CENTURY ALUMINUM COCENX
CENTURY ALUMINUM CO Income Taxes Disclosure
16. Income Taxes
In 2025, the Company adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on a prospective basis. This guidance requires disaggregated information about the effective tax rate reconciliation, additional disaggregated data on income taxes paid by jurisdiction, and certain other amendments to improve the effectiveness of income tax disclosures. The adoption did not impact the Company’s consolidated financial position, results of operations, or cash flows but enhanced the income tax footnote disclosures for the year ended December 31, 2025.
The components of pre-tax book income (loss) consist of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. | $ | 167.4 | $ | 335.5 | $ | 78.0 | |||||||||||
| Foreign | (164.7) | (25.7) | (149.1) | ||||||||||||||
| Total | $ | 2.7 | $ | 309.8 | $ | (71.1) | |||||||||||
Significant components of income tax expense consist of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| U.S. federal current expense (benefit) | $ | (0.2) | $ | — | $ | 0.5 | |||||||||||
| State current expense (benefit) | 0.4 | — | — | ||||||||||||||
| Foreign current expense (benefit) | 0.4 | 4.9 | 15.8 | ||||||||||||||
| Total current expense (benefit) | 0.6 | 4.9 | 16.3 | ||||||||||||||
| Deferred: | |||||||||||||||||
| U.S. federal deferred benefit | — | — | (0.3) | ||||||||||||||
| State deferred benefit | — | — | (0.1) | ||||||||||||||
| Foreign deferred tax (benefit) expense | (13.7) | (1.7) | (30.5) | ||||||||||||||
| Total deferred (benefit) expense | (13.7) | (1.7) | (30.9) | ||||||||||||||
| Total income tax (benefit) expense | $ | (13.1) | $ | 3.2 | $ | (14.6) | |||||||||||
A reconciliation of the statutory U.S. Federal income tax rate to the effective income tax rate on income (loss) is as follows:
| Year Ended December 31, | ||||||||||||||
| 2025 | ||||||||||||||
| Statutory U.S. federal income tax rate | $ | 0.6 | 21.0 | % | ||||||||||
State income taxes, net of related federal income tax benefit(1) | 0.3 | 10.5 | ||||||||||||
| Foreign tax effects | ||||||||||||||
| Iceland | ||||||||||||||
| Valuation allowance | (4.5) | (165.0) | ||||||||||||
| Net operating loss expiration and remeasurement | 4.5 | 163.8 | ||||||||||||
| Nondeductible interest | 8.5 | 314.0 | ||||||||||||
| Nondeductible items | 2.4 | 88.5 | ||||||||||||
| Fixed asset remeasurement | 0.6 | 23.7 | ||||||||||||
| Other | 1.0 | 35.7 | ||||||||||||
| Netherlands | ||||||||||||||
| Nontaxable items | (2.4) | (88.5) | ||||||||||||
| Other | (0.3) | (12.0) | ||||||||||||
| Jamaica | ||||||||||||||
| Minority interest | 5.5 | 200.7 | ||||||||||||
| Valuation allowance | 5.2 | 189.9 | ||||||||||||
| Nondeductible items | 3.6 | 131.0 | ||||||||||||
| Federal statutory rate difference between Jamaica and the United States | (1.1) | (41.5) | ||||||||||||
| Effect of cross border tax laws | (0.1) | (4.5) | ||||||||||||
| Effect of changes in tax laws or rates enacted in the period | — | — | ||||||||||||
| Changes in valuation allowances | (11.7) | (429.9) | ||||||||||||
| Nontaxable or nondeductible Items | ||||||||||||||
| Nontaxable advanced manufacturing production credit income | (18.6) | (683.5) | ||||||||||||
| Executive compensation | 6.6 | 242.4 | ||||||||||||
| Stock compensation excess tax benefits | (4.3) | (156.5) | ||||||||||||
| Nontaxable interest | (8.8) | (322.8) | ||||||||||||
| Changes in unrecognized tax benefits | 0.1 | 2.7 | ||||||||||||
| Other adjustments | (0.2) | (2.4) | ||||||||||||
| Effective income tax rates | $ | (13.1) | (482.7) | % | ||||||||||
(1)State taxes in Tennessee and Kentucky comprise the majority (greater than 50 percent) of the tax effect in this category.
The effective tax rate for the year ending December 31, 2025 was (482.7)% compared to the statutory US tax rate of 21%. This lower effective rate is primarily due to the non-taxable benefit of the Advanced Manufacturing Production Credit under Section 45X, which is discussed below and favorable changes in the current year regarding our US valuation allowance.
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Federal Statutory Rate | 21.0 | % | 21.0 | % | |||||||
| Permanent differences | 2.0 | (0.2) | |||||||||
| State taxes, net of Federal benefit | — | (0.1) | |||||||||
| Rate change | (0.5) | (0.3) | |||||||||
| Foreign earnings taxed at different rates than U.S. | — | 1.9 | |||||||||
| Valuation allowance | (11.6) | 3.4 | |||||||||
| Foreign dividends and inclusions | 0.5 | (12.0) | |||||||||
| Net operating loss expiration and remeasurement | 3.0 | (7.5) | |||||||||
| Filing differences | 9.2 | 0.6 | |||||||||
| Changes in uncertain tax reserves | 0.2 | (1.2) | |||||||||
| Advanced Manufacturing Production Credit | (6.3) | 17.5 | |||||||||
Bargain Purchase gain | (16.7) | — | |||||||||
| Other | 0.2 | (2.6) | |||||||||
| Effective tax rate | 1.0 | % | 20.5 | % | |||||||
The following table presents the amounts paid for income taxes, net of refunds:
| Year Ended December 31, 2025 | ||||||||
| Federal | $ | — | ||||||
| State | 0.5 | |||||||
| Foreign | ||||||||
| Iceland | 2.3 | |||||||
| Netherlands | 2.0 | |||||||
| Total | $ | 4.8 | ||||||
Section 45X of the Inflation Reduction Act of 2022 ("IRA") contains a production tax credit equal to 10% of certain eligible production costs, including, without limitation, labor, energy, depreciation and amortization and overhead expenses. On October 24, 2024, the U.S. Department of the Treasury and the Internal Revenue Service issued final regulations on the production tax credit requirements under Internal Revenue Code Section 45X (the "IRA Regulations"). The IRA Regulations provide guidance on rules that taxpayers must satisfy to qualify for the IRA Section 45X tax credit. For the year ended December 31, 2025 and December 31, 2024, we recognized $89.1 million and $89.7 million as a reduction in Cost of goods sold, and $3.8 million and $2.9 million as a reduction in selling, general and administrative expenses, respectively, within the Consolidated Statements of Operations.
In July 2025, the One Big Beautiful Bill Act (the "Act") became law. The Act removed the exemption for critical minerals related to the phase out of the advanced manufacturing production tax credit under Internal Revenue Code Section 45X of the Inflation Reduction Act of 2022 and final regulations issued in October of 2024. Under the Act, beginning in 2031, the amount of the tax credit will be reduced by 25% each year and reduced to 0% in 2034. Additionally, the Act made changes to, but not limited to, permanently extending bonus depreciation that permits full expensing of qualified property, and changes to limitations on the deductibility of interest expense. The Act did not have a material impact on our financial results for the year ending December 31, 2025. We will continue to evaluate the effects of the Act on our results as further guidance is issued.
The Company’s accounting policy with respect to releasing income tax effects from accumulated other comprehensive income is to apply a security by security approach whereby the tax effects are measured based on the change in the unrealized gains or losses reflected in Other comprehensive income (loss).
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The significant components of our deferred tax assets and liabilities as of December 31 are as follows:
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accrued postretirement benefit cost | $ | 18.2 | $ | 30.1 | |||||||
| Net operating losses | 465.0 | 473.3 | |||||||||
| Disallowed interest expense | 31.9 | 37.1 | |||||||||
| Derivative and hedging contracts | 11.2 | 0.1 | |||||||||
| Other | 28.6 | 29.4 | |||||||||
| Total deferred tax assets | 554.9 | 570.0 | |||||||||
| Valuation allowance | (471.0) | (504.4) | |||||||||
| Net deferred tax assets | $ | 83.9 | $ | 65.6 | |||||||
| Deferred tax liabilities: | |||||||||||
| Fixed asset book over tax basis | (119.3) | (115.9) | |||||||||
| Foreign basis differences | 0.1 | 0.6 | |||||||||
| Other | (22.0) | (21.4) | |||||||||
| Total deferred tax liabilities | (141.2) | (136.7) | |||||||||
| Net deferred tax liability | $ | (57.3) | $ | (71.1) | |||||||
We regularly assess the likelihood that deferred tax assets will be recovered from future taxable income. To the extent we believe that it is more likely than not that a deferred tax asset will not be realized, a valuation allowance is established. When a valuation allowance is established or increased, an income tax charge is included in the Consolidated Statements of Operations and net deferred tax assets are adjusted accordingly. Future changes in tax laws, statutory tax rates and taxable income levels could result in actual realization of the deferred tax assets being materially different from the amounts provided for in the consolidated financial statements. If the actual recovery amount of the deferred tax asset is less than anticipated, we would be required to write-off the remaining deferred tax asset and increase the tax provision.
We have a valuation allowance of $471.0 million recorded against our net U.S. and Jamaican deferred tax assets, and a portion of our Icelandic deferred tax assets as of December 31, 2025. The Company is subject to the provisions of ASC 740-10, Income Taxes, which requires that the effect on deferred tax assets and liabilities of a change in tax rates be recognized in the period the tax rate change was enacted.
The changes in the valuation allowance are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance, valuation allowance | $ | 504.4 | $ | 537.6 | $ | 487.9 | |||||||||||
| Expiration of net operating losses | (5.2) | (6.1) | (7.2) | ||||||||||||||
| Other change in valuation allowance | (28.2) | (27.1) | 56.9 | ||||||||||||||
| Ending balance, valuation allowance | $ | 471.0 | $ | 504.4 | $ | 537.6 | |||||||||||
The significant components of our NOLs are as follows:
| 2025 | 2024 | ||||||||||
Federal (1) | $ | 1,544.9 | $ | 1,571.2 | |||||||
State (2) | 1,168.1 | 1,163.5 | |||||||||
Foreign (3)(4) | 377.7 | 342.2 | |||||||||
(1)US federal NOLs begin to expire in 2028.
(2)US state NOLs begin to expire in 2027.
(3)NOLs in Iceland expire in 2026 and 2035.
(4)NOLs in Jamaica do not expire.
Our ability to utilize our deferred tax assets to offset future federal taxable income may be significantly limited if we experience an "ownership change" as defined in the Code. In general, an ownership change would occur if our "five-percent shareholders," as defined under the Code, collectively increase their ownership in us by more than 50 percentage points over a rolling three-year period. Future transactions in our stock that may not be in our control may cause us to experience such an ownership change and thus limit our ability to utilize net operating losses, tax credits and other tax assets to offset future taxable income.
A reconciliation of the beginning and ending amounts of gross unrecognized tax benefits (excluding interest) is as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance as of January 1, | $ | 3.5 | $ | 3.0 | $ | 2.2 | |||||||||||
| Additions based on tax positions related to the current year | 0.1 | 0.6 | 1.3 | ||||||||||||||
| Decreases due to lapse of applicable statute of limitations | — | (0.1) | (0.5) | ||||||||||||||
| Balance as of December 31, | $ | 3.6 | $ | 3.5 | $ | 3.0 | |||||||||||
As of December 31, 2025, the Company’s gross unrecognized tax benefits totaled $3.6 million. Included in the above balances are tax positions relating to temporary differences where there is uncertainty about the timing of tax return inclusion, but not that the amounts will ultimately be tax deductible. Because of the impact of deferred tax accounting, other than interest and penalties, the timing would not impact the annual effective tax rate but could accelerate the payment of cash to the taxing authority to an earlier period. It is our policy to recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.
The Company considers the undistributed earnings of its foreign subsidiaries and joint ventures to be permanently reinvested and has not provided for U.S. federal income taxes on these unremitted earnings. No deferred tax liability has been recorded for the related outside basis differences in these entities. Determination of the amount of any unrecognized deferred tax liability on this outside basis difference is not practicable as such determination involves material uncertainties about the potential extent and timing of any reversals.
Century and its subsidiaries file income tax returns in the U.S. federal jurisdiction, various state and local jurisdictions, and several foreign jurisdictions.
Our federal income tax returns have been reviewed by the IRS through 2010. However, we have NOLs beginning in 2008 that are available for carryforward to future years. Under U.S. tax law, NOLs may be adjusted by the IRS until the statute of limitations expires for the year in which the NOL is used. Accordingly, our 2008 and later NOLs may be reviewed until they are used or expire.
We are subject to examination by tax authorities according to statutory periods defined in each jurisdiction. The earliest statutory period open is beginning in 2020.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 3, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Mar 15, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Mar 4, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 14, 2017 | |
| 2015 | Mar 7, 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.