ALBEMARLE CORPALB
ALBEMARLE CORP Income Taxes Disclosure
Income Taxes:
Income before income taxes and equity in net income of unconsolidated investments, and current and deferred income tax expense (benefit) are composed of the following (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Income before income taxes and equity in net income of unconsolidated investments: | |||||||||||||||||
| Domestic | $ | (624,724) | $ | 201,266 | $ | (461,897) | |||||||||||
| Foreign | 72,651 | (1,965,091) | 708,635 | ||||||||||||||
| Total | $ | (552,073) | $ | (1,763,825) | $ | 246,738 | |||||||||||
| Current income tax expense (benefit): | |||||||||||||||||
| Federal | $ | (11,226) | $ | 212,542 | $ | (54,250) | |||||||||||
| State | 1,683 | (450) | (3,395) | ||||||||||||||
| Foreign | 85,255 | 105,399 | 387,045 | ||||||||||||||
| Total | $ | 75,712 | $ | 317,491 | $ | 329,400 | |||||||||||
| Deferred income tax expense (benefit): | |||||||||||||||||
| Federal | $ | 53,058 | $ | (172,464) | $ | (8,545) | |||||||||||
| State | 21,183 | 1,523 | (4,154) | ||||||||||||||
| Foreign | 6,928 | (59,465) | 113,576 | ||||||||||||||
| Total | $ | 81,169 | $ | (230,406) | $ | 100,877 | |||||||||||
| Total income tax expense | $ | 156,881 | $ | 87,085 | $ | 430,277 | |||||||||||
Following the adoption and prospective application of Accounting Standards Update (“ASU”) 2023-09, the reconciliation of the U.S. federal statutory rate to the effective income tax rate for the year ended December 31, 2025 is as follows (in thousands, except percentages):
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| $ | % | ||||||||||
| Federal statutory rate | $ | (115,935) | 21.0 | % | |||||||
State and local income tax, net of federal tax effect(a) | 22,513 | (4.1) | |||||||||
| Foreign tax effects: | |||||||||||
| China | |||||||||||
| Statutory tax rate difference | 5,318 | (1.0) | |||||||||
| Change in valuation allowance | 8,692 | (1.6) | |||||||||
| Other | (2,885) | 0.5 | |||||||||
| Chile | |||||||||||
| Statutory tax rate difference | 2,200 | (0.4) | |||||||||
| State and local income tax (mining tax) | 7,066 | (1.3) | |||||||||
| Non-deductible payments | 7,265 | (1.3) | |||||||||
| Other | 2,430 | (0.4) | |||||||||
| Jordan | |||||||||||
| Statutory tax rate difference | 3,580 | (0.6) | |||||||||
| Tax rate incentive | (28,639) | 5.2 | |||||||||
| Netherlands | |||||||||||
| Statutory tax rate difference | (7,929) | 1.4 | |||||||||
| Non-deductible goodwill impairment | 46,712 | (8.4) | |||||||||
| Pillar two tax impact | 10,855 | (2.0) | |||||||||
| Return to provision | (7,860) | 1.4 | |||||||||
| Other | (3,487) | 0.6 | |||||||||
| United Kingdom | |||||||||||
| Non-deductible payments | 16,858 | (3.1) | |||||||||
| Other | 2,752 | (0.5) | |||||||||
| Other foreign jurisdictions | 15,103 | (2.7) | |||||||||
| Effect of cross-border tax laws: | |||||||||||
| Subpart F income | 5,573 | (1.0) | |||||||||
| Outside basis difference | (79,899) | 14.5 | |||||||||
| Tax credits: | |||||||||||
| Research and development | (1,748) | 0.3 | |||||||||
| Change in valuation allowance | 192,584 | (34.9) | |||||||||
| Non-taxable or non-deductible items: | |||||||||||
| Long-lived asset impairment | 51,576 | (9.3) | |||||||||
| Section 162(m) limitation | 7,876 | (1.4) | |||||||||
| Other, net | (2,413) | 0.5 | |||||||||
| Change in unrecognized tax benefits | (1,277) | 0.2 | |||||||||
| Effective income tax rate | $ | 156,881 | (28.4) | % | |||||||
(a)State taxes in Louisiana and Pennsylvania made up the majority (greater than 50%) of the tax effect in this category.
The reconciliation of the U.S. federal statutory rate to the effective income tax rate for the years ended December 31, 2024 and 2023 is as follows:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Federal statutory rate | 21.0 | % | 21.0 | % | |||||||
| State taxes, net of federal tax effect | — | (2.8) | |||||||||
Change in valuation allowance(a) | (26.0) | 98.8 | |||||||||
Impact of foreign earnings, net(b) | 3.3 | 7.7 | |||||||||
| Global intangible low tax inclusion | — | 4.2 | |||||||||
| Section 162(m) limitation | (0.3) | 4.4 | |||||||||
| Subpart F income | (0.3) | (1.9) | |||||||||
| Stock-based compensation | — | (3.9) | |||||||||
| Depletion | 0.3 | (2.4) | |||||||||
| U.S. federal return to provision | 0.1 | (6.1) | |||||||||
Change in unrecognized tax benefits(c) | (2.1) | 39.1 | |||||||||
| Legal accrual | — | 18.6 | |||||||||
| Other, net | (0.9) | (2.3) | |||||||||
| Effective income tax rate | (4.9) | % | 174.4 | % | |||||||
(a)Our statutory rate is decreased by our share of the income of JBC, a Free Zones company under the laws of the Hashemite Kingdom of Jordan. The applicable provisions of the Jordanian law, and applicable regulations thereunder, do not have a termination provision and the exemption is indefinite. As a Free Zones company, JBC is not subject to income taxes on the profits of products exported from Jordan, and currently, substantially all of the profits are from exports. This resulted in a rate benefit of 1.2%, and 20.1% for the years ended December 31, 2024 and 2023, respectively.
(b)Due to the Company being in a three-year cumulative loss position in China as of December 31, 2023, and Australia as of December 31, 2024, the year ended December 31, 2024 includes a valuation allowance of $271.0 million on current year losses in certain Chinese entities and the establishment of a valuation of $254.9 million on current year losses in the Company’s Australian entities. In addition, the year ended December 31, 2024 includes benefits of $70.1 million due to the release of a foreign valuation allowance due to changes in expected profitability.
(c) The year ended December 31, 2024 includes a $37.0 million expense recorded for a current year tax reserve related to an uncertain tax position in Chile.
Following the adoption and prospective application of ASU 2023-09, income taxes paid (net of refunds) are composed of the following (in thousands):
| Year Ended | |||||
| December 31, 2025 | |||||
| Federal income taxes paid (net of refunds) | $ | 23,459 | |||
State income taxes paid (net of refunds)(a) | (1,645) | ||||
| Foreign | |||||
| Australia | (33,377) | ||||
| Belgium | (10,627) | ||||
| Canada | 7,762 | ||||
| Chile | 113,485 | ||||
| China | 5,784 | ||||
| Germany | 13,825 | ||||
| Japan | 12,427 | ||||
| Netherlands | 3,712 | ||||
| Taiwan | 10,195 | ||||
| Other | 7,482 | ||||
| Total foreign income taxes paid (net of refunds) | 130,668 | ||||
| Total income taxes paid (net of refunds) | $ | 152,482 | |||
(a)Income taxes paid to state jurisdictions are individually immaterial.
Deferred income tax assets and liabilities recorded on the consolidated balance sheets as of December 31, 2025 and 2024 consist of the following (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accrued employee benefits | $ | 34,045 | $ | 32,993 | |||||||
| Operating loss carryovers | 2,338,465 | 1,841,399 | |||||||||
| Pensions | 17,360 | 17,148 | |||||||||
| Inventory reserves | 12,221 | 27,974 | |||||||||
| Tax credit carryovers | 15,333 | 11,228 | |||||||||
| Outside basis difference | 83,646 | — | |||||||||
| Capitalized research and development | 28,361 | 41,938 | |||||||||
| Lease liability | 51,735 | 53,968 | |||||||||
| Other | 24,818 | 62,406 | |||||||||
| Gross deferred tax assets | 2,605,984 | 2,089,054 | |||||||||
| Valuation allowance | (2,107,936) | (1,736,456) | |||||||||
| Deferred tax assets | 498,048 | 352,598 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation | (609,494) | (456,231) | |||||||||
| Intangibles | (41,757) | (49,676) | |||||||||
| Right of use asset | (47,414) | (48,951) | |||||||||
| Outside basis difference | — | (51,971) | |||||||||
| Other | (150,116) | (50,190) | |||||||||
| Deferred tax liabilities | (848,781) | (657,019) | |||||||||
| Net deferred tax liabilities | $ | (350,733) | $ | (304,421) | |||||||
| Classification in the consolidated balance sheets: | |||||||||||
| Noncurrent deferred tax assets | $ | 17,542 | $ | 53,608 | |||||||
| Noncurrent deferred tax liabilities | (368,275) | (358,029) | |||||||||
| Net deferred tax liabilities | $ | (350,733) | $ | (304,421) | |||||||
Changes in the balance of our deferred tax asset valuation allowance are as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at January 1 | $ | (1,736,456) | $ | (1,349,924) | $ | (1,087,505) | |||||||||||
| Additions | (394,829) | (519,169) | (262,469) | ||||||||||||||
| Deductions | 20,092 | 132,637 | 50 | ||||||||||||||
| Reclass to assets held for sale | 3,257 | — | — | ||||||||||||||
| Balance at December 31 | $ | (2,107,936) | $ | (1,736,456) | $ | (1,349,924) | |||||||||||
At December 31, 2025, the Company had approximately $15.3 million of domestic credits available to offset future payments of income taxes, expiring in varying amounts between 2026 and 2046. The Company has established full valuation allowances for those domestic credits since it believes that it is more likely than not that the related deferred tax assets will not be realized.
At December 31, 2025, the Company has, on a pre-tax basis, domestic federal and state net operating losses of $1.3 billion, which have pre-tax valuation allowances of $1.3 billion established. $297.2 million of these domestic net operating losses expire between 2026 and 2042 and $1.0 billion have no expiration date. In addition, the Company has, on a pre-tax basis, $8.6 billion of foreign net operating losses, which have pre-tax valuation allowances for $8.5 billion established. $636.5 million of these foreign net operating losses expire in 2028, $1.3 billion expire in 2029, $20.8 million expire in 2030, $2.9 billion expire in 2035, $229.3 million expire in 2036, $21.8 million expire in 2037, $752.6 million expire in 2042 and $2.6 billion have an indefinite life. The Company has established valuation allowances for these deferred tax assets since it believes that it is
more likely than not that the related deferred tax assets will not be realized. For the same reason, the Company established pre-tax valuation allowances of $555.7 million for federal, state and foreign deferred tax assets unrelated to net operating losses. The realization of the deferred tax assets is dependent on the generation of sufficient taxable income in the appropriate tax jurisdictions. Although realization is not assured, the Company believes it is more likely than not that the remaining deferred tax assets will be realized. However, the amount considered realizable could be reduced if estimates of future taxable income change.
The TCJA imposed a mandatory transition tax on accumulated foreign earnings and generally eliminated U.S. taxes on foreign subsidiary distribution with the exception of foreign withholding taxes and other foreign local tax. The Company generally does not provide for taxes related to its undistributed earnings its foreign subsidiaries and joint ventures because such earnings either would not be taxable when remitted or they are considered to be indefinitely reinvested. If in the foreseeable future, the Company can no longer demonstrate that these earnings are indefinitely reinvested, a deferred tax liability will be recognized. A determination of the amount of the unrecognized deferred tax liability related to these undistributed earnings is not practicable due to the complexity and variety of assumptions necessary based on the manner in which the undistributed earnings would be repatriated.
Liabilities related to uncertain tax positions were $259.2 million and $259.6 million at December 31, 2025 and 2024, respectively, inclusive of interest and penalties of $65.4 million and $71.0 million at December 31, 2025 and 2024, respectively, and are reported in Other noncurrent liabilities as provided in Note 14, “Other Noncurrent Liabilities.” These liabilities at December 31, 2025 and 2024 were reduced by $75.8 million and $74.8 million, respectively, for offsetting benefits from the corresponding effects of potential transfer pricing adjustments, state and local income taxes, and rate arbitrage related to foreign structure. These offsetting benefits are recorded in Other assets as provided in Note 9, “Other Assets.” The resulting net liability of $118.0 million, excluding interest and penalties, as of December 31, 2025 would favorably affect earnings if recognized and released, as would the net liability of $113.8 million, excluding interest and penalties, have as of December 31, 2024.
The liabilities related to uncertain tax positions, exclusive of interest, were $193.8 million and $188.8 million at December 31, 2025 and 2024, respectively. The following is a reconciliation of our total gross liability related to uncertain tax positions for 2025, 2024 and 2023 (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at January 1 | $ | 188,826 | $ | 178,785 | $ | 72,162 | |||||||||||
| Additions for tax positions related to prior years | — | 31 | 6,216 | ||||||||||||||
| Additions for tax positions related to current year | 5,653 | 10,989 | 101,179 | ||||||||||||||
| Lapses in statutes of limitations/settlements | (547) | (1,038) | (770) | ||||||||||||||
| Foreign currency translation adjustment | (132) | 59 | (2) | ||||||||||||||
| Balance at December 31 | $ | 193,800 | $ | 188,826 | $ | 178,785 | |||||||||||
The Company is subject to income taxes in the U.S. and numerous foreign jurisdictions. Due to the statute of limitations, the Company is no longer subject to U.S. federal income tax audits by the Internal Revenue Service (“IRS”) for years prior to 2022. Due to the statute of limitations, the Company is also no longer subject to U.S. state income tax audits prior to 2019.
With respect to jurisdictions outside the U.S., several audits are in process. The Company has audits ongoing for the years 2017 through 2024 related to Australia, Belgium, Canada, Chile and Germany, some of which are for entities that have since been divested.
While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could be greater than our accrued position. Accordingly, additional provisions on federal and foreign tax-related matters could be recorded in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 11, 2026 | Showing above |
| 2024 | Feb 12, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 15, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 29, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.