Zura Bio Ltd Income Taxes Disclosure

8.Income Taxes

The Company accounts for income taxes under the liability method; under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax reporting bases of assets and liabilities and are measured using enacted tax rates and laws that are expected to be in effect when the differences are expected to reverse. Realization of deferred tax assets is dependent upon future earnings, the timing and amount of which are uncertain.

The Company utilizes a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained upon tax authority examination, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon ultimate settlement.

For financial reporting purposes, Loss before income taxes, includes the following components:

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Provision For Income Taxes

During the year ended December 31, 2025, the Company adopted ASU 2023-09 to enhance the income tax disclosures regarding income taxes paid and the rate reconciliation disclosure. The provision for income taxes reconciles to the amount computed by applying the U.S. federal statutory rate of 21% to income (loss) before income taxes as follows (in thousands):

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The Company has not recorded any state taxes in 2025 and 2024. However, the jurisdictions that comprise the majority (greater than 50%) of the composite state rate are Florida and Virginia.

Deferred Tax Assets and Valuation Allowance

Deferred income taxes reflect the net tax effects of loss and credit carryforwards and 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 our deferred tax assets for federal and state income taxes are as follows (in thousands):

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In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that the deferred tax assets will be realized. The ultimate realization of deferred tax assets is based on the assessment of available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit the utilization of existing deferred tax assets. The Company considered all positive and negative evidence when determining the amount of the net deferred tax assets that are more likely than not to be realized. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. A significant piece of objective negative evidence evaluated was the cumulative loss incurred since the Company’s inception. Such objective evidence limits the ability to consider subjective evidence such as the Company’s projections for future growth. Based on this assessment, the Company maintained a full valuation allowance against the Company’s net deferred tax assets as of December 31, 2025, and 2024. If these estimates and assumptions change in the future, the Company may be required to reduce the Company’s existing valuation allowance resulting in less income tax expense. The Company’s overall valuation allowance increased by $13.8 million during 2025 resulting from current year losses for which no tax benefit was provided.

As required under ASU 2023-09, the Company has included only the portion of the valuation allowance related to federal deferred tax assets in the “change in valuation allowance” line of the rate reconciliation. The following table presents a reconciliation of the total change in the valuation allowance:

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As of December 31, 2025, the Company had U.S. federal net operating loss (“NOL”) carryforwards of approximately $59.4 million which may be carried forward indefinitely but are only available to offset 80% of future taxable income. In addition, the Company had $6.3 million of foreign net operating loss carryforwards generated in the United Kingdom which may be carried forward indefinitely. In addition, the Company also has approximately $0.4 million in state net operating loss carryforwards (tax-effected) of which the Florida NOL of $0.2 million can be carried forward 20 years, and the Virginia NOL of $0.1 million and the South Carolina NOL of $0.1 million may be carried forward indefinitely but is only available to offset 80% of future taxable income.

The net operating loss carryforwards are subject to review and possible adjustment by the U.S. and state tax authorities. Net operating loss carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders, as defined under Section 382 of the Internal Revenue Code. This could limit the amount of NOLs that the Company could use on an annual basis to offset future taxable income or tax liabilities. As of December 31, 2025, the Company had not performed an analysis to determine whether any of the Company’s net operating loss carryforwards are subject to limitation under Sections 382 of the Internal Revenue Code.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA contains numerous business tax provisions, including business extenders made permanent such as restoration of 100% bonus depreciation, IRC Section 174 expensing for US-based research, and the EBITDA-based business interest expense limitation under Section 163(j). The enacted legislation did not have a material impact on the Company’s effective tax rate for the year ended December 31, 2025.

The Company applies the applicable authoritative guidance which prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its consolidated financial statements all material uncertain tax positions that the Company has taken or expects to take on a tax return. As of December 31, 2025, the Company had no uncertain tax positions. There are no uncertain tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within twelve months of December 31, 2025.

The Company files income tax returns in the United States, the United Kingdom and certain state jurisdictions. The U.S federal tax years open to examination by the Internal Revenue Service are 2022 to 2025. The Company’s state and United Kingdom tax years that are open to tax examination are 2021 to 2025.