Senti Biosciences Holdings, Inc.SNTI
Senti Biosciences Holdings, Inc. Income Taxes Disclosure
Income Tax
The Company did not record any income tax expense or benefit during the years ended December 31, 2024 and 2023. The Company has a net operating loss and has provided a valuation allowance against net deferred tax assets due to uncertainties regarding the Company’s ability to realize these assets.
For the calendar years ended December 31, 2024 and 2023, the tax effects of significant items comprising the Company's deferred taxes are as follows (in thousands):
| Years Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| Net operating losses | $ | 50,961 | $ | 33,566 | ||||||||||
| Capitalized R&D Section 174 expense | 13,509 | 10,146 | ||||||||||||
| Tax credits | 10,592 | 9,237 | ||||||||||||
| Lease liability | 5,639 | 6,005 | ||||||||||||
| Stock-based compensation | 3,736 | 4,785 | ||||||||||||
| Accruals and reserves | 532 | 724 | ||||||||||||
| Related Party Fair Value Adjustment | — | 346 | ||||||||||||
| Fixed asset basis | 438 | — | ||||||||||||
| Total deferred tax assets | 85,407 | 64,809 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Operating lease right-of-use assets | (1,534) | (1,548) | ||||||||||||
| Fixed asset basis | (2,165) | (2,008) | ||||||||||||
| Total deferred tax liabilities | (3,699) | (3,556) | ||||||||||||
| Valuation allowance | (81,708) | (61,253) | ||||||||||||
| Net deferred taxes | $ | — | $ | — | ||||||||||
The Company records the tax benefit of net operating losses, temporary differences, and credit carryforwards as assets to the extent that management assesses that realization is "more likely than not." Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.
The valuation allowance increased by approximately $20.5 million and $19.2 million during years ended December 31, 2024 and 2023, respectively, and the Company’s deferred tax assets continue to be fully offset by the valuation allowance as at December 31, 2024. For the years ended December 31, 2024 and 2023, the Company did not record an income tax provision.
Net operating losses and tax credit carryforwards as of December 31, 2024 are as follows (in thousands):
| Amount | Expiration Years | |||||||||||||
| Net operating losses, federal (Post December 31, 2017) | $ | 188,302 | Do Not Expire | |||||||||||
| Net operating losses, federal (Pre January 1, 2018) | $ | 3,508 | 2036-2037 | |||||||||||
| Net operating losses, state | $ | 152,895 | 2036-2044 | |||||||||||
| Tax credits, federal | $ | 7,699 | 2036-2044 | |||||||||||
| Tax credits, state | $ | 6,362 | Do Not Expire | |||||||||||
Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. This annual limitation may result in the expiration of net operating losses and credits before utilization. The Company has not performed an analysis to determine the limitation of our net operating loss carryforwards.
The effective tax rate of the Company's provision (benefit) for income taxes differs from the federal statutory rate as follows:
| Years Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Statutory rate | 21.00% | 21.00% | ||||||||||||
| State tax | 11.87% | 3.30% | ||||||||||||
| Other | 0.08% | (0.86)% | ||||||||||||
| Tax credits | 1.43% | 3.37% | ||||||||||||
| Fair value of contingent earnout liability | 2.53% | 1.04% | ||||||||||||
Fair value of preferred stock tranche liability | 5.33% | —% | ||||||||||||
Stock Based Compensation | (3.49)% | —% | ||||||||||||
| Valuation allowance | (38.75)% | (27.84)% | ||||||||||||
| Total | —% | —% | ||||||||||||
The Company has elected to include interest and penalties as a component of tax expense. For the years ended December 31, 2024 and 2023, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next 12 months.
The Company files income tax returns in federal and various state jurisdictions where a filing obligation has been determined. The federal and state income tax returns from inception to December 31, 2024 remain subject to examination.
The Company had $2.4 million of unrecognized tax benefits as of December 31, 2024. No liability related to uncertain tax positions is recorded on the financial statements as all uncertain tax positions are currently recorded as a reduction to the Company’s deferred tax assets, which are subject to a valuation allowance. If recognized, none of the unrecognized tax benefits would affect the effective tax rate. The Company does not anticipate the total amounts of unrecognized tax benefits will significantly increase or decrease in the next 12 months. No positions were settled with tax authorities in 2024 and no positions were reduced as a result of a lapse of applicable statutes of limitations. The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes, as necessary. The Company did not recognize any accrued interest and penalties related to gross unrecognized tax benefits related to the year ended December 31, 2024. A reconciliation of the Company’s unrecognized tax benefits for the years ended December 31, 2024 and 2023 is as follows (in thousands):
| Years Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Balance at beginning of the year | $ | 2,076 | $ | 1,643 | ||||||||||
| Decrease related to prior year tax positions | — | (243) | ||||||||||||
| Increase related to current year tax positions | 301 | 676 | ||||||||||||
| Balance at end of the year | $ | 2,376 | $ | 2,076 | ||||||||||
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2024 | Mar 20, 2025 | Showing above |
| 2023 | Mar 21, 2024 | |
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.