UroGen Pharma Ltd. Income Taxes Disclosure

NOTE 18 – INCOME TAXES

 

The Company is taxed under Israeli tax laws:

 

Corporate tax rate

 

The applicable Israeli tax rate relevant to the Company for 2024 and thereafter is 23%.

 

For financial reporting purposes, the (benefit) expense for current income taxes consists of the following (in thousands):

 

		2025				2024
Current taxes:
U.S. Federal		$	196			$	2,206
U.S. State			(118	)			626
Total current taxes		$	78			$	2,832

 

Cash taxes paid

 

Total cash taxes paid during 2025 and 2024 totaled approximately $3.0 million and $1.8 million, respectively, which related entirely to foreign jurisdictions (U.S. Federal and U.S. states). No individual U.S. states comprised more than 5% of total cash taxes paid in 2025. In 2024, cash taxes paid to the state of New Hampshire comprised approximately 6.3% of total cash taxes paid.

 

Deferred income taxes

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company and its subsidiary deferred tax assets are as follows (in thousands):

 

		December 31,
		2025				2024
In respect of:
Net operating loss carryforward		$	153,354			$	122,944
Research and development expenses			20,028				26,231
Stock-based compensation			13,254				12,441
Accrued expenses			2,973				2,371
Interest expense			6,054				2,630
In-process research and development			527				815
Lease Liabilities			1,741				683
Issuance costs			107				221
Other			2,364				988
Total deferred tax assets			200,402				169,324
Less—valuation allowance			(198,448	)			(168,555	)
Deferred tax assets, net of valuation allowance			1,954				769
Right-of-use asset			(1,898	)			(725	)
Depreciation of fixed assets			(56	)			(44	)
Total deferred tax liabilities			(1,954	)			(769	)
Net deferred tax assets		$	—			$	—

 

The change in valuation allowance for the years ended December 31, 2025 and 2024 were as follows (in thousands):

 

		2025				2024
Balance at the beginning of the year		$	(168,555	)		$	(143,566	)
Changes during the year			(29,893	)			(24,989	)
Balance at the end of the year		$	(198,448	)		$	(168,555	)

 

The main reconciling items between the statutory tax rates of the Company and the effective rate are nondeductible expenses related to financing on the prepaid forward obligation and share-based compensation, the provision for a full valuation allowance in respect of tax benefits from carryforward tax losses due to the uncertainty of the realization of such tax benefits, utilization of tax credits and expense related to uncertain tax positions. A reconciliation of the Company’s statutory tax rate to effective tax is as follows (in thousands, except statutory rate):

 

 

		December 31, 2025								December 31, 2024
		USD thousands				Percentage of Pretax Loss				USD thousands				Percentage of Pretax Loss
Loss before income taxes		$	(153,416	)						$	(124,042	)
Statutory rate			23	%							23	%
Income tax expense/(benefit) at statutory rate			(35,286	)							(28,530	)
Additional tax (tax saving) in respect of:
Foreign tax effects
United States
Differing tax rate of foreign subsidiaries			605				-0.39	%			219				-0.18	%
Current and deferred US state taxes			175				-0.11	%			(887	)			0.72	%
Tax credits in foreign jurisdictions			(789	)			0.51	%			(510	)			0.41	%
Changes in valuation allowances in foreign jurisdictions			6,792				-4.43	%			4,893				-3.94	%
Nontaxable or nondeductible items in foreign jurisdictions			1,002				-0.65	%			1,040				-0.84	%
Changes in unrecognized tax benefits in foreign jurisdictions			112				-0.07	%			598				-0.48	%
Changes in valuation allowances			23,102				-15.06	%			20,095				-16.20	%
Nondeductible financing cost on prepaid forward obligation			4,256				-2.77	%			5,385				-4.34	%
Other nontaxable or nondeductible items			20				-0.01	%			502				-0.40	%
Other			89				-0.06	%			27				-0.02	%
Income tax expense		$	78							$	2,832

   

Pretax loss for December 31, 2025 and 2024 includes pretax loss from foreign (United States) jurisdictions of $35.0 million and $11.0 million, respectively.

 

Losses for tax purposes carried forward to future years

 

As of December 31, 2025 and 2024, the Company had approximately $626.7 million and $533.9 million of carryforward tax losses, prior to tax effecting, respectively, available to reduce future taxable income without limitation of use in relation to its parent tax jurisdiction, Israel. These carryforward tax losses in Israel can be carried forward indefinitely. As of December 31, 2025, the Company had approximately $51.4 million of carryforward tax losses, prior to tax effecting, of United States federal and state carryforward tax losses, which can be carried forward indefinitely. The Internal Revenue Code of 1986, as amended (the “Code”), contains provisions that may limit our use of federal net operating loss carryforwards if significant changes occur in the constructive stock ownership of UroGen Pharma, Inc. In the event it has had an “ownership change” within the meaning of Section 382 of the Code, utilization of its net operating loss carryforwards could be restricted under Section 382 of the Code and similar state provisions.

 

Uncertain tax positions

 

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

 

		2025				2024
Unrecognized tax benefits at the beginning of the year		$	1,974			$	1,974
Gross increases — tax positions in prior period			550				—
Gross decreases— tax positions in prior period			(717	)			—
Unrecognized tax benefits at the end of the year		$	1,807			$	1,974

 

The liability for uncertain tax positions of $3.9 million as of December 31, 2025 is related to transfer pricing between affiliated entities. The uncertain tax positions liability on the consolidated balance sheets includes $2.1 million and $1.8 million of accrued interest and penalties related to unrecognized tax benefits at December 31, 2025 and December 31, 2024, respectively. The Company recognizes interest accrued and penalties related to uncertain tax positions as a component of income tax expense. If recognized, balances of uncertain tax positions as of December 31, 2025 would affect the Company's effective tax rate.

 

The Company operates on a global basis and is subject to tax laws and regulations in the United States and Israel. The estimate of the Company’s tax liabilities relating to uncertain tax positions requires management to assess uncertainties and to make judgments about the application of complex tax laws and regulations, expectations regarding the outcome of tax authority examinations, as well as the ultimate measurement of potential liabilities.

 

The uncertain tax positions are reviewed quarterly and adjusted as events occur that could affect potential liabilities for additional taxes, including lapsing of applicable statutes of limitations, correspondence with tax authorities, proposed assessments by tax authorities, identification of new issues, and issuance of new legislation or regulations. The Company recognizes its gross uncertain tax positions as a long-term liabilities. The Company believes that adequate amounts of tax have been provided in income tax expense for any adjustments that may result from its uncertain tax positions. The current balance of the uncertain tax position relates to tax years for which the statute of limitations will expire within the next 12 months. 

 

The Company has received final tax assessments up to and including its 2017 tax year in Israel and 2020 in the US.