Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

13.Income Taxes

The income tax expense (benefit) in 2024 and 2023 consisted of the following:

	Year Ended December 31,
	2024		2023
Current
Federal	$	(294)	$	—
State	58		—
	(236)		—
Deferred
Federal	1,868		400
State	866		(16)
	2,734		384
Total income tax expense (benefit)	$	2,498	$	384

The differences between the federal tax rate and the Company’s effective tax rate for the years ended December 31, 2024 and 2023 are as follows:

	Year Ended December 31,
	2024		2023
Federal statutory income tax rate	21.00	%	21.00	%
State taxes, net of federal benefit	3.18		1.01
State rate change	-1.61		-0.05
Revisions to prior years' estimates	2.54		-0.38
Nontaxable passthrough LLC income	-9.94		-10.41
Change in valuation allowance	-25.67		-6.93
Other	0.30		0.00
Transaction related expenses	0.30		-4.57
Revaluation of warrants	-0.25		-0.29
Effective tax rate	(10.15)	%	(0.62)	%

The Company is a member of American Oncology Network, LLC, which is treated as a partnership for U.S. federal and certain state and local income taxes. As a partnership, American Oncology Network, LLC is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by American Oncology Network, LLC is passed through to and included in the taxable income of its members, including the Company, in accordance with the partnership agreement.

The Company is subject to U.S. federal income taxes, as well as certain state and local income taxes, on its allocable share of taxable income of American Oncology Network, LLC. Additionally, other corporate entities

within the Company's structure are subject to income taxes. These corporate entities continue to generate losses and continue to maintain a valuation allowance against their net deferred tax assets.

Components of the net deferred tax assets and liabilities at December 31, 2024 and 2023 are as follows:

	As of December 31
	2024		2023
Deferred tax assets
Investment in partnership	$	16,026	$	9,337
Net operating loss carryforwards	13,680		10,092
Accrued expenses	224		160
Start-up costs	1,242		748
Interest expense limitation carryforward	341		—
Stock compensation	1,098		—
Gross deferred tax assets	32,611		20,337
Valuation allowance	(32,611)		(17,443)
Net deferred tax assets (after valuation allowance)	—		2,894

As of December 31, 2024, the Company had federal and state net operating loss (“NOL”) carryforwards of $53.4 million and $57.5 million, respectively. As of December 31, 2023, the Company had federal and state net operating loss (“NOL”) carryforwards of $40.0 million and $38.6 million, respectively.The federal NOL carryforwards can be carried forward indefinitely and the state NOL carryforwards begin to expire in 2028.

During the years ended December 31, 2024 and 2023, the Company recorded an increase in the valuation allowance of $15.2 million and $11.6 million, respectively. The increase is primarily related to basis adjustments made to the Company's investment in the American Oncology Network, LLC partnership and operating results (losses incurred) of the Company in 2024. As a result of its 2024 loss incurred, the Company has shifted into a three-year cumulative loss position at each of its separate legal entities. As of December 31, 2024, the Company has recorded a full valuation allowance against its net deferred tax assets at each of its corporate entities. The Company will continue to monitor the realizability of its deferred tax assets and consider multiple factors, including recent operating results, existing taxable temporary differences, future taxable income projections and tax planning strategies. The Company intends to maintain a valuation allowance on its net deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of the valuation allowance. The release of all, or a portion of, the valuation allowance would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period the release is recorded.

As of December 31, 2024 and 2023, there are no liabilities related to uncertain tax positions. The Company recognizes interest and penalties related to unrecognized tax liabilities as a component of income tax expense, if any. The Company recognized no material interest and penalties during the years ended December 31, 2024 and 2023 and had no accrued interest or penalties as of December 31, 2024 and 2023.

The Company files income tax returns in the U.S. Federal jurisdiction and various state and local jurisdictions. The U.S. Federal and state and local tax returns are subject to examination for years 2019 and later. The federal income tax return of an affiliate entity included within the Company's structure is currently under examination by the Internal Revenue Service (IRS). The IRS is exam has not identified any issues to date. Management believes that the Company's tax positions are supportable and intends to defend its positions and, therefore, no additional income tax accruals have been made. However, the outcomes of tax examinations are inherently uncertain, and the Company could be required to make adjustments to its tax provisions in future periods.