SELLAS Life Sciences Group, Inc.SLS
SELLAS Life Sciences Group, Inc. Income Taxes Disclosure
Income Taxes
The Company's loss before income taxes is as follows (in thousands):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. | $ | (9,535) | $ | (10,116) | |||||||
| Non - U.S. | (21,346) | (27,224) | |||||||||
| $ | (30,881) | $ | (37,340) | ||||||||
The components of net deferred tax assets are as follows (in thousands):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net operating loss carryforwards | $ | 14,116 | $ | 12,220 | |||||||
| Stock-based compensation | 622 | 613 | |||||||||
| Licensing deduction deferral | 3,286 | 3,911 | |||||||||
| Lease liability | 216 | 194 | |||||||||
| Capitalized Section 174 research and development | 2,502 | 1,755 | |||||||||
| Other | 324 | 297 | |||||||||
| Gross deferred tax assets | 21,066 | 18,990 | |||||||||
| Valuation allowance | (20,866) | (18,806) | |||||||||
| Net deferred tax assets | $ | 200 | $ | 184 | |||||||
The components of gross deferred tax liabilities are as follows (in thousands):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Right of use asset | $ | (200) | $ | (184) | |||||||
| Gross deferred tax liability | $ | (200) | $ | (184) | |||||||
The net deferred tax liabilities are as follows (in thousands):
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net deferred tax asset | $ | 200 | $ | 184 | |||||||
| Gross deferred tax liability | (200) | (184) | |||||||||
| Net deferred tax liability | $ | — | $ | — | |||||||
The provision for income taxes differs from the provision computed by applying the federal statutory rate to net loss before income taxes as follows:
| As of December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal statutory income tax rate | (21.0) | % | (21.0) | % | |||||||
| State and local taxes, net of federal benefit | (0.4) | % | (0.4) | % | |||||||
| Foreign rate differential | 14.5 | % | 15.3 | % | |||||||
| Valuation allowance | 6.6 | % | 6.5 | % | |||||||
| Permanent differences | 0.5 | % | 0.4 | % | |||||||
| Other | (0.2) | % | (0.8) | % | |||||||
| Effective income tax rate | — | % | — | % | |||||||
There was no income tax benefit or expense for the years ended December 31, 2024 and 2023.
In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion or all of the deferred tax assets will not 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. The valuation allowance increased by approximately $2.1 million for the year ended December 31, 2024, which was primarily driven by increases in net operating loss ("NOL") carryforwards and capitalized research and development, which were partially offset by a decrease related to licensing deduction deferrals.
At December 31, 2024, the Company had domestic federal and state net operating loss carryforwards of approximately $65.6 million and $4.2 million, respectively, available to reduce future taxable income, which expire beginning in 2027.
Under the provisions of the Internal Revenue Code, the net operating losses (“NOL”) and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period in excess of 50%, as defined under Sections 382 and 383 of the Internal Revenue Code of 1986, respectively, as well as similar state tax provisions. This could limit the amount of tax attributes that the Company can utilize annually to offset future taxable income or tax liabilities. The amount of the annual limitation, if any, will be determined based on the value of the Company immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years. The Company has completed several financings since its inception, which may have resulted in a change in control as defined by Sections 382 and 383 of the Internal Revenue Code, or could result in a change in control in the future. Utilization of the net operating loss and tax credits carryforwards may be limited by “ownership change” rules, as defined in Section 382 of the Internal Revenue Code of 1986, as amended, and similar state provisions. This annual limitation may result in the expiration of the net operating losses and credits before utilization.
The Company files income tax returns in the United States and various state jurisdictions. For U.S. federal and state income tax purposes, the statute of limitations currently remains open for the years ending December 31, 2021 to present and December 31, 2020 to present, respectively. In addition, all of the net operating losses and research and development credit carryforwards that may be utilized in future years may be subject to examination.
The Company does not recognize tax benefits that are not more-likely-than-not to be supported based upon the technical merits of the tax position taken. In assessing its unrecognized tax benefits, the Company has analyzed its tax return filing positions in all of the federal, state and foreign filing jurisdictions where it is required to file income tax returns, as well as all open years in those jurisdictions.
As of December 31, 2024, the Company has no unrecognized tax benefits or accrued interest or penalties associated with uncertain tax positions. The Company does not believe that it is reasonably possible that its unrecognized tax benefits would significantly change in the following 12 months.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 20, 2025 | Showing above |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 31, 2022 | |
| 2020 | Mar 23, 2021 | |
| 2019 | Mar 13, 2020 | |
| 2018 | Mar 22, 2019 | |
| 2016 | Mar 15, 2017 | |
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.