Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

(10)Income Taxes

During the fourth quarter of 2024, Cullinan recorded a current income tax expense of $0.1 million. The income tax expense recorded for 2024 was driven by return to provision adjustments for the utilization of federal research and development credits generated during 2023 that were carried back to tax year 2022. During 2023, the Company recorded a current income tax benefit of $14.1 million. The income tax benefit recorded for 2023 was driven by return to provision adjustments for the utilization of 2022 and historical tax attributes against the gain on sale of Cullinan Pearl and the expected utilization of federal research and development credits generated during 2023 that could be carried back to tax year 2022 and used against the gain on sale of Cullinan Pearl. The Company’s net loss before income taxes consists solely of domestic income and losses in each of 2024 and 2023. As of December 31, 2024, Cullinan had recorded $3.0 million within prepaid expenses and other current assets on its consolidated balance sheets for the Company’s tentative refund from the carryback of 2023 federal research and development credits to tax year 2022.

A reconciliation of the Company’s statutory income tax rate to its effective income tax rate in 2024 and 2023 is as follows:

	2024			2023
Federal statutory rate		21.00	%		21.00	%
State taxes, net of federal benefit		2.55	%		6.70	%
Research and development credits		2.20	%		6.28	%
Tax law change		2.20	%		0.94	%
Equity-based compensation		(2.05	)%		(1.49	)%
Other, net		(0.06	)%		(0.67	)%
Valuation allowance		(25.91	)%		(24.41	)%
Effective tax rate		(0.07	)%		8.35	%

As of December 31, 2024 and 2023, the net deferred income tax asset balance related to the following (in thousands):

	December 31,
	2024			2023
Deferred tax assets:
Capitalized research and development	$	65,606		$	41,901
Net operating losses		32,148			14,443
Equity-based compensation		21,035			16,960
Research and development credits		6,970			3,155
Accrued expenses		2,699			1,836
Basis difference on gain on sale of Cullinan Pearl		1,700			1,700
Licenses		694			7,189
Lease liability		590			985
Capitalized organizational and start-up expenses		101			116
Gross deferred tax assets		131,543			88,285
Valuation allowance		(130,939	)		(87,371	)
Net deferred tax asset		604			914
Deferred tax liability
ROU asset		457			697
Depreciation and amortization		147			217
Net deferred tax asset	$	—		$	—

The Company's net operating loss ("NOL") and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service ("IRS") and state tax authorities. Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, as well as similar state provisions, NOL and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership interest of significant stockholders over a three-year period in excess of 50%. The rules generally operate by focusing on changes in ownership among stockholders considered by the rules as owning, directly or indirectly, 5% or more of the stock of a company and any change in ownership arising from new issuances of stock by the company.

As of December 31, 2024 and 2023, the Company had federal NOL carryforwards, of $125.3 million and $54.3 million, respectively, which may be available to offset future income tax liabilities. As of December 31, 2024, $123.9 million of Cullinan's federal NOL carryforwards can be carried forward indefinitely, and the remaining $1.4 million expires in 2037. As of December 31, 2024 and 2023, the Company had state NOL carryforwards of $128.2 million and $56.8 million, respectively, which may be available to offset future income tax liabilities. As of December 31, 2024, Cullinan's state NOL carryforwards begin to expire in 2031.

As of December 31, 2024 and 2023, the Company had federal research and development tax credit carryforwards of $5.4 million and $1.6 million, respectively. As of December 31, 2024, Cullinan’s federal research and development tax credit carryforwards begin to expire in 2036. As of each of December 31, 2024 and 2023, the Company had state research and development tax credit carryforwards of $2.0 million. As of December 31, 2024, $0.3 million of Cullinan's state research and development tax credit carryforwards can be carried forward indefinitely, and the remaining $1.7 million expires beginning in 2036.

Cullinan has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets, which primarily consist of capitalized research and development costs, temporary differences on equity-based compensation, and NOL carryforwards. The Company has considered its history of cumulative net losses, estimated future taxable income and prudent and feasible tax planning strategies and has concluded that it is more likely than not that Cullinan will not realize the benefits of its deferred tax assets. As a result, as of December 31, 2024, the Company has maintained a full valuation allowance against its remaining net deferred tax assets.

Cullinan’s valuation allowance increased during 2024 and 2023 primarily due to capitalized research and development costs and the generation of NOLs as follows (in thousands):

	2024		2023
Valuation allowance at beginning of year	$	87,371	$	46,766
Increases recorded to income tax provision		43,568		41,307
Increases (decreases) recorded to equity		—		(702	)
Valuation allowance at end of year	$	130,939	$	87,371

The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations for both federal taxes and the states in which Cullinan operates or does business in.

The Company recognizes a tax benefit from an uncertain tax position when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, on the basis of the technical merits. Cullinan records uncertain tax positions as liabilities and adjusts these liabilities when its judgment changes as a result of the evaluation of new information not previously available. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from the Company’s current estimate of the unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which new information is available. As of December 31, 2024 and 2023, Cullinan has not recorded a liability for any uncertain tax positions in its consolidated financial statements.

The Company recognizes interest and penalties related to unrecognized tax benefits on the income tax expense line in the accompanying consolidated statements of operations and comprehensive income (loss). As of December 31, 2024 and 2023, no accrued interest or penalties are included in the consolidated balance sheets.

Cullinan files tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions in the U.S. There are currently no pending tax examinations. Cullinan's federal and state income tax returns are generally subject to tax examinations for tax years 2016 and later. To the extent that the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the IRS and the state tax authorities to the extent utilized in a future period.