740			$	5,055,279
Less: valuation allowance			(7,785,740	)			(5,055,279	)
Net deferred tax liability		$	—			$	—

 

As of December 31, 2025 and 2024, the Company had approximately $28.0 million and $10.9 million of net operating losses (“NOL”) carried forward to offset federal and state taxable income, if any, in the future. In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against all of the deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.

 

NOLs created prior to 2018 could be carried back two years and carried forward 20 years. As amended by the Tax Cuts and Jobs Act of 2017 (TCJA), NOLs created after 2017 can no longer be carried back and are instead carried forward indefinitely. The Company has $139,813 and $238,380 of federal NOL carryforwards from 2016 and 2017, respectively, which begin to expire in 2036. The Company has an additional $27.3 million and $26.3 million of federal and state NOLs created after 2017, respectively, which can be carried forward indefinitely. The NOLs can be used to offset future income limited to the lesser of the NOL or 80% of the year’s taxable income.

 

As of December 31, 2025, the Company has $200,715 of federal Research and Development tax credits. These can be carried forward 20 years to offset future federal income tax. These begin to expire in 2037.

 

The Company recognizes tax benefits from uncertain tax positions only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities based on the technical merits of the position. The tax benefits recognized from such positions are estimated based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. There are no uncertain tax positions to be reported for the tax years 2025 and 2024.

 

Beginning in 2022, the Tax Cuts and Jobs Act (the “Tax Act”) requires taxpayers to capitalize research and development expenses with amortization periods over five years for domestic research and developments costs and fifteen years for foreign research and development costs. The One Big Beautiful Bill Act (the “OBBBA”) was signed into law on July 4, 2025, and contains significant tax law changes, including allowing for the immediate expensing in 2025 and forward of domestic research and development costs. Because of the Company’s valuation allowance on its deferred tax assets, the change did not impact the Company’s consolidated financial statements.