CLEAN HARBORS INCCLH

CLEAN HARBORS INC Income Taxes Disclosure

10-KFiled Feb 18, 20265 min read
INCOME TAXES
The domestic and foreign components of income before provision for income taxes were as follows (in thousands):
 For the years ended December 31,
 202520242023
Domestic$441,591 $444,118 $401,912 
Foreign86,376 89,325 101,367 
Total$527,967 $533,443 $503,279 
The provision for income taxes consisted of the following (in thousands):
 For the years ended December 31,
 202520242023
Current:   
Federal$66,183 $68,321 $64,164 
State24,264 27,649 25,496 
Foreign20,783 16,737 23,078 
111,230 112,707 112,738 
Deferred   
Federal22,556 20,669 18,251 
State3,771 (4,415)(9,049)
Foreign(564)2,183 3,483 
25,763 18,437 12,685 
Provision for income taxes$136,993 $131,144 $125,423 
The Company's effective income tax rate varied from the amount computed using the statutory federal income tax rate of 21% as follows (in thousands, except percentages):
 For the years ended December 31,
 202520242023
AmountPercentAmountPercentAmountPercent
Adjusted pre-tax book income$527,967 $533,443 $503,279 
U.S. federal statutory tax rate110,873 21.0 %112,023 21.0 %105,689 21.0 %
State and local income taxes, net of federal income tax effect(1)
22,147 4.2 18,480 3.5 12,948 2.6 
Foreign tax effects
Canada
Statutory tax rate difference between Canada and the United States(4,600)(0.9)(4,876)(0.9)(5,630)(1.1)
Provincial income taxes6,673 1.3 7,391 1.4 9,786 1.9 
Divestiture of business(5,693)(1.1)— — — — 
Other adjustments4,701 0.9 (3,086)(0.6)1,177 0.2 
Other foreign jurisdictions661 0.1 446 0.1 (160)— 
Total foreign tax effects1,742 0.3 (125)— 5,173 1.0 
Effect of changes in tax laws or rates enacted in the current period— — — — — — 
Effect of cross-border tax laws— — — — — — 
Tax credits(1,000)(0.2)3,099 0.6 2,144 0.4 
Changes in valuation allowances(16)— (4,075)(0.8)(3,245)(0.6)
Nontaxable and nondeductible items156 — (7)— (940)(0.2)
Changes in unrecognized tax benefits— — — — — — 
Other adjustments3,091 0.6 1,749 0.3 3,654 0.7 
Effective tax rate$136,993 25.9 %$131,144 24.6 %$125,423 24.9 %
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(1)In 2025 state taxes in California, Texas, Arkansas, Illinois, Louisiana, Massachusetts, New York and New Jersey comprise the majority of the state taxes, net of federal effect category. In 2024 and 2023 state taxes in California, Texas, Massachusetts, Illinois, Louisiana and New York comprise the majority of the state taxes, net of federal effect category.
On July 4, 2025, the One Big Beautiful Bill Act was signed into law. The business tax provisions in the legislation did not have a material impact on the Company’s effective tax rate. Certain provisions, such as bonus depreciation, had a beneficial impact to cash taxes.
Income taxes paid by jurisdiction, net of refunds received, consisted of the following (in thousands):
 For the years ended December 31,
 202520242023
Federal$64,802 $83,000 $54,670 
State30,407 30,958 27,664 
Total Domestic95,209 113,958 82,334 
Foreign
Canada19,395 13,471 47,186 
Other Foreign Jurisdictions3,300 3,177 2,794 
Total Foreign22,695 16,648 49,980 
Total$117,904 $130,606 $132,314 
No individual jurisdictions within the “State” or “Other Foreign Jurisdictions” captions above were equal to or greater than 5 percent of total income taxes paid, net of refunds received.
The components of the total net deferred tax assets and liabilities as of December 31, 2025 and 2024 were as follows (in thousands):
20252024
Deferred tax assets:  
Provision for doubtful accounts$9,626 $14,808 
Closure, post-closure and remedial liabilities29,770 32,189 
Operating lease liabilities63,020 60,929 
Accrued expenses15,631 14,749 
Accrued compensation and benefits17,483 16,876 
Net operating loss carryforwards(1)
57,298 48,331 
Excess business interest(2)
13,116 22,078 
Tax credit carryforwards
2,507 2,619 
Stock-based compensation5,822 4,877 
Other2,556 2,565 
Total deferred tax assets216,829 220,021 
Deferred tax liabilities:  
Property, plant and equipment(316,192)(311,546)
Operating lease right-of-use assets(61,948)(59,999)
Interest rate swap asset(3,674)(8,748)
Permits and other intangible assets(165,672)(158,905)
Prepaid expenses(12,640)(10,881)
Total deferred tax liabilities(560,126)(550,079)
Total net deferred tax liability before valuation allowance(343,297)(330,058)
Less valuation allowance(34,418)(27,232)
Net deferred tax liabilities$(377,715)$(357,290)
___________________________________
(1)As of December 31, 2025, the net operating loss carryforwards included (i) gross state net operating loss carryforwards of $290.4 million which will begin to expire in 2026, (ii) gross federal net operating loss carryforwards of $75.7 million which will begin to expire in 2026 and (iii) gross foreign net operating loss carryforwards of $69.3 million which will begin to expire in 2026.
(2)The Company previously recognized U.S. federal income taxes related to the operations in Canada and has not accrued for any remaining undistributed foreign earnings. These amounts continue to be indefinitely reinvested. The amount of tax associated with those unrepatriated earnings is not expected to be material.
A valuation allowance is required to be established when, based on an evaluation of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The components of the total valuation allowance as of December 31, 2025 and 2024 were as follows (in thousands):
20252024
Allowance related to:  
Foreign tax credits$346 $346 
Federal net operating losses3,768 3,783 
State net operating loss carryforwards4,728 4,734 
Foreign net operating loss carryforwards16,072 14,543 
Deferred tax assets of a Canadian subsidiary251 3,521 
Realized and unrealized capital losses9,253 305 
Total valuation allowance$34,418 $27,232 
The Company files U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations before 2017. The Company has ongoing U.S., state and local jurisdictional audits, as well as Canadian federal and provincial audits, all of which the Company believes will not result in material liabilities. The Company has not identified any material uncertain tax positions in the periods presented.
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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.

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