Income Taxes

12 Months Ended

Dec. 31, 2025

The components of income (loss) before income taxes are summarized as follows:


	Year Ended December 31,
(In thousands)	2025		2024		2023
U.S.	$	17,471	$	10,580	$	(2,381)
Foreign	(94)		(70)		13
Income (loss) before income taxes	$	17,377	$	10,510	$	(2,368)

Provision for income taxes consisted of the following:


	Year Ended December 31,
(In thousands)	2025
Federal	$	—
State	859
International	—
Total	$	859

During the year ended December 31, 2025, the Company adopted ASU 2023-09 to enhance income taxes disclosures regarding incomes taxes paid and the rate reconciliation disclosures.

Income taxes paid, net of refunds, consisted of the following:


	Year Ended December 31,
(In thousands)	2025
Federal	$	—
State	580
Foreign	—
Total income taxes paid, net of refunds	$	580

Income taxes paid, net of refunds, exceeded 5 percent of the total income taxes paid in the following jurisdictions:


	Year Ended December 31,
(In thousands)	2025
State
California	$	136
New York	135
Massachusetts	84
Tennessee	76
Louisiana	45
Georgia	37
Other	67
Total	$	580

A reconciliation of income taxes computed using the U.S. federal statutory rate to the taxes reported in the consolidated statements of operations is as follows:


	December 31, 2025
(In thousands)	Amount		Percent
Income before income taxes	$	17,377
U.S. Federal Statutory Tax Rate	3,649		21.0	%
State and Local Income taxes, Net of Federal Income Tax Effect (a)	859		4.9	%


Effect of change in tax laws or rates enacted in the current period	—		—	%


Tax Credits
Research and development tax credits	(2,310)		(13.3)	%

Changes in Valuation Allowances	(2,175)		(12.5)	%
Nontaxable or Nondeductible items
Stock Compensation	(2,856)		(16.4)	%
Officers Compensation - 162(m)	3,510		20.2	%
Other	182		1.0	%




Effective Tax Rate	$	859	4.9	%

(a) State taxes in California, New York and Massachusetts make up the majority (greater than 50%) of the tax effect in this category.


	Year Ended December 31,
(In thousands)		2024			2023
Income (loss) before income taxes		$	10,510		$	(2,368)
Federal statutory rate		21		%	21		%
Taxes computed at federal statutory rate		2,207			(497)
State and local income taxes		381			(389)
Nondeductible stock-based compensation		(6,547)			(586)
Federal and state rate change		1,090			(704)
Research and orphan drug credits		(156)			362
Other		402			162
Deferred tax adjustment		7,374			—
Change in valuation allowance		(4,603)			2,466
Reported income taxes		$	148		$	814

Deferred tax assets (liabilities) consist of the following:


	Year Ended December 31,
(In thousands)	2025		2024
Deferred tax assets:
Net operating loss carryforwards	$	9,462	$	15,481
Employee benefits and stock-based compensation	20,050		18,606
Research and development costs	—		4,778
Intangible assets	327		786
Operating lease liabilities	22,887		20,664
Inventory reserve	5,093		2,540
Tax credit carryforward	13,222		10,937
Other, net	5		3
Total deferred tax assets	71,046		73,795
Less: valuation allowance	(41,195)		(45,153)
Total net deferred tax assets	29,851		28,642
Deferred tax liabilities:
Right-of-use assets	(16,742)		(18,056)
Property and equipment, net	(13,109)		(10,586)
Total net deferred tax liabilities	(29,851)		(28,642)
Net deferred tax assets and liabilities	$	—	$	—

As of December 31, 2025, the Company had U.S. federal net operating loss carryforwards of $36.3 million, of which $6.2 million begin to expire in 2033 and the remainder do not expire but are subject to 80% limitation. As of December 31, 2025, the Company had state net operating loss carryforwards of $15.2 million that begin to expire in 2030. The projected annual limitation on the use of the net operating losses that existed prior to September 17, 2014, resulting from the Company’s change in control in 2014 per Section 382 of the Internal Revenue Code is $0.8 million. As a result, a portion of the net operating losses and tax credit carryforwards may expire prior to their utilization. As of December 31, 2025, the Company’s U.S. federal tax credit carryforwards available to offset future profits are $13.2 million. These credit carryforwards expire between 2026 and 2044.

In accordance with the accounting guidance for income taxes, the Company estimates whether recoverability of its deferred tax assets is “more likely than not”, based on forecasts of taxable income in the related tax jurisdictions. In this estimate, the Company uses historical results, projected future operating results based upon approved business plans, eligible carry forward periods, tax planning opportunities and other relevant considerations. Based on these factors, including historical losses incurred by the Company, a full valuation allowance for the deferred tax assets, including the deferred tax assets for the aforementioned net operating losses and credits has been provided, since they are not more likely than not to be realized. If sufficient positive evidence exists in future periods to support a release of some or all of the valuation allowance, such a release would likely have a material impact on the Company’s results of operations. The change in the valuation allowance was a decrease of $4.0 million and $4.6 million for the years ended December 31, 2025 and 2024, respectively.

The Company assesses uncertain tax positions in accordance with the guidance for accounting for uncertain tax positions. This pronouncement prescribes a recognition threshold and measurement methodology for recording within the consolidated financial statements uncertain tax positions taken, or expected to be taken, in the Company’s income tax returns. To the extent the uncertain tax positions do not meet the “more likely than not” threshold, the Company derecognizes such positions. To the extent the uncertain tax positions meet the “more likely than not” threshold, the Company measures and records the highest probable benefit, and establishes appropriate reserves for benefits that exceed the amount likely to be sustained upon examination. The Company currently has not recorded any uncertain tax positions and does not anticipate that unrecognized tax benefits will significantly increase or decrease within the next twelve months.

The Company files U.S. federal and state income tax returns with varying statutes of limitations. During the year ended December 31, 2020, examinations by U.S. tax authorities were completed for 2017 and 2018. During the year ended December 31, 2025, examinations by U.S. tax authorities were completed for 2021. Due to the Company’s net operating loss

carryforwards, federal income tax returns from incorporation are still subject to examination. The Company files in several state tax jurisdictions and is subject to examination in years ranging from incorporation to 2025.

On July 4, 2025, the One Big Beautiful Act (“OBBBA”), was signed into law. Included in this legislation are provisions that allow for the immediate expensing of domestic U.S. research and development expenses, a general requirement to reduce the deduction for research and development expense by any research credit taken, and reinstates 100% bonus depreciation on qualified property placed in service after January 19, 2025. The company has incorporated the impact of the enacted legislation and has determined there is no material impact to the company’s consolidated financial statements.

- Definition

The entire disclosure for income tax.

+ References

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+ Details

Vericel Corp 10-K