Tempus AI, Inc. Income Taxes Disclosure

For the years ended December 31, 2025 and 2024, the Company recognized income tax benefit on stock-based compensation of $83.1 million and $46.2 million, respectively (tax-effected).

The Company’s income tax expense as recorded in the financial statements differs from the benefit computed by applying statutory tax rates to net loss before income taxes due to permanent differences related to the deductibility of certain expenses and the valuation allowance. Due to the acquisition of Ambry during the year ended December 31, 2025, the existing valuation allowance decreased for the establishment of the deferred tax liabilities. Current income tax expense for the years ended December 31, 2025, 2024 and 2023, related to state and foreign expense was not material.

As of December 31, 2025 the Company had federal net operating loss (“NOL”) carry forwards of $332.8 million (tax effected) and state NOL carry forwards of approximately $69.6 million (tax effected), which may be available to offset future taxable income. The federal NOLs will begin to expire in 2037 and the state NOLs will begin to expire in 2028.

As of December 31, 2025, the Company had federal and state credit carry forwards of $11.6 million, which may be able to offset future tax expense. The credits will begin to expire in 2039. A full valuation allowance has been recorded against the NOL and credit carry forwards.

The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions. Due to its operating loss carryforwards, the U.S. federal statute of limitations remains open for tax year 2016 and onward and the Company continues to be subject to examination by the Internal Revenue Service for tax years 2016 and later. The resolutions of any examinations are not expected to be material to these financial statements. As of December 31, 2025 and 2024, there are no penalties or accrued interest recorded in the consolidated financial statements. The calculation of the Company’s tax obligations involves dealing with uncertainties in the application of complex tax laws and regulations. ASC 740, Income Taxes, provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. The Company has assessed its income tax positions and recorded tax benefits for all years subject to examination, based upon its evaluation of the facts, circumstances and information available at each period end. For those tax positions where the Company has determined there is a greater than 50% likelihood that a tax benefit will be sustained, the Company has recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where it is determined there is less than 50% likelihood that a tax benefit will be sustained, no tax benefit has been recognized.

Of the $5.1 million unrecognized tax benefits as of December 31, 2025, all are recorded as a net offset to deferred income taxes in our consolidated financial statements. If recognized, none of the unrecognized tax benefits as of December 31, 2025 would impact our effective tax rate.

The Company recognizes interest and, if applicable, penalties for any uncertain tax positions. Interest and penalties are recorded as a component of income tax expense. In the years ended December 31, 2025, 2024 and 2023, the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits.

The Company does not provide for U.S. income taxes on unremitted earnings of foreign subsidiaries. Unremitted earnings of foreign subsidiaries were immaterial on December 31, 2025 and 2024.

One Big Beautiful Bill Act

On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was enacted into law in the U.S. The Act includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Company has evaluated the impact of the Act on deferred tax assets and liabilities, including adjustments to valuation allowances, and has reflected these effects in the consolidated financial statements.