Scholar Rock Holding Corp Income Taxes Disclosure

11. Income Taxes

For the years ended December 31, 2025 and 2024, the loss before income taxes consisted of the following (in thousands):

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The Company has not recorded a current tax provision for the years ended December 31, 2025 and 2024.

The effective income tax rate differed from the amount computed by applying the federal statutory rate to the Company’s loss before income taxes as follows (in thousands):

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The amount of cash income taxes paid (net of refunds) during the year are as follows (in thousands):

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Deferred tax assets (liabilities) consist of the following at December 31, 2025 and 2024 (in thousands):

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Total Net Deferred Tax Assets

Deferred tax assets are reduced by a valuation allowance if, based on the weight of available positive and negative evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2025 and 2024. The valuation allowance for deferred tax assets increased by $120.0 million and $76.5 million in 2025 and 2024, respectively. This increase mainly relates to the establishment of a valuation allowance against the Company’s net deferred tax assets in connection with net operating losses generated in each year and additional tax credit carryforwards generated. As of December 31, 2025, the Company had approximately $921.9 million and $861.4 million of Federal and State operating loss carryforwards respectively, which begin to expire in 2032, except for $871.4 million of the Company’s federal net operating loss carryforwards, and $3.2 million of state net operating losses that do not expire. These loss carryforwards may be available to reduce future taxable income, if any. These loss carryforwards are subject to review and possible adjustment by the appropriate taxing authorities. As of December 31, 2025, the Company also had federal and state credit carryforwards of $74.1 million and $10.4 million, respectively, which begin to expire in 2034 and 2032, respectively. The amount of loss and credit carryforwards that may be utilized in any future period may be limited based upon changes in the ownership of the Company. Additionally, the deductibility of federal net operating

losses generated after December 31, 2017 and the indefinite state net operating losses is limited to 80% of the Company’s taxable income in any future taxable year.

The Company follows the provisions of ASC 740-10, “Accounting for Uncertainty in Income Taxes,” which specifies how tax benefits for uncertain tax positions are to be recognized, measured, and recorded in financial statements; requires certain disclosures of uncertain tax matters; specifies how reserves for uncertain tax positions should be classified on the balance sheet; and provides transition and interim period guidance, among other provisions. As of December 31, 2025 and 2024, the Company has not recorded any amounts for uncertain tax positions. The Company’s policy is to recognize interest and penalties accrued on any uncertain tax positions as a component of income tax expense, if any, in its statements of income.

The Company’s net operating loss 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 percent as defined under Section 382 and 383 of the U.S. Internal Revenue Code of 1986, respectively, as well as similar state provisions. The amount of the annual limitation is determined based on the value of the Company immediately prior to the ownership change. The Company conducted a Section 382 study covering the period of November 26, 2013 through December 31, 2023. The study concluded that ownership changes occurred during that period which limit the amount of the Company’s net operating losses and tax credit carryforwards that can be utilized before expiring. The carryforwards disclosed represent the amount of attributes that can be utilized based on the results of the study.

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All of the Company’s tax years will remain open for examination by the federal and state tax authorities to the extent that the Company's tax attributes are utilized in future years to offset income or income taxes.