Calumet, Inc. /DE Income Taxes Disclosure

15. Income Taxes

Calumet, Inc. is a corporation and is subject to U.S. federal and state income taxes. Income taxes are accounted for under the asset and liability method. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits of utilizing net operating loss and tax credit carryforwards, using enacted tax rates in effect for the taxing jurisdiction in which the Company operates for the year in which those temporary differences are expected to be recovered or settled. The Company recognizes the financial statement effects of a tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination. Net deferred tax assets are then reduced by a valuation allowance if the Company believes it is more likely than not such net deferred tax assets will not be realized. The Company assessed the realizability of the deferred tax assets (“DTAs”) and concluded that a full valuation allowance for the net DTAs is deemed appropriate as the DTAs, except for as described below, is deemed appropriate as the DTAs were not more likely than not to be realized under relevant accounting standards.

On July 10, 2024, the Company completed the Conversion pursuant to which it became the parent holding company of the Partnership. Following the Conversion, the Company’s sole material asset is the partnership interests in the Partnership, which for U.S. federal, state and local income tax purposes passes its net taxable income and related tax credits, if any, through to its partners for inclusion in the partners’ tax returns. The Partnership is also subject to and reports entity level taxes in certain states. The income tax burden on the earnings taxed to the noncontrolling interest holders is not reported by the Company in its consolidated financial statements under U.S. GAAP. As a result, the Company’s effective tax rate differs materially from the statutory rate.

Sale of Transferable Tax Credits

In 2025, the Company sold $93.5 million in transferable non-refundable tax credits. The Company does not expect any material recapture risk associated with the credits sold, and no contingent liabilities have been recorded as of the reporting date.

The components of net income (loss) before income tax expense (benefit) were as follows (in millions):

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The components of the income tax expense (benefit) were as follows (in millions) for the year ended December 31:

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Prior to the Conversion on July 10, 2024, the Partnership was not subject to U.S. federal income tax whereas following the Conversion, the Company is generally subject to U.S. federal income tax as a corporation. The effective tax rate differs from the statutory tax rate primarily due to the benefit of tax credits combined with pre-tax losses, along with valuation allowance that offsets the deferred tax benefit that would otherwise be recorded.  

The table below provides the updated requirements of ASU 2023-09 for the year ended December 31, 2025. See Note 2. Summary of Significant Accounting Policies-New Accounting Pronouncements for additional details on the adoption of ASU 2023-09. The reconciliation between the effective tax rate to the U.S. statutory tax rate is as follows for the year ended December 31:

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As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows for the year ended:

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One Big Beautiful Bill Act

On July 4, 2025, the United States Congress passed budget reconciliation bill H.R. 1 referred to as the One Big Beautiful Bill Act (the "OBBB"). The OBBB contains several changes to corporate taxation.  The Company has assessed the impacts of the OBBB, the provisions that impact us the most are the following:

We have evaluated the effects of the legislation on our financial position, results of operations or liquidity in the future; the effects of OBBB did not have a material impact on our financial position, results of operations and liquidity in 2025.

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Significant components of the Company’s deferred tax assets and liabilities are as follows (in millions) as of December 31:

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Due to the weight of objectively verifiable negative evidence, including its history of losses, the Company’s deferred tax assets have been fully offset by a valuation allowance, outside of its tax credits as noted above. During the year ended December 31, 2025, the Company reassessed the realizability of its deferred tax assets from previously unutilized clean fuel production credits (“CFPCs”). As a result of the successful monetization of a portion of these credits through a third-party sale under Section 6418 of the Internal Revenue Code, the Company obtained sufficient positive evidence to support the realization of certain deferred tax assets that were previously subject to a valuation allowance. Accordingly, the Company reversed the valuation allowance, resulting in a corresponding income tax benefit recognized during the period. The reversal reflects management’s updated assessment that it is more likely than not that the related deferred tax assets will be realized based on the availability of a reliable monetization for the credits and the receipt of proceeds from the sale transactions in 2025.

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As of December 31, 2025, the Company has federal and state net operating loss carryforwards of approximately $670.1 million and $342.3 million, respectively. Federal net operating losses carry forward indefinitely. Of the $342.3 million of state net operating loss carryforwards, $24.0 million carry forward indefinitely. The remaining state net operating loss carryforwards begin to expire in 2034. The Company also has Canada net operating loss carryforwards of approximately $1.4 million. Canada net operating losses have a carryforward period of 20 years and begin expiring in 2040.

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As of December 31, 2025, the Company has credit carryforwards of approximately $12.7 million. The credits begin to expire in 2032 through 2045.

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As a result of the Company’s analysis, management has determined that the Company does not have any uncertain tax positions. The Company believes the income tax filing positions, including previous status as a pass-through entity, would be sustained on audit and do not anticipate any adjustments that would result in a material change to the consolidated balance sheet. As of December 31, 2025 and 2024, no material unrecognized tax benefits were recognized as liabilities in the consolidated balance sheet.

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The Company is subject to taxation in the United States and various state and foreign jurisdictions. The only material jurisdiction in which the Company operates is the United States. The Company’s federal and state tax returns remain subject to examination by taxing authorities for three years.

The following is a supplemental schedule of cash paid for income taxes (in millions), disaggregated in accordance with ASU 2023-09, which was adopted prospectively in 2025 as follows for the year ended:

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Individual jurisdictions equaling 5% or more of the total income taxes paid (net of refunds) for the year ended December 31, 2025 include U.S. Federal at $0.1 million, Texas at $0.3 million, and Kentucky at $0.1 million.