Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

Note 16: Income Taxes

From August 1, 2015, vTv Therapeutics Inc. has been subject to U.S. federal income taxes as well as state taxes.  The Company recorded an income tax provision of $0.1 million for the years ended December 31, 2021, and 2019, representing foreign withholding taxes incurred in connection with payments received under license agreements with foreign entities. The Company did not record an income tax provision for the year ended December 31, 2020.

As discussed in Note 14, the Company is party to a tax receivable agreement with a related party which provides for the payment by the Company to M&F (or certain of its transferees or other assignees) of 85% of the amount of cash savings, if any, in U.S. federal, state and local income tax or franchise tax that the Company actually realizes (or, in some circumstances, the Company is deemed to realize) as a result of certain transactions.  As no transactions have occurred which would trigger a liability under this agreement, the Company has not recognized any liability related to this agreement as of December 31, 2021.

In December 2019, the FASB issued ASU 2019-12, which intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application of ASC 740. This guidance is effective for fiscal years beginning after December 15, 2020, including interim periods therein, and early adoption is permitted. The adoption of ASU 2019-12 in 2021 did not have a material effect on the Company’s consolidated financial statements.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted in response to COVID-19 pandemic.  Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted.  The CARES Act made various tax law changes including among other things (i) increased the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional expensing of interest, (ii) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k), (iii) made modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes, and (iv) enhanced recoverability of AMT tax credits.  Given the Company’s full valuation allowance position, the CARES Act did not have a material impact on the financial statements.

A reconciliation of the U.S. statutory income tax rate to the Company’s effective tax rate is as follows (in thousands):

	December 31,
	2021			2020			2019
U.S. statutory tax benefit	$	(3,699	)	$	(2,688	)	$	(4,586	)
Partnership income (federal) not subject to tax to the Company		996			904			1,868
Foreign withholding tax		91			—			79
State taxes (net of federal benefit)		(14	)		(13	)		134
Research and development tax credit		(173	)		(138	)		(231	)
Other		10			75			(81	)
Change in valuation allowance		2,904			1,860			2,917
Provision for income taxes	$	115		$	—		$	100
Effective income tax rate		-0.7	%		0.0	%		-0.5	%

F-25

Significant components of our net deferred tax assets/(liabilities) are as follows (in thousands):

	December 31,
	2021			2020
Deferred tax assets:
Net operating loss carryforwards	$	20,909		$	17,338
R&D Tax Credit carryforwards		1,755			1,587
Investment in partnerships		(2,353	)		(1,520	)
Charitable contributions		11			12
Total deferred tax assets		20,322			17,417
Valuation allowance		(20,322	)		(17,417	)
Net deferred tax assets	$	—		$	—

The Company assesses the available positive evidence and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of existing deferred tax assets.  A significant piece of objective negative evidence evaluated was the Company’s recent operating losses.  Such objective evidence limits the ability to consider other subjective evidence, such as forecasts of profitability.  Based on the weight of objective evidence, including cumulative pre-tax losses in recent years, the Company concluded that its deferred tax assets were not realizable on a more-likely-than-not basis and recorded a full valuation allowance.  During the year ended December 31, 2021, the Company’s valuation allowance increased by $2.9 million.

The Company has federal net operating loss carryforwards of $95.9 million that will be available to offset future taxable income.  Approximately, $40.0 million of these carryforwards expire in varying amounts starting in 2035 to 2037, if not utilized and are available to offset 100% of future taxable income.  The remaining $55.9 million may be carried forward indefinitely but are only available to offset 80% of future taxable income.  The Company has federal research and development tax credits of $1.8 million which expire in varying amounts starting in 2035 to 2040.

The Company applies applicable authoritative guidance which prescribes a comprehensive model for the manner in which a company should recognize, measure, present and disclose in its financial statements all material uncertain tax positions that the Company has taken or expects to take on a tax return.  As of December 31, 2021, 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, 2021.

The Company files U.S. federal, New York, North Carolina and Virginia tax returns.  The earliest open tax years that are still subject to examination by the IRS and the aforementioned state tax authorities are 2017 to 2021.