v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
U.S. and foreign components of consolidated (loss) income before income taxes for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
Year Ended December 31,
202520242023
United States$(35,120)$61,371 $(348,050)
Foreign(18,127)(36,021)16,346 
(Loss) income before income taxes$(53,247)$25,350 $(331,704)
The (benefit from) provision for income taxes for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
Year Ended December 31,
202520242023
Current (benefit) provision
Federal$852 $— $— 
State(4,481)10,438 3,762 
Foreign1,493 (5,996)7,239 
Total current$(2,136)$4,442 $11,001 
Deferred (benefit) provision
Federal(2,253,928)481 481 
State(631,787)427 (337)
Foreign(9,404)(2,784)(2,529)
Total deferred(2,895,119)(1,876)(2,385)
Total (benefit from) provision for income taxes$(2,897,255)$2,566 $8,616 
The reconciliation of the U.S. federal statutory income tax rates to the Company’s effective income tax rate is as follows (in thousands, except for percentages):
Year Ended December 31,
2025
%$
Provision for income taxes at U.S. federal statutory rate
21.0 %$(11,182)
State income taxes, net of federal effect(1)
1,339.3 %(713,139)
Foreign tax effects
Canada
Statutory tax rate difference between Canada and U.S.
(1.5)%777 
Provincial tax impacts
3.8 %(2,002)
Other adjustments
2.5 %(1,339)
Germany
Statutory tax rate difference between Germany and U.S.
(1.8)%961 
Trade tax
5.1 %(2,728)
Other adjustments0.2 %(108)
Other foreign jurisdictions
0.5 %(262)
Change in valuation allowance
3,808.0 %(2,027,633)
Nontaxable or nondeductible items
Permanent tax adjustments
(4.9)%2,597 
Nondeductible expenses
(16.9)%8,984 
Stock-based compensation
19.7 %(10,478)
Executive compensation
(26.0)%13,864 
Nondeductible transaction costs
(6.7)%3,593 
Tax credits
Research and development
646.6 %(344,315)
Changes in unrecognized tax benefits
(347.7)%185,155 
Provision for income taxes5441.2 %$(2,897,255)
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(1)State taxes in California, New York, New York City, and Illinois made up the majority (greater than 50%) of the tax effect in this category.
The following table is a reconciliation of the U.S. federal statutory income tax rates to the Company’s effective income tax rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:
Year Ended December 31,
20242023
Provision at federal statutory rate
21.0 %21.0 %
State, net of federal benefit
29.2 9.7 
Permanent tax adjustments
10.3 (1.1)
Nondeductible expenses
54.4 (8.3)
Stock-based compensation
(65.6)(15.1)
Executive compensation
63.0 (2.4)
Change in valuation allowance
(101.5)(2.5)
Impact of foreign operations
(4.7)(0.4)
Deferred adjustments
— (3.2)
Other adjustments
4.0 (0.3)
Effective income tax rate
10.1 %(2.6)%
The amounts of income taxes paid (net of refunds received) by the Company are as follows (in thousands):
Year Ended December 31,
2025
Federal$— 
State and local
6,582 
Foreign679 
Income taxes, net of refunds
$7,261 
Income taxes paid (net of refunds) exceeded 5% of total income taxes paid (net of refunds) in the following jurisdictions (in thousands):
Year Ended December 31,
2025
State and Local
California$1,000 
Illinois1,158 
Cincinnati
(523)
Philadelphia
1,068 
Texas2,043 
Foreign
Canada(1,033)
Mexico849 
Ireland
773 
Spain
518 
Switzerland
(913)
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 at the enacted rates. The significant components of the Company’s deferred tax assets and liabilities as of the periods indicated were as follows (in thousands):
December 31,
20252024
Deferred tax assets:
Net operating loss carryforwards$2,254,164 $1,975,436 
Insurance reserves and accruals425,547 382,532 
Research tax credits406,978 — 
Stock-based compensation17,851 16,837 
Research capitalization202,235 288,464 
Accrued legal settlement/fees150,765 92,975 
Lease liability73,551 73,356 
Accrued and other liabilities31,378 47,233 
Capital losses7 64 
Other assets22,874 — 
Total deferred tax assets3,585,350 2,876,897 
Less: Valuation allowance(285,548)(2,690,489)
Deferred tax assets, net of valuation allowance3,299,802 186,408 
Deferred tax liabilities:
State income taxes(168,532)(132,126)
Operating lease right-of-use assets(66,416)(63,632)
Prepaid expenses(122,068)— 
Other liabilities(60,318)(427)
Total deferred tax liabilities(417,334)(196,185)
Net deferred tax assets (liabilities)$2,882,468 $(9,777)
A reconciliation of the valuation allowance is as follows (in thousands):
Year Ended December 31,
202520242023
Beginning balance$2,690,489 $2,715,841 $2,706,982 
Net changes in deferred tax assets and liabilities(2,404,941)(25,352)8,859 
Ending balance$285,548 $2,690,489 $2,715,841 
The valuation allowance decreased by $2.4 billion for the year ended December 31, 2025, compared to the decrease of $25.4 million for the year ended December 31, 2024, primarily driven by the valuation allowance release with respect to our U.S. federal and certain state deferred tax assets in the fourth quarter of 2025. For the year ended December 31, 2025, the remaining valuation allowance is attributable to California R&D credits and certain foreign deferred tax assets.
For the year ended December 31, 2025, the Company recorded a $2.9 billion benefit from the release of the valuation allowance with respect to our U.S. federal and certain state deferred tax assets. This includes the benefit of approximately $226.8 million related to federal R&D credits attributable to prior years that were recognized in the current period upon completion of the Company's R&D credit study in tax year 2025. As of December 31, 2025, based on all available positive and negative evidence, having demonstrated sustained U.S. profitability, which is objective and verifiable, and taking into account anticipated future earnings, we have concluded it is more-likely-than-not that we will realize our U.S. federal and state deferred tax assets, with the exception of California R&D credits. We continue to maintain a valuation allowance against these deferred tax assets as they have not met the “more-likely-than-not” realization criterion.
As of December 31, 2025, the Company had U.S. federal and state net operating loss carryforwards of approximately $7.9 billion and $6.4 billion, respectively. The federal net operating loss carryforwards generated through December 31, 2017 expire at various dates beginning in 2034 and will continue to expire through 2037, while U.S. federal net operating loss carryforwards generated in 2018 or later do not expire. The state net operating loss carryforward will begin to expire in 2026 and will continue to expire at various times depending upon individual state carryforward rules.
As of December 31, 2025, the Company had foreign net operating loss carryforwards of approximately $557.4 million. These net operating loss carryforwards will begin to expire in 2026 and will continue to expire at various times depending upon individual jurisdiction carryforward rules.
As of December 31, 2025, the Company had U.S. federal R&D tax credit carryforwards of $344.3 million that begin to expire in 2033. The Company had California R&D tax credit carryforwards of $251.9 million that have an unlimited carryforward period.
Utilization of the net operating loss and tax credit carryforwards are subject to various limitations including the ownership change limitations provided by U.S. Internal Revenue Code of 1986 (“IRC”) Section 382 and similar state provisions.
The Company has not provided foreign withholding taxes on the undistributed earnings of its foreign subsidiaries as of December 31, 2025, 2024, and 2023, because it intends to permanently reinvest such earnings outside of the U.S. If these foreign earnings were to be repatriated in the future, the related U.S. tax liability will be immaterial, due to the participation exemption put in place by the Tax Cuts and Jobs Act of 2017, Pub L. No. 115-97 (the “2017 Tax Act”), enacted in the U.S.
The following table reflects changes in gross unrecognized tax benefits (in thousands):
Year Ended December 31,
202520242023
Beginning balance$— $— $— 
Gross increases - current year tax positions8,036 — — 
Gross increases - prior year tax positions181,201 — — 
Ending balance$189,237 $— $— 
As of December 31, 2025, approximately $108.3 million of unrecognized tax benefits, if recognized, would impact the effective tax rate. The remaining $80.9 million of the unrecognized tax benefits would not impact the effective tax rate due to the valuation allowance against certain deferred tax assets.
The Company’s policy is to recognize interest and penalties associated with uncertain tax benefits as part of the income tax provision and include accrued interest and penalties with the related income tax liability on the Company’s consolidated balance sheets. To date, the Company has not recognized any interest and penalties in its consolidated statements of operations, nor has it accrued for or made payments for interest and penalties.
The Company is subject to routine examination by U.S. federal, state and foreign tax authorities. To the extent we have tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the federal, state or foreign tax authorities to the extent utilized in a future period. Management believes that the Company’s tax filings are materially complete and accurate, and that all positions taken are supportable under applicable tax laws.
As of December 31, 2025, the open tax years for our major tax jurisdictions are as follows:
JurisdictionTax Years
U.S. Federal2010-2025
U.S. States
2010-2025
Canada2021-2025
Germany2018-2025
On July 4, 2025, the One Big Beautiful Bill Act, Public Law No. 119-21 and formally titled “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” (“OBBBA”) was enacted in the United States. The OBBBA includes a broad range of tax provisions, such as the permanent extension of certain provisions of the 2017 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 provisions of the OBBBA and determined that the most significant impact relates to capitalization of research and experimental expenditures under IRC Section 174. The effects of this provision have been reflected in the Company’s income tax provision.