Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

12. Income Taxes

For the year ended December 31, 2024, Lineage did not record a tax provision or deferred tax benefit.

For the year ended December 31, 2023, Lineage recorded a $1.8 million deferred tax benefit, due to the ability to offset certain deferred tax assets against the deferred tax liability associated with IPR&D, and the related release of the valuation allowance. It was determined that a portion of the deferred tax liability related to the indefinite lived assets may be realized prior to the expiration of certain pre 2018 net operating losses.

The domestic and foreign breakout of loss before net income tax benefit was as follows:

	Year Ended December 31,
	2024			2023
Domestic	$	(18,864	)	$	(23,402	)
Foreign		282			120
Loss before net income tax benefit	$	(18,582	)	$	(23,282	)

Income taxes differed from the amounts computed by applying the indicated current U.S. federal income tax rate to pretax losses from operations as a result of the following:

	Year Ended December 31,
	2024			2023
Computed tax benefit at federal statutory rate		21	%		21	%
Research and development and other credits		2	%		(1	)%
Permanent differences		1	%		(1	)%
Change in valuation allowance		(34	)%		(12	)%
State tax benefit		10	%		2	%
GILTI inclusion		—	%		(1	)%
Income tax benefit (expense)		—	%		8	%

The primary components of the deferred tax assets and liabilities at December 31, 2024 and 2023 were as follows (in thousands):

Deferred tax assets/(liabilities):	December 31, 2024			December 31, 2023
Net operating loss carryforwards	$	68,180		$	63,461
Research and development and other credits		9,433			8,890
Patents and licenses		1,612			1,606
Stock-based compensation		3,841			3,117
Operating lease liability		233			240
Capitalized research expense		8,441			6,217
Other		1,688			1,707
Total deferred tax assets		93,428			85,238
Valuation allowance		(86,314	)		(80,513	)
Deferred tax assets, net of valuation allowance		7,114			4,725
Operating lease ROU assets		(219	)		(221	)
Intangibles		(7,168	)		(4,771	)
Marketable securities at fair value		—			(6	)
Total deferred tax liabilities		(7,387	)		(4,998	)
Net deferred tax liabilities	$	(273	)	$	(273	)

Lineage has established an accrual for uncertain tax positions related to its U.S. research and development credits. As of December 31, 2024 and 2023, there was no accrued interest related to uncertain tax positions. A reconciliation of beginning and ending balances for unrecognized tax benefits is as follows (in thousands):

	Year Ended December 31,
	2024		2023
Balance at the beginning of the period	$	2,963	$	—
Additions for tax positions related to the current year		190		354
Additions for tax positions related to prior years		—		2,609
Balance at the end of the period	$	3,153	$	2,963

Under ASC 740, a valuation allowance is provided when it is more likely than not that some portion of the deferred tax assets will not be realized. Lineage established a full valuation allowance as of December 31, 2018 due to the uncertainty of realizing future tax benefits from its net operating loss carryforwards and other deferred tax assets, including foreign net operating losses generated by its subsidiaries.

As of December 31, 2024 and 2023, Lineage had gross federal net operating loss carryforwards, of approximately $177 million and $163.1 million, respectively. The pre-2018 federal net operating loss carryforwards expire in varying amounts between 2030 and 2037. The post-2017 federal net operating loss carryforwards can be carried forward indefinitely and can only offset 80 percent of taxable income. As of December 31, 2024 and 2023, Lineage’s foreign subsidiaries had net operating loss carryforwards of approximately $63.4 and $64.8 million, respectively, which carryforward indefinitely.

As of December 31, 2024 and 2023, Lineage has net operating losses of $213.6 million and $188.8 million, respectively for state tax purposes. The California net operating losses expire in varying amounts between 2030 and 2044.

The state of California suspended the use of NOL deductions for tax years 2024 through 2026 if the California taxable income is greater than or equal to $1 million. Accordingly, the Company may not be able to offset taxable income with their NOL carryforwards for these years. The state of California also limited the use of their research and development credits to $5 million for tax years 2024 through 2026.

As of December 31, 2024 and 2023, Lineage had research tax credit carryforwards for federal tax purposes of $4.7 million and $4.3 million, respectively. These tax credits reflect the amounts for Lineage and its’ domestic subsidiaries. For federal purposes, the credits generated each year have a carryforward period of 20 years. The federal tax credits expire in varying amounts between 2023 and 2044.

As of December 31, 2024 and 2023, Lineage had research tax credit carryforwards for California tax purposes of $4.7 million and $4.6 million, respectively. These tax credits reflect the amounts for Lineage and its’ domestic subsidiaries. The state tax credits have no expiration period.

On December 17, 2021, Lineage and its subsidiary, CCN, entered into a Collaboration and License Agreement with Roche, wherein Lineage granted to Roche exclusive worldwide rights to develop and commercialize RPE cell therapies. Under the agreement Roche paid Lineage a $50.0 million upfront payment, which was received in January of 2022. See Note 13 (Commitments and Contingencies) for additional information.

For the tax years beginning on or after January 1, 2022, the Tax Cuts and Jobs Act of 2017 (“TCJA”) eliminates the option to currently deduct research and development expenses and requires taxpayers to capitalize and amortize them over five years for research activities performed in the United States and 15 years for research activities performed outside the United States pursuant to IRC Section 174. Although Congress is considering legislation that would repeal and defer this capitalization and amortization requirement for research activities performed in the United States, it is not certain that this provision will be repealed or otherwise modified. If the requirement is not repealed or replaced, it will continue to defer our tax deduction for research and development expense in future years.

During December 2021, in an intercompany transaction, Lineage acquired the economic rights to CCN’s interest in certain intellectual property. This transaction generated a gain to CCN of $31.7 million which was fully offset by net operating loss carryforwards in Israel. For book and California income tax purposes, this transaction eliminates in consolidation. For federal income tax purposes, the activities of our foreign subsidiaries are not included in the consolidated tax return. However, under the regulations related to global intangible low-taxed income (“GILTI”), the profits of our foreign subsidiaries may be included, see further discussion below.

The 2017 Tax Act subjects a U.S. stockholder to GILTI earned by certain foreign subsidiaries. In general, GILTI is the excess of a U.S. stockholder’s total net foreign income over a deemed return on tangible assets. The provision further allows a deduction of 50% of GILTI, however this deduction is limited to the company’s pre-GILTI U.S. income. For the years ended December 31, 2024 and 2023, Lineage’s combined foreign entities generated a profit arising from intercompany transactions. As a result, there was an inclusion of $1.2 million and $1.1 million for GILTI purposes for 2024 and 2023, respectively. The resulting net income for federal income tax purposes was fully offset by their federal net operating loss carryforwards.

Other Income Tax Matters

Internal Revenue Code Section 382 places a limitation (“Section 382 Limitation”) on the amount of taxable income that can be offset by NOL carryforwards after a change in control (generally greater than 50% change in ownership within a three-year period) of a loss corporation. California has similar rules. Generally, after a change in control, a loss corporation cannot deduct NOL carryforwards in excess of the Section 382 Limitation. Due to these “change in ownership” provisions, utilization of the NOL and tax credit carryforwards may be subject to an annual limitation regarding their utilization against taxable income in future periods.

Lineage files a U.S. federal income tax return as well as a California combined and foreign income tax returns. In general, Lineage is no longer subject to tax examination by major taxing authorities for years before 2020. Although the statute is closed for purposes of assessing additional income and tax in these years, the taxing authorities may still make adjustments to the NOL and credit carryforwards used in open years. Therefore, the statute should be considered open as it relates to the NOL and credit carryforwards used in open years.

Lineage may be subject to potential examination by U.S. federal, U.S. states or foreign jurisdiction authorities in the areas of income taxes. These potential examinations may include questioning the timing and amount of deductions, the nexus of income among various tax jurisdictions and compliance with U.S. federal, U.S. state and

foreign tax laws. Based on Lineage’s assessment, no liabilities for uncertain tax positions should be recorded as of December 31, 2024 and 2023.

Lineage’s practice is to recognize interest and penalties related to income tax matters in tax expense. As of December 31, 2024 and 2023, Lineage has no accrued interest and penalties.