Protara Therapeutics, Inc. Income Taxes Disclosure

13. Income Taxes

 

For financial reporting purposes, income (loss) before taxes includes the following components:

 

		For the Year Ended December 31,
		2025				2024
United States		$	(57,309	)		$	(44,538	)
Foreign			(42	)			(25	)
Total income (loss) before taxes		$	(57,351	)		$	(44,563	)

 

Federal and State income tax expense (benefit) is as follows:

 

		For the Year Ended December 31,
		2025				2024
Current
Federal		$	-			$	-
State			-				-
Foreign			-				-
Total current			-				-
Deferred
Federal			(13,649	)			(11,192	)
State			2,608				(8,583	)
Foreign			-				-
Total deferred			(11,041	)			(19,775	)
Change in valuation allowance			11,041				19,775
Total income tax expense (benefit)		$	-			$	-

 

Deferred income taxes, if applicable, are provided for the differences between the basis of assets and liabilities for financial reporting and income tax purposes.

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets are as follows:

 

		As of December 31,
		2025				2024
Deferred tax assets:
Net operating loss carry forwards		$	44,907			$	37,195
Capitalized research and development			21,164				18,336
Stock option expense			4,960				6,342
Research and development tax credits			9,107				6,931
Operating lease liability			887				1,471
RSU expense			2,617				3,173
Other			842				817
Total deferred tax assets			84,484				74,265
Valuation allowance			(83,550	)			(72,509	)
Deferred tax assets, net of valuation allowance			934				1,756
Deferred tax liabilities:
Operating ROU asset			(838	)			(1,396	)
Other			(96	)			(360	)
Total deferred tax liabilities			(934	)			(1,756	)
Deferred tax assets, net of valuation allowance and deferred tax liabilities		$	-			$	-

 

A reconciliation of the provision for income taxes with the amounts computed by applying the statutory federal income tax to income before provision for income taxes is as follows:

 

		For the Year Ended December 31,
		2025								2024
U.S. federal statutory rate		$	(12,044	)			(21.00	)%		$	(9,338	)			(21.00	)%
State and local income taxes, net of the federal benefit(a)			350				0.61	%			531				1.19	%
Foreign tax effects			5				0.01	%			4				0.01	%
Tax credits
Research and development tax credits			(1,079	)			(1.88	)%			(773	)			(1.74	)%
Orphan drug tax credits			(1,097	)			(1.91	)%			(776	)			(1.74	)%
Changes in valuation allowance			13,030				22.72	%			10,107				22.73	%
Nontaxable or nondeductible items			795				1.39	%			103				0.23	%
Changes in unrecognized tax benefits			-				-	%			-				-	%
Other			40				0.06	%			142				0.32	%
Effective tax rate		$	-				-	%		$	-				-	%

 

(a)	State and local taxes in New York and New York City comprise the majority of the state taxes, net of the federal benefit.

Income taxes paid (net of refunds received) consisted of the following:

 

		For the Year Ended December 31,
		2025				2024
Federal		$	-			$	-
State			-				-
Foreign			-				-
Effective tax rate		$	-			$	-

 

For the years ended December 31, 2025 and 2024, the Company’s effective tax rate was 0%, which consisted principally of a federal rate of 21%, the Company’s estimate of state income taxes, primarily driven by changes in tax rate and apportionment changes net of the federal benefit, research and development related tax credits, and the change in the valuation allowance recorded against its deferred tax assets.

 

As of December 31, 2025 and 2024 for U.S. federal and state income tax reporting purposes, the Company has approximately $300,069 and $244,842, respectively, of unused net operating losses, or NOLs, available for carry forward to future years. As a result of the Tax Cuts and Jobs Act of 2017, or TCJA, for U.S. income tax purposes, NOLs generated in tax years beginning before January 1, 2018 can be carried forward for up to 20 years, but NOLs generated for tax years beginning after December 31, 2017 may be carried forward indefinitely and can be used to offset 80% of taxable income. Of the total federal NOLs carried forward, $600 can be carried forward until 2037; and $177,416 can be carried forward indefinitely. The New York state and city NOLs may be carried forward through the year 2045 and may be applied against future taxable income, while Massachusetts NOLs may be carried forward through the year 2038 to apply against future taxable income. Further, the benefit from utilization of NOL carry forwards could be subject to limitations due to material ownership changes that may have occurred or could occur in the future as the Company continues to issue additional shares of common stock pursuant to its capital raising plans. Based on such limitations, the Company has significant NOLs for which realization of tax benefits is uncertain. The Company has not performed a study to determine whether or not there is such a limitation.

 

The Company remains subject to examination by tax authorities for all tax years.

 

Based on a history of cumulative losses at the Company and the results of operations for the years ended December 31, 2025 and 2024, the Company determined that it is more likely than not that it will not realize benefits from the net deferred tax assets. The Company will not record income tax benefits in the financial statements until it is determined that it is more likely than not that the Company will generate sufficient taxable income to realize the deferred income tax assets. As a result of the analysis, the Company determined that a full valuation allowance against the deferred tax assets, net, was required. As of December 31, 2025 and 2024, the Company has recorded a valuation allowance of $83.6 million and $72.5 million, respectively.

 

In July 2025, U.S. tax legislation known as the “One Big Beautiful Bill Act”, or OBBBA, was signed into law which makes permanent many of the tax provisions enacted in 2017 as part of the TCJA that were set to expire at the end of 2025. In addition, the OBBBA makes changes to certain U.S. corporate tax provisions, many of which are generally not effective until January 1, 2026. The OBBBA did not have a material effect on the Company’s consolidated financial statements for the year ended December 31, 2025.

 

As of December 31, 2025 and 2024, management does not believe that the Company has any material uncertain tax positions that would require it to measure and reflect the potential lack of sustainability of a position on audit in its consolidated financial statements. The Company will continue to evaluate its uncertain tax positions in future periods to determine if measurement and recognition in its consolidated financial statements is necessary. The Company does not believe there will be any material changes in its unrecognized tax positions over the next year.