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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

13. Income Taxes

 

Following the conversion of Celcuity LLC to Celcuity Inc. on September 15, 2017, Celcuity Inc. began filing federal and state returns where required. No income tax benefit was recorded for the years 2024 and 2023, due to net losses and recognition of a valuation allowance. The following table presents a reconciliation of the tax expense computed at the statutory federal rate and the Company’s tax expense for the years ended December 31:

 

   2024   2023 
Tax benefit at statutory federal rate  $(23,474,000)  $(13,394,000)
State income tax benefit, net of federal tax effect   (95,000)   (82,000)
Change in valuation allowance on deferred tax assets   24,081,000    13,542,000 
Research & Development Credits   (1,236,000)   (550,000)
Other permanent items   724,000    484,000 
Income tax benefits  $-   $- 

 

  

Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Company’s deferred tax assets relate primarily to its net operating loss carryforwards and other balance sheet basis differences. In accordance with ASC 740, “Income Taxes,” the Company recorded a valuation allowance to fully offset the net deferred tax asset, because it is more likely than not that the Company will not realize future benefits associated with these deferred tax assets at December 31, 2024. The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets are at December 31:

 

   2024   2023 
Deferred tax assets (liabilities):          
Accrued expenses  $459,000   $207,000 
Share-based compensation   2,861,000    2,141,000 
Property and equipment   420,000    393,000 
Right-of-use assets   (45,000)   (85,000)
Lease liability   48,000    87,000 
IRC 174 Expenditures   30,133,000    13,900,000 
Start-up expenditures   12,998,000    11,029,000 
Net operating losses and tax credits   13,340,000    8,461,000 
Valuation allowance   (60,214,000)   (36,133,000)
Net deferred tax assets  $-   $- 

 

At December 31, 2024, the Company had federal and state net operating loss carryforwards of approximately $43.2 million and $0.8 million, respectively. The federal and state net operating loss carryforwards for 2017 will begin to expire in the year ending December 31, 2037. The federal net operating loss carryforwards starting in 2018 have no expiration. These deferred tax assets were subject to a full valuation allowance as of December 31, 2024 and December 31, 2023.

 

At December 31, 2024, the Company had federal and state research and development tax credit carryforwards resulting in deferred tax assets of approximately $2.9 million and $1.6 million, respectively. The federal and state credit carryforwards will begin to expire in the years ending December 31, 2038 and December 31, 2033, respectively. These deferred tax assets were subject to a full valuation allowance as of December 31, 2024 and December 31, 2023.

 

Under the provisions of Section 382 of the Internal Revenue Code of 1986, certain substantial changes in the Company’s ownership, including a sale of the Company, or significant changes in ownership due to sales of equity, may limit in the future the amount of net operating loss carryforwards available to offset future taxable income.

 

The Company recognizes uncertain tax positions in accordance with ASC 740 on the basis of evaluating whether it is more-likely-than not that the tax positions will be sustained upon examination by tax authorities. For those tax positions that meet the more-likely-than not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement. As of December 31, 2024, and 2023, the Company has no significant uncertain tax positions. There are no unrecognized tax benefits included on the balance sheet that would, if recognized, impact the effective tax rate. The Company does not anticipate there will be a significant change in unrecognized tax benefits within the next 12 months.

 

Prior to the conversion, Celcuity was a limited liability company and therefore was taxed as a partnership for income tax purposes. Accordingly, no benefit for income taxes was recorded prior to the conversion.

 

For years prior to 2021, the Company is no longer subject to U.S. federal or state income tax examinations and remains open for the unutilized tax attributes as of December 31, 2024, carried forward from these years. The Company’s policy is to recognize interest and penalties related to uncertain tax positions as a component of general and administrative expenses.