Virgin Galactic Holdings, IncSPCE
Virgin Galactic Holdings, Inc Income Taxes Disclosure
Income Taxes
Loss before income taxes consists of the following components:
| Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (In thousands) | ||||||||||||||
| United States | $ | (278,971) | $ | (346,826) | ||||||||||
| International | 116 | 160 | ||||||||||||
| Loss before income taxes | $ | (278,855) | $ | (346,666) | ||||||||||
The components of income tax expense are as follows:
| Current | Deferred | Total | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
Year ended December 31, 2025 | ||||||||||||||||||||
| Federal | $ | — | $ | — | $ | — | ||||||||||||||
| State | 7 | — | 7 | |||||||||||||||||
| Foreign | 105 | (60) | 45 | |||||||||||||||||
| $ | 112 | $ | (60) | $ | 52 | |||||||||||||||
Year ended December 31, 2024 | ||||||||||||||||||||
| Federal | $ | — | $ | — | $ | — | ||||||||||||||
| State | 10 | — | 10 | |||||||||||||||||
| Foreign | 132 | (68) | 64 | |||||||||||||||||
| $ | 142 | $ | (68) | $ | 74 | |||||||||||||||
On July 4, 2025, the One Big Beautiful Bill Act was signed into law. The legislation did not have a material impact on the Company's income tax expense for the year ended December 31, 2025, nor did it materially change the Company's effective income tax rate for 2025.
Significant items comprising the Company’s deferred taxes are as follows:
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (In thousands) | ||||||||||||||
| Deferred tax assets: | ||||||||||||||
| Net operating losses | $ | 510,732 | $ | 447,735 | ||||||||||
| Research and development credits | 125,149 | 82,432 | ||||||||||||
| Capitalized research and experimental expenditures | 96,515 | 129,951 | ||||||||||||
| Goodwill | 170,556 | 189,132 | ||||||||||||
| Book/tax basis difference in debt | 25,578 | — | ||||||||||||
| Other | 31,398 | 37,488 | ||||||||||||
| Total gross deferred tax assets | 959,928 | 886,738 | ||||||||||||
| Valuation allowance | (950,241) | (870,427) | ||||||||||||
| Net deferred tax assets | 9,687 | 16,311 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
Operating lease right-of-use assets | (9,562) | (14,986) | ||||||||||||
Other | (115) | (1,375) | ||||||||||||
| Total gross deferred tax liabilities | (9,677) | (16,361) | ||||||||||||
Net deferred tax assets (liabilities) | $ | 10 | $ | (50) | ||||||||||
Based on the Company’s earnings history and available objectively verifiable positive and negative evidence, the Company determined that it is more likely than not that a substantial portion of its deferred tax assets will not be realized in the future. As of December 31, 2025 and 2024, the Company recorded a valuation allowance of $950.2 million and $870.4 million, respectively, against its deferred tax assets that were determined to not be more likely than not realizable.
A reconciliation of income tax expense with the amount computed by applying the federal statutory tax rate to loss before income taxes is as follows:
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | |||||||||||||||||||||||||
| (In thousands, except percentages) | ||||||||||||||||||||||||||
| U.S. federal statutory rate | $ | (58,560) | 21.0 | % | $ | (72,800) | 21.0 | % | ||||||||||||||||||
| Research and development tax credits | (10,607) | 3.8 | % | (14,558) | 4.2 | % | ||||||||||||||||||||
| Change in valuation allowance | 64,027 | (23.0) | % | 80,104 | (23.1) | % | ||||||||||||||||||||
| Other, net | 5,192 | (1.9) | % | 7,328 | (2.1) | % | ||||||||||||||||||||
| $ | 52 | — | % | $ | 74 | — | % | |||||||||||||||||||
Cash paid for income taxes, net of refunds, was $0.3 million for foreign jurisdictions for the year ended December 31, 2024 and was not material for any other jurisdictions for the years ended December 31, 2025 and 2024.
As of December 31, 2025, the Company had approximately $2.0 billion and $1.9 billion of federal and state net operating loss (“NOL”) carryforwards, respectively. All NOLs incurred during the year ended December 31, 2019 and thereafter are carried forward indefinitely for federal tax purposes. California has not conformed to the indefinite carry forward period for NOLs. The NOLs begin expiring in the calendar year 2039 for state purposes.
In the ordinary course of its business, the Company incurs costs that, for tax purposes, are determined to be qualified research expenditures within the meaning of Internal Revenue Code (“IRC”) Section 41 and are, therefore, eligible for the increasing research activities credit under IRC Section 41. The research and development (“R&D”) tax credit carryforward as of December 31, 2025 is $87.5 million and $42.0 million for federal and state purposes, respectively. The R&D tax credit carryforwards begin expiring in the calendar year 2039 for federal purposes. R&D credits generated for California purposes are carried forward indefinitely.
Under Section 382 of the IRC, the Company’s ability to utilize NOL carryforwards or other tax attributes such as research tax credits, in any taxable year, may be limited if the Company experiences an “ownership change.” A Section 382 “ownership change” generally occurs if one or more stockholders or groups of stockholders, who own at least 5% of the Company’s stock, increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. The Company may in the future experience one or more Section 382 “ownership changes.” If so, the Company may not be able to utilize a material portion of its NOL carryforwards and tax credits, even if the Company achieves profitability.
The Company recognizes tax benefits from uncertain tax positions only if it believes that it is more likely than not that the tax position will be sustained on examination by the taxing authorities based on the technical merits of the position. As the Company expands, it will face increased complexity in determining the appropriate tax jurisdictions for revenue and expense items. The Company’s policy is to adjust these reserves when facts and circumstances change, such as the closing of a tax audit or refinement of an estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will affect the income tax expense in the period in which such determination is made and could have a material impact on the Company’s financial condition and operating results. The income tax expense includes the effects of any accruals that the Company believes are appropriate, as well as the related net interest and penalties.
As of December 31, 2025, the Company has total uncertain tax positions of $24.1 million, which is net of tax. The balance is related to the R&D tax credit, which is recorded as a reduction of the deferred tax asset related credit carryforwards. No interest or penalties have been recorded related to the uncertain tax positions. A reconciliation of the beginning and ending balances of unrecognized tax benefits is as follows:
| Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (In thousands) | ||||||||||||||
| Balance at the beginning of the year | $ | 20,607 | $ | 16,351 | ||||||||||
| Additions based on tax positions related to current year | 3,521 | 4,256 | ||||||||||||
| Balance at the end of year | $ | 24,128 | $ | 20,607 | ||||||||||
It is not expected that there will be a significant change in uncertain tax position in the next 12 months. The Company is subject to U.S. federal income tax, as well as to income tax in multiple state jurisdictions and one foreign jurisdiction. In the normal course of business, the Company is subject to examination by tax authorities. There are no tax examinations in progress as of December 31, 2025. Due to NOL carryforwards, the U.S. federal and state income tax returns remain subject to examination by the Internal Revenue Service and state jurisdictions for the period from October 26, 2019 through December 31, 2019 and annual periods thereafter. The statute of limitations for the Company’s foreign tax jurisdiction is open for tax years after December 31, 2022.
Effective for tax years beginning after December 31, 2021, research and experimental (“R&E”) expenditures are amortized ratably for tax purposes over a 5-year period (or 15-year period for R&E expenditures attributable to foreign research).
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 30, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 28, 2020 | |
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.