CLEVELAND-CLIFFS INC.CLF
CLEVELAND-CLIFFS INC. Income Taxes Disclosure
NOTE 11 - INCOME TAXES
Income (loss) from continuing operations before income taxes includes the following components:
| Year Ended December 31, | ||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| United States | $ | (1,546) | $ | (901) | $ | 582 | ||||||||||||||
| Foreign | (458) | (49) | (3) | |||||||||||||||||
| Total | $ | (2,004) | $ | (950) | $ | 579 | ||||||||||||||
The components of the income tax expense (benefit) from continuing operations consist of the following:
| Year Ended December 31, | ||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Current provision: | ||||||||||||||||||||
| United States federal | $ | (70) | $ | (38) | $ | 4 | ||||||||||||||
| United States state & local | (5) | (6) | 25 | |||||||||||||||||
| Foreign | — | 3 | 4 | |||||||||||||||||
| (75) | (41) | 33 | ||||||||||||||||||
| Deferred provision (benefit): | ||||||||||||||||||||
| United States federal | (324) | (153) | 94 | |||||||||||||||||
| United States state & local | (58) | (33) | 7 | |||||||||||||||||
| Foreign | (124) | (9) | 10 | |||||||||||||||||
| Total income tax expense (benefit) from continuing operations | $ | (581) | $ | (236) | $ | 144 | ||||||||||||||
Reconciliation of our income tax attributable to continuing operations computed at the U.S. federal statutory rate as required by the newly adopted ASU No. 2023-09 for the year ended December 31, 2025 is as follows:
| (In millions) | 2025 | |||||||||||||
| Tax at U.S. statutory rate | $ | (421) | 21 | % | ||||||||||
Increase (decrease) due to: | ||||||||||||||
State and local income taxes, net of federal income tax1 | (50) | 3 | % | |||||||||||
| Foreign tax effects | ||||||||||||||
| Canada | ||||||||||||||
| Statutory rate difference | (19) | 1 | % | |||||||||||
| Tax credits | (7) | — | % | |||||||||||
| Change in valuation allowance | (3) | — | % | |||||||||||
| Other adjustments | (1) | — | % | |||||||||||
Other foreign jurisdictions | 1 | — | % | |||||||||||
| Non-taxable or nondeductible items | ||||||||||||||
| Depletion | (1) | — | % | |||||||||||
| Changes in unrecognized tax benefits | (70) | 3 | % | |||||||||||
| Other adjustments | ||||||||||||||
| Provision to return | (10) | 1 | % | |||||||||||
| Noncontrolling interest | (10) | 1 | % | |||||||||||
| Other | 10 | (1) | % | |||||||||||
Provision for income tax expense (benefit) and effective income tax rate including discrete items | $ | (581) | 29 | % | ||||||||||
1State taxes in Illinois, Indiana and Michigan made up the majority (greater than 50 percent) of the tax effect in this category. | ||||||||||||||
Reconciliation of our income tax attributable to continuing operations computed at the U.S. federal statutory rate before the adoption of ASU No. 2023-09 for the years ended December 31, 2024 and December 31, 2023 is as follows:
| (In millions) | 2024 | 2023 | ||||||||||||||||||||||||
| Tax at U.S. statutory rate | $ | (199) | 21 | % | $ | 122 | 21 | % | ||||||||||||||||||
| Increase (decrease) due to: | ||||||||||||||||||||||||||
| Percentage depletion in excess of cost depletion | (20) | 2 | (32) | (5) | ||||||||||||||||||||||
| Valuation allowance | — | — | 14 | 2 | ||||||||||||||||||||||
| Unrecognized tax benefits | 7 | — | 7 | 1 | ||||||||||||||||||||||
| State taxes, net | (30) | 3 | 27 | 5 | ||||||||||||||||||||||
| Federal & state provision to return | (4) | — | (20) | (3) | ||||||||||||||||||||||
| Income not subject to tax | (10) | 1 | (11) | (2) | ||||||||||||||||||||||
| Goodwill impairment | — | — | 26 | 4 | ||||||||||||||||||||||
| Other items, net | 20 | (2) | 11 | 2 | ||||||||||||||||||||||
| Provision for income tax expense (benefit) and effective income tax rate including discrete items | $ | (236) | 25 | % | $ | 144 | 25 | % | ||||||||||||||||||
The components of cash payments in excess of refunds received (refunds in excess of payments made) by jurisdiction are as follows:
| Year Ended December 31, | ||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
U.S. Federal | $ | — | ||||||||||||||||||
State | ||||||||||||||||||||
| Illinois | (6) | |||||||||||||||||||
| Michigan | (3) | |||||||||||||||||||
| Alabama | (2) | |||||||||||||||||||
| Ohio | (1) | |||||||||||||||||||
| State total | (12) | |||||||||||||||||||
| Foreign | ||||||||||||||||||||
| Canada | (5) | |||||||||||||||||||
| Other | 1 | |||||||||||||||||||
| Foreign total | (4) | |||||||||||||||||||
| Total refunds in excess of payments made | $ | (16) | ||||||||||||||||||
| Total refunds in excess of payments made (prior to ASU 2023-09) | $ | (30) | $ | (111) | ||||||||||||||||
The components of income taxes for other than continuing operations consisted of the following:
| (In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||
| Pension and OPEB | $ | 51 | $ | 55 | $ | 10 | ||||||||||||||
| Derivative instruments | (11) | (37) | 47 | |||||||||||||||||
| Foreign currency translation | (4) | — | — | |||||||||||||||||
| Total | $ | 36 | $ | 18 | $ | 57 | ||||||||||||||
Significant components of our deferred tax assets and liabilities are as follows:
| (In millions) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Operating loss and other carryforwards | $ | 778 | $ | 589 | |||||||
| Pension and OPEB liabilities | 154 | 129 | |||||||||
| Environmental | 77 | 69 | |||||||||
| Product inventories | 62 | 53 | |||||||||
| State and local | 93 | 36 | |||||||||
| Employee-based compensation | 71 | 71 | |||||||||
| Interest limitation | 201 | 19 | |||||||||
| Lease liabilities | 154 | 87 | |||||||||
| Other liabilities | 107 | 69 | |||||||||
| Total deferred tax assets before valuation allowance | 1,697 | 1,122 | |||||||||
| Deferred tax asset valuation allowance | (394) | (388) | |||||||||
| Net deferred tax assets | 1,303 | 734 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Investment in ventures | (179) | (181) | |||||||||
| Lease assets | (125) | (88) | |||||||||
| Property, plant and equipment and mineral rights | (1,015) | (811) | |||||||||
| Intangible assets | (243) | (441) | |||||||||
| Other assets | (53) | (59) | |||||||||
| Total deferred tax liabilities | (1,615) | (1,580) | |||||||||
| Net deferred tax liabilities | $ | (312) | $ | (846) | |||||||
NOL and interest limitation carryforwards are as follows:
| (In millions) | 2025 | 2024 | |||||||||
Gross domestic (including states) NOL carryforwards1 | $ | 4,827 | $ | 3,549 | |||||||
Gross foreign NOL carryforwards2 | 1,673 | 1,507 | |||||||||
| Gross U.S. interest expense limitation carryforward | 789 | 92 | |||||||||
| Gross Canadian interest expense limitation carryforward | 141 | — | |||||||||
1If unused, Federal and state NOL carryforwards begin to expire in 2034 and 2026, respectively. | |||||||||||
2If unused, foreign NOL carryforwards begin to expire in 2035. | |||||||||||
The changes in the valuation allowance are presented below:
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of year | $ | 388 | $ | 396 | $ | 390 | |||||||||||
| Change in valuation allowance: | |||||||||||||||||
| Income tax (benefit) expense | 6 | (8) | 6 | ||||||||||||||
| Balance at end of year | $ | 394 | $ | 388 | $ | 396 | |||||||||||
As of December 31, 2025 and 2024, we have a valuation allowance recorded of $347 million and $349 million, respectively, related to foreign deferred tax assets, and an additional $47 million and $39 million, respectively, against certain state NOLs, which are expected to expire before utilization.
Our losses in Luxembourg and certain Canadian entities in recent periods represent sufficient negative evidence to require a full valuation allowance against the deferred tax assets in those jurisdictions. We intend to maintain a valuation allowance against the deferred tax assets related to the operating losses in these jurisdictions, unless and until sufficient positive evidence exists to support the realization of such assets.
As of December 31, 2025 and 2024, we had no cumulative undistributed earnings of foreign subsidiaries included in retained earnings. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of earnings.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Unrecognized tax benefits balance as of January 1 | $ | 121 | $ | 76 | $ | 58 | |||||||||||
| Increases for tax positions in current year | 35 | 46 | 18 | ||||||||||||||
| Decrease due to tax positions in prior year | (2) | (1) | — | ||||||||||||||
| Lapses in statutes of limitations | (57) | — | — | ||||||||||||||
| Unrecognized tax benefits balance as of December 31 | $ | 97 | $ | 121 | $ | 76 | |||||||||||
As of December 31, 2025 and 2024, we had unrecognized tax benefits of $97 million and $121 million, respectively. Of these amounts, $16 million and $75 million were included in Other non-current liabilities on the Statements of Consolidated Financial Position. Additionally, $81 million and $46 million were included in Deferred income taxes as of December 31, 2025 and 2024, respectively. If the unrecognized tax benefits were recognized, $16 million would impact the effective tax rate. Interest and penalties related to unrecognized tax benefits are $4 million and $15 million for the years ended December 31, 2025 and 2024, respectively.
Tax years 2022 and forward remain subject to examination for the U.S., and tax years 2021 and forward remain subject to examination for Canada.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 9, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 8, 2024 | |
| 2022 | Feb 14, 2023 | |
| 2021 | Feb 11, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 8, 2019 | |
| 2017 | Feb 14, 2018 | |
| 2016 | Feb 9, 2017 | |
| 2015 | Feb 24, 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.