GeneDx Holdings Corp.WGS
GeneDx Holdings Corp. Income Taxes Disclosure
Income Taxes
The components of loss before incomes taxes consisted of the following:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Foreign | $ | 1,178 | $ | 929 | $ | 623 | |||||||||||
| Domestic | (22,315) | (53,558) | (177,316) | ||||||||||||||
| Loss before income tax benefit | (21,137) | (52,629) | (176,693) | ||||||||||||||
The components of income tax benefit consisted of the following:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State and local | 555 | — | — | ||||||||||||||
| Foreign | 310 | 241 | 164 | ||||||||||||||
| Total Current | $ | 865 | $ | 241 | $ | 164 | |||||||||||
| Deferred | |||||||||||||||||
| Federal | $ | (439) | $ | (229) | $ | 942 | |||||||||||
| State and local | (542) | (355) | (2,032) | ||||||||||||||
| Foreign | — | — | — | ||||||||||||||
| Total Deferred | (981) | (584) | (1,090) | ||||||||||||||
Total income tax benefit | $ | (116) | $ | (343) | $ | (926) | |||||||||||
For the years ended December 31, 2025, 2024, and 2023, the Company recorded a total income tax benefit of $0.1 million, $0.3 million, and $0.9 million, respectively. Accordingly, the effective tax rate for the Company for the years ended December 31, 2025, 2024, and 2023 was 0.5%, 0.6%, and 0.5% respectively.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was enacted into law in the United States. The OBBBA includes, among other provisions, changes to bonus depreciation rules, the treatment of research and experimental expenditures under Section 174A, limitations on the deductibility of interest under Section 163(j), and modifications to certain international tax regimes. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027.
The Company has evaluated the effective provisions of the OBBBA for the year ended December 31, 2025, and determined their impact on the consolidated financial statements to be immaterial. The Company will continue to evaluate the full impact of the OBBBA changes as additional guidance becomes available.
As noted in Note 2, “Summary of Significant Accounting Policies”, the Company adopted ASU 2023-09 and applied the new disclosure requirements prospectively for the year ended December 31, 2025. A reconciliation of the anticipated income tax benefit computed by applying the statutory federal income tax rate of 21% to loss before income taxes to the amount reported in the statement of operations and comprehensive loss after the adoption of ASU 2023-09 is as follows:
| Year ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| U.S. federal statutory tax rate | $ | (4,439) | 21.0% | ||||||||
State and local income taxes, net of federal benefit (1) | (104) | 0.5 | |||||||||
| Foreign tax effects | 62 | (0.3) | |||||||||
| Changes in valuation allowances | 5,896 | (27.9) | |||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Stock-based compensation | (14,295) | 67.6 | |||||||||
| Excess compensation | 12,701 | (60.1) | |||||||||
| Unrealized fair value gain on warrants | 253 | (1.2) | |||||||||
| Other | 128 | (0.6) | |||||||||
| Other adjustments: | |||||||||||
| Return to provision adjustments | (318) | 1.5 | |||||||||
| Effective tax rate | $ | (116) | 0.5% | ||||||||
(1)State taxes in Pennsylvania made up the majority (greater than 50%) of the tax in this category.
A reconciliation of the anticipated income tax benefit computed by applying the statutory federal income tax rate of 21% to loss before income taxes to the amount reported in the statements of operations and comprehensive loss for years prior to the adoption of ASU 2023-09 is as follows:
| Year ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal taxes at statutory rate | 21.0% | 21.0% | |||||||||
| State and local taxes, net of federal benefit | 0.6 | 1.1 | |||||||||
| Research and development tax credits | — | (0.8) | |||||||||
| Non-deductible stock-based compensation | (3.8) | (2.4) | |||||||||
| 162(m) limitation | (2.7) | (0.1) | |||||||||
| Permanent items | (0.5) | (0.1) | |||||||||
| Unrealized fair value (gain) loss on warrants | (5.4) | 0.1 | |||||||||
| Goodwill impairment | — | (0.1) | |||||||||
| Change in valuation allowance | (10.7) | (18.4) | |||||||||
| Other | 2.1 | 0.2% | |||||||||
| Effective tax rate | 0.6% | 0.5% | |||||||||
The tax effects of temporary differences and carryforwards that give rise to significant portions of the net deferred tax assets and liabilities were as follows:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 280,752 | $ | 257,047 | |||||||
| Stock-based compensation | 4,848 | 2,599 | |||||||||
| Accrued compensation | 4,377 | 2,001 | |||||||||
| Accrued expenses | 326 | 247 | |||||||||
| Research and development credits | 8,681 | 6,477 | |||||||||
| Leases | 13,890 | 14,801 | |||||||||
| Obsolete inventory reserve | 10 | 12 | |||||||||
| Third party liability | 2,565 | 2,971 | |||||||||
| Section 174 amortization | 24,733 | 29,484 | |||||||||
| Capitalized software | 451 | 766 | |||||||||
| Other | 1,107 | 1,194 | |||||||||
| Total deferred tax assets | 341,740 | 317,599 | |||||||||
| Valuation allowance | (295,260) | (272,275) | |||||||||
| Deferred tax assets, net of valuation allowance | 46,480 | 45,324 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property and equipment | (524) | (1,013) | |||||||||
| ROU asset | (5,657) | (6,252) | |||||||||
| Intangible amortization | (41,056) | (39,024) | |||||||||
| Total deferred tax liabilities | (47,237) | (46,289) | |||||||||
| Net deferred tax liability after valuation allowance | $ | (757) | $ | (965) | |||||||
As of December 31, 2025, the Company had the following tax net operating loss carryforwards available to reduce future federal and state taxable income, and tax credit carryforwards available to offset future federal and Connecticut income taxes:
| Amount | Expiration period | ||||||||||
| Tax net operating loss carryforwards: | |||||||||||
| Federal (pre-2018 net operating losses) | $ | 62,892 | 2026-2037 | ||||||||
| Federal (post-2017 net operating losses) | $ | 932,482 | No expiration | ||||||||
| State and local | $ | 1,237,797 | 2027-2055 | ||||||||
| State and local | $ | 116,087 | No expiration | ||||||||
| Tax credit carryforwards: | |||||||||||
| Federal research and development | $ | 7,208 | 2038-2044 | ||||||||
| Connecticut research and development | $ | 777 | 2036 | ||||||||
| Connecticut research and development | $ | 511 | No expiration | ||||||||
California research and development | 1,256 | No expiration | |||||||||
The Company had the following deferred tax valuation allowance balances:
| Year | Balance at the Beginning of Period | Additions | Balance at the End of Period | |||||||||||||||||
| 2025 | $ | 272,275 | 22,985 | $ | 295,260 | |||||||||||||||
| 2024 | $ | 271,567 | 708 | $ | 272,275 | |||||||||||||||
| 2023 | $ | 226,644 | 44,923 | $ | 271,567 | |||||||||||||||
Future realization of the tax benefits of existing temporary differences and carryforwards ultimately depends on the existence of sufficient taxable income within the carryforward period. As of December 31, 2025 and 2024 the Company performed an evaluation to determine whether a valuation allowance was needed. Based on the Company’s analysis, which considered all available evidence, both positive and negative, the Company determined that it is more likely than not that a significant portion of its deferred tax assets will not be realized. Accordingly, the Company maintained a full valuation allowance as of December 31, 2025 and 2024. The valuation allowance increased by $23.0 million in 2025 and $0.7 million in 2024, primarily due to the increase in net operating loss carryforwards related to the Merger and current year activity.
Under Internal Revenue Code Section 382, if a corporation undergoes an “ownership change,” the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes to offset its post-change income may be limited. Generally, an ownership change occurs when certain shareholders increase their aggregated ownership by more than 50 percentage points over their lowest ownership percentage in a testing period (typically three years). Future changes in stock ownership, which may be outside of the Company’s control, may trigger an ownership change. In addition, future equity offerings or acquisitions that have an equity component of the purchase price could result in an ownership change. If an ownership change has occurred or does occur in the future, utilization of the NOL carryforwards or other tax attributes may be limited.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits for the years ended December 31, 2025 and 2024 is as follows:
As of December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Unrecognized tax benefits – January 1 | $ | 718 | $ | 718 | $ | 718 | |||||||||||
Gross increases – tax positions in current period | — | — | — | ||||||||||||||
Unrecognized tax benefits – December 31 | $ | 718 | $ | 718 | $ | 718 | |||||||||||
To the extent penalties and interest would be assessed on any underpayment of income tax, the Company’s policy is that such amounts would be accrued and classified as a component of income tax expense in the financial statements. The Company had a nominal amount of accrued interest or penalties related to uncertain tax positions as of December 31, 2025 and 2024.
The Company files income tax returns for U.S federal jurisdiction, various state jurisdictions, and various foreign countries. In the normal course of business, the Company is subject to examination by federal, state and foreign jurisdictions, where applicable. There are currently no pending federal, state or foreign income tax examinations. As a result of the Company’s net operating loss carryforwards, the Company’s federal and state statutes of limitations remain open from 2007 and forward until the net operating loss carryforwards are utilized or expire prior to utilization.
The amounts of cash income taxes paid by the Company were as follows:
Year ended | |||||
December 31, 2025 | |||||
| Federal | $ | — | |||
| State and local: | |||||
| Florida | 103 | ||||
| Maryland | 40 | ||||
| North Carolina | 40 | ||||
| Pennsylvania | 129 | ||||
| Other state and local | 35 | ||||
| Foreign: | |||||
| Canada | 215 | ||||
| Iceland | 99 | ||||
| Total cash income taxes paid | $ | 661 | |||
The amount of cash income taxes paid by the Company during the years ended December 31, 2024 and 2023 was $0.2 million and $0.1 million, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 14, 2022 | |
| 2020 | Mar 30, 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.