Twist Bioscience CorpTWST
Twist Bioscience Corp Income Taxes Disclosure
Income Taxes
The Company recorded income tax expense of $0.7 million, $0.6 million and $1.2 million for the years ended September 30, 2025, 2024 and 2023, respectively.
The domestic and foreign components of pre-tax loss for the years ended September 30, 2025, 2024, and 2023 are as follows:
| Year ended September 30, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| US | $ | (78,490) | $ | (209,545) | $ | (205,389) | ||||||||||||||
| Foreign | 1,539 | 1,379 | 1,923 | |||||||||||||||||
| Total | $ | (76,951) | $ | (208,166) | $ | (203,466) | ||||||||||||||
The components of the income tax expense for the years ended September 30, 2025, 2024, and 2023 are as follows:
| Year ended September 30, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Current | ||||||||||||||||||||
| Federal | $ | — | $ | — | $ | — | ||||||||||||||
| State | 27 | 20 | 9 | |||||||||||||||||
| Foreign | 692 | 540 | 1,143 | |||||||||||||||||
| Total current | $ | 719 | $ | 560 | $ | 1,152 | ||||||||||||||
| Deferred | ||||||||||||||||||||
| Federal | $ | — | $ | — | $ | — | ||||||||||||||
| State | — | — | — | |||||||||||||||||
| Foreign | — | — | — | |||||||||||||||||
| Total deferred | $ | — | $ | — | $ | — | ||||||||||||||
| Total provision (benefit) | $ | 719 | $ | 560 | $ | 1,152 | ||||||||||||||
The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate for the years ended September 30, 2025, 2024, and 2023:
| Year ended September 30, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Tax expense computed at the federal statutory rate | 21 | % | 21 | % | 21 | % | ||||||||||||||
| Change in valuation allowance | (22) | % | (22) | % | (25) | % | ||||||||||||||
| Research and development credit benefit | 7 | % | 3 | % | 5 | % | ||||||||||||||
| Section 162(m) limitation on compensation | (9) | % | (1) | % | — | % | ||||||||||||||
| Stock-based compensation | 1 | % | (1) | % | (1) | % | ||||||||||||||
| Change in fair value of contingent consideration and holdbacks | — | % | — | % | 1 | % | ||||||||||||||
| Gain on sale of intangible assets | 1 | % | — | % | — | % | ||||||||||||||
| Others | — | % | — | % | (2) | % | ||||||||||||||
| Total income tax expense | (1) | % | — | % | (1) | % | ||||||||||||||
The significant components of the Company’s deferred tax assets and liabilities are as follows for the years ended September 30, 2025, and 2024:
| September 30, | ||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||
| Net operating loss carryforwards | $ | 232,380 | $ | 226,959 | ||||||||||
| Research and development credit carryforwards | 67,626 | 59,578 | ||||||||||||
| Capitalized research and development | 54,438 | 43,232 | ||||||||||||
| Operating lease liability | 18,657 | 21,377 | ||||||||||||
| Stock-based compensation | 13,359 | 13,384 | ||||||||||||
| Other | 12,333 | 14,310 | ||||||||||||
| Gross deferred tax assets | $ | 398,793 | $ | 378,840 | ||||||||||
| Less: Valuation allowance | (383,378) | (360,594) | ||||||||||||
| Net deferred tax assets | $ | 15,415 | $ | 18,246 | ||||||||||
| Operating lease right-of-use asset | $ | (12,174) | $ | (14,786) | ||||||||||
| Intangible assets | (3,241) | (3,460) | ||||||||||||
| Gross deferred tax liabilities | $ | (15,415) | $ | (18,246) | ||||||||||
| Total net deferred tax asset | $ | — | $ | — | ||||||||||
Based on the available evidence, management believes it is more likely than not that the deferred tax assets will not be fully realizable. Accordingly, the Company has provided a full valuation allowance against its deferred tax assets at September 30, 2025 and 2024. The valuation allowance was $383.4 million and $360.6 million as of September 30, 2025 and 2024, respectively. The change in the valuation allowance was mainly due to an increase in the current year net operating loss, research and development credits and capitalized research and development during the fiscal year 2025.
The Company intends to continue maintaining a full valuation allowance on the Company’s deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of the allowance. The release of all, or a portion, of the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.
As of September 30, 2025, the Company had net operating loss carryforwards of approximately $915.6 million and $621.2 million available to reduce future taxable income, if any, for federal and state income tax purposes, respectively. Of the total federal net operating loss carryforwards, $714.8 million never expires and the remaining carryforwards of $200.8 million expire at various dates beginning in 2032 through 2038. Of the total state net operating loss carryforwards, the California State tax loss carryforwards of $310.0 million begin to expire in 2033 and the remaining carryforwards of $311.2 million for other states begin to expire at various dates beginning 2026 and beyond.
The Company also had federal and state research and development credit carryforwards of approximately $58.1 million and $38.8 million, respectively, at September 30, 2025. The federal credits will expire starting in 2033 if not utilized. The California research and development credits have no expiration date. Utilization of the net operating losses and tax credits is subject to annual limitation due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitations may result in the expiration of the net operating losses and tax credits before utilization.
The provisions of ASC 740-10, Accounting for Uncertainty in Income Taxes, prescribe a comprehensive model for the recognition, measurement, and presentation and disclosure in financial statements of any uncertain tax positions that have been taken or expected to be taken on a tax return. The Company has identified uncertain tax positions related to federal and state research and development credits and foreign jurisdictions.
The aggregate changes in the balance of gross unrecognized tax benefits are as follows:
| Federal and state | ||||||||||||||||||||
| September 30, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Unrecognized tax benefits at beginning of year | $ | 22,412 | $ | 19,185 | $ | 13,383 | ||||||||||||||
| Increase related to tax positions taken during year | 2,617 | 3,354 | 5,043 | |||||||||||||||||
| Increase/(decrease) related to tax positions taken in the prior year | 259 | (127) | 759 | |||||||||||||||||
| Unrecognized tax benefits at end of year | $ | 25,288 | $ | 22,412 | $ | 19,185 | ||||||||||||||
The Company does not expect a material change in unrecognized tax benefits in the next twelve months. As of September 30, 2025 and 2024, approximately $0.6 million and $0.4 million of unrecognized tax benefit would, if recognized, impact the Company’s effective income tax rate, respectively.
It is the Company’s policy to include penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary. The Company’s management determined that no accrual for interest and penalties was required as of September 30, 2025 and 2024.
The Company’s files federal and state income tax returns with varying statutes of limitations. All tax years remain open to examination due to the carryover of net operating losses or tax credits. The Company currently has no federal, state or foreign tax examinations in progress.
In fiscal year 2022, the Company began recognizing an additional component of total Federal tax expense, the tax on Global Intangible Low-Taxed Income (“GILTI”) provision of the Tax Act, which became applicable to the Company in fiscal year 2022. The Company elected to account for GILTI as a period cost, and therefore included GILTI expense in the effective tax rate calculation. This provision did not have a material effect on the effective tax rate for the years ended September 30, 2025, 2024 and 2023.
On July 4, 2025, H.R.1, commonly referred to as the One Big Beautiful Bill Act, was enacted in the U.S., which includes a broad range of tax reform provisions, including extending and modifying certain key Tax Cuts and Jobs Act provisions (both domestic and international). The legislation has multiple effective dates, with certain provisions effective in 2025 and others to be implemented through 2027. The Company has evaluated the impact of the guidance provided to date and determined that it did not have a material impact related to fiscal year ended September 30, 2025. The Company will continue to evaluate the impact of changes to various provisions that could affect our income tax payable and deferred tax liability.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 17, 2025 | Showing above |
| 2024 | Nov 18, 2024 | |
| 2023 | Nov 21, 2023 | |
| 2022 | Nov 28, 2022 | |
| 2021 | Nov 23, 2021 | |
| 2020 | Nov 27, 2020 | |
| 2019 | Dec 13, 2019 | |
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.