Tarsus Pharmaceuticals, Inc.TARS
Tarsus Pharmaceuticals, Inc. Income Taxes Disclosure
INCOME TAXES
The components of loss from operations before income tax provision were as follows:
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | (64,359) | $ | (115,554) | $ | (135,893) | |||||||||||
| Total | $ | (64,359) | $ | (115,554) | $ | (135,893) | |||||||||||
The U.S. federal, state, and local income tax provision is summarized as follows:
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| U.S. federal | $ | — | $ | — | $ | — | |||||||||||
| State and local | 2,059 | — | — | ||||||||||||||
| Total current income tax provision | 2,059 | — | — | ||||||||||||||
| Deferred: | |||||||||||||||||
| U.S. federal | — | — | — | ||||||||||||||
| State and local | — | — | — | ||||||||||||||
| Total deferred income tax provision | — | — | — | ||||||||||||||
| Total income tax provision | $ | 2,059 | $ | — | $ | — | |||||||||||
A reconciliation of income taxes was computed by applying the U.S. federal statutory income tax rate in each period to the pretax loss for the years ended December 31, 2025, 2024 and 2023, and adjusted for certain classes of transactions, as summarized below:
Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| US federal statutory tax rate | $ | (13,487) | 21.0 | % | $ | (24,266) | 21.0 | % | $ | (28,538) | 21.0 | % | |||||||||||||||||||||||
State and local income taxes, net of federal income tax effect(1) | 1,626 | (2.5) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Research and development tax credits | 1,162 | (1.8) | % | (237) | 0.2 | % | (2,321) | 1.7 | % | ||||||||||||||||||||||||||
| Nontaxable or non-deductible items: | |||||||||||||||||||||||||||||||||||
| Share-based payment awards | (3,177) | 4.9 | % | (1,290) | 1.1 | % | 579 | (0.4) | % | ||||||||||||||||||||||||||
| Executive compensation | 4,231 | (6.6) | % | 2,679 | (2.3) | % | 1,691 | (1.2) | % | ||||||||||||||||||||||||||
| Other | 306 | (0.5) | % | (1) | — | % | 209 | (0.2) | % | ||||||||||||||||||||||||||
| Changes in valuation allowances | 11,398 | (17.7) | % | 23,115 | (20.0) | % | 28,380 | (20.9) | % | ||||||||||||||||||||||||||
| Effective tax rate | $ | 2,059 | (3.2) | % | $ | — | — | % | $ | — | — | % | |||||||||||||||||||||||
(1) Before the valuation allowance, various states made up the majority (greater than 50 percentage) of the tax effect in this category, including Pennsylvania for 2025; Pennsylvania, California and Massachusetts for 2024; and Tennessee and Pennsylvania for 2023. The cash paid for income taxes (net of refunds) during the year was $0.1 million for federal tax and $0.2 million for state and local taxes.
The tax effects of significant items comprising the Company’s deferred tax assets and liabilities were as follows:
Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 41,461 | $ | 33,677 | |||||||
| Research and development credit carryforwards | 6,986 | 8,642 | |||||||||
| Capitalized research and development | 7,959 | 21,734 | |||||||||
| Charitable contributions | 27,692 | 8,842 | |||||||||
| Intangible assets | 3,575 | 3,658 | |||||||||
| Stock-based compensation | 6,877 | 4,760 | |||||||||
| Accruals | 13,638 | 6,764 | |||||||||
| Operating lease liability | 4,361 | 151 | |||||||||
| Other, net | 124 | 169 | |||||||||
| Total deferred tax assets before valuation allowance | 112,673 | 88,397 | |||||||||
| (Less): Valuation allowance | (107,935) | (88,043) | |||||||||
| Total deferred tax assets | $ | 4,738 | $ | 354 | |||||||
| Deferred tax liabilities, net: | |||||||||||
| Operating lease right-of-use assets | (4,224) | (137) | |||||||||
| Fixed assets | (186) | (217) | |||||||||
| Prepaid expenses | (328) | — | |||||||||
| Net deferred tax asset | $ | — | $ | — | |||||||
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company maintains a valuation allowance against its net deferred tax assets due to the uncertainty that such assets will be realized and evaluates the recoverability of its deferred tax assets on at least an annual basis. The Company has determined that its deferred tax assets, with the exception of amounts supported by the reversal of taxable temporary differences, are not realizable. Consequently, the Company has recorded a valuation allowance on deferred tax assets of $107.9 million and $88.0 million at December 31, 2025 and 2024, respectively.
At December 31, 2025, the Company has U.S. federal, state, and local net operating loss (“NOL”) carryforwards of approximately $176.1 million and $105.9 million, respectively. As a result of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”), for U.S. income tax purposes, NOLs generated prior to December 31, 2017 can be carried forward for up to 20 years, while NOLs generated after December 31, 2017 can be carried forward indefinitely, but are limited to 80% utilization against taxable income. The Company’s total U.S. federal NOL of $176.1 million will not expire but will only be able to offset 80% of future taxable income within each year. The other state and local NOLs will begin to expire in 2033. At December 31, 2025, the Company had U.S. federal and other state research and development tax credits of $6.9 million and $2.2 million, respectively. The Company’s U.S. federal research and development tax credits begin to expire in 2040 unless previously utilized, and the other state and local credit carryforwards do not expire.
The Internal Revenue Code (“IRC”) Sections 382 and 383 limit annual use of NOL and research and development credit carryforwards in the event a cumulative change in ownership of more than 50% occurs within a three-year period. The Company has completed an ownership change analysis, which resulted in some ownership changes. Of the total U.S. federal, state, and local NOLs of $176.1 million and $105.9 million respectively, $174.6 million and $105.0 million are available as of December 31, 2025 to offset future taxable income. The remaining $1.5 million and $0.9 million will become available in future years. If a requisite ownership change occurs in the future, the amount of remaining tax attribute carryforwards available to offset taxable income and income tax expense in future years may be restricted or eliminated. If eliminated, the related asset would be removed from deferred tax assets with a corresponding reduction in the valuation allowance. Due to the existence of the valuation allowance, limitations created by future ownership changes, if any, will not impact the Company’s effective tax rate.
Uncertain tax positions are evaluated based upon the facts and circumstances that exist at each reporting period. Subsequent changes in judgment based upon new information may lead to changes in recognition, derecognition, and measurement. Adjustment may result, for example, upon resolution of an issue with the taxing authorities or expiration of a statute of limitations barring an assessment for an issue. The Company recognizes a tax benefit from an uncertain tax position when it is more-likely-than-not that it will be sustained upon examination by tax authorities. As of December 31, 2025, the Company had gross unrecognized tax benefits of $4.3 million, none of which would affect the effective tax rate if recognized. The Company’s policy is to recognize the interest expense and/or penalties related to income tax matters as a component of income tax expense. The Company had no accrual for interest or penalties in the accompanying Balance Sheets at December 31, 2025 and has not recognized interest and/or penalties in the accompanying Statements of Operations and Comprehensive Loss for the years ended December 31, 2025 or 2024.
The following table summarizes the changes to the gross unrecognized tax benefits:
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at beginning of year | $ | 4,750 | $ | 3,928 | $ | 3,393 | |||||||||||
| Additions related to current year positions | 242 | 986 | 468 | ||||||||||||||
| Additions related to prior year positions | — | — | 67 | ||||||||||||||
| Decreases related to prior year positions | (713) | (164) | — | ||||||||||||||
| Balance at end of year | $ | 4,279 | $ | 4,750 | $ | 3,928 | |||||||||||
The Company is subject to taxation in the U.S. Federal jurisdiction and various states. All tax years from inception are subject to examination by federal and state tax authorities. Further, the Company is not currently under examination by any federal, state, or local tax authority.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Mar 17, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 31, 2021 | |
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.