Clearwater Paper CorpCLW
Clearwater Paper Corp Income Taxes Disclosure
INCOME TAXES
Income Tax Provision (Benefit)
The components of income tax provision (benefit) from continuing operations is comprised of the following:
| For The Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 13.8 | $ | (73.9) | $ | 17.4 | |||||||||||
| State | 0.3 | (1.1) | 3.0 | ||||||||||||||
| Total current | 14.1 | (75.0) | 20.5 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | (20.9) | 50.9 | (3.7) | ||||||||||||||
| State | (0.3) | (3.0) | 0.1 | ||||||||||||||
| Total deferred | (21.2) | 47.9 | (3.6) | ||||||||||||||
| Income tax provision (benefit) | $ | (7.1) | $ | (27.1) | $ | 16.9 | |||||||||||
We adopted ASU 2023-09 "Income Taxes (Topic 740): "Improvements to Income Tax Disclosures" on a prospective basis beginning with the year ended December 31, 2025. The following table presents the required disclosures pursuant to ASU 2023-09 and reconciles the U.S. federal statutory amounts and rate to our actual effective amount and rate on income from continuing operations for the year ended December 31, 2025.
| For The Year Ended December 31, 2025 | |||||||||||
| $ | % | ||||||||||
| Tax at the statutory rate | $ | (12.6) | 21.0 | % | |||||||
| State and local taxes, net of federal income tax impact | 1.1 | (1.8) | % | ||||||||
| Tax credits | |||||||||||
| Research credit | (4.2) | 7.0 | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Goodwill impairment | 7.4 | (12.2) | % | ||||||||
| Other items | 1.3 | (2.1) | % | ||||||||
| Change in unrecognized tax benefit | 1.7 | (2.8) | % | ||||||||
| Other, net | |||||||||||
| Return to provision | (0.7) | 1.2 | % | ||||||||
| Deferred tax adjustments | (1.2) | 2.0 | % | ||||||||
| Other, net | 0.1 | (0.2) | % | ||||||||
| Income tax benefit | $ | (7.1) | 11.8 | % | |||||||
The following table presents the required disclosures prior to the adoptions of ASU 2023-09 and reconciles the U.S. federal statutory amounts and rate to our actual effective amount and rate on income from continuing operations for the years ended December 31, 2024 and 2023.
| Years Ended December 31, | |||||||||||||||||||||||
| 2024 | % | 2023 | % | ||||||||||||||||||||
| Tax at the statutory rate | $ | (21.2) | 21.0 | % | $ | 13.8 | 21.0 | % | |||||||||||||||
| State and local taxes, net of federal income tax impact | (4.5) | 4.5 | % | 2.6 | 4.0 | % | |||||||||||||||||
| Adjustment for state deferred tax rate | (0.1) | 0.1 | % | (0.2) | (0.2) | % | |||||||||||||||||
| Federal credits | (3.0) | 3.0 | % | (1.0) | (1.6) | % | |||||||||||||||||
| Uncertain tax positions | 0.1 | (0.1) | % | 2.2 | 3.3 | % | |||||||||||||||||
| Non-deductible expenses | 0.7 | (0.7) | % | 1.3 | 1.9 | % | |||||||||||||||||
Change in valuation allowances1 | 0.4 | (0.4) | % | (0.7) | (1.1) | % | |||||||||||||||||
| Other, net | 0.6 | (0.6) | % | (1.0) | (1.5) | % | |||||||||||||||||
| Income tax provision (benefit) | $ | (27.1) | 26.8 | % | $ | 16.9 | 25.8 | % | |||||||||||||||
Cash Income Taxes
We adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025 and have included the following table as a result of our adoption, which presents income taxes paid (net of refunds received) for the year ended December 31, 2025:
| Federal taxes | $ | 40.2 | ||||||
| State taxes: | ||||||||
| California | 4.7 | |||||||
| Illinois | 3.3 | |||||||
| All Other | 5.6 | |||||||
| Total cash taxes paid | $ | 53.8 | ||||||
The amount of cash income taxes paid by us during the years ended December 31, 2024 and 2023 was $19.0 million and $16.6 million.
Deferred Taxes
The tax effects of significant temporary differences creating deferred tax assets and liabilities at December 31 were:
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Employee benefits | $ | 2.6 | $ | 2.2 | |||||||
| Postretirement employee benefits | 10.8 | 11.4 | |||||||||
| Incentive compensation | 1.8 | 2.6 | |||||||||
| Inventories | 1.9 | 5.2 | |||||||||
| Pensions | 0.1 | 0.9 | |||||||||
| Federal and state credit carryforwards | 11.6 | 9.7 | |||||||||
| Federal and state net operating losses | 21.6 | 1.0 | |||||||||
| Operating leases | 10.9 | 6.9 | |||||||||
| Intangible assets | 5.5 | 1.7 | |||||||||
| Deferred interest expense | 9.1 | 0.3 | |||||||||
| Capitalized research credits | 13.8 | 10.7 | |||||||||
| Other | 4.3 | 3.8 | |||||||||
| Total deferred tax assets | 93.9 | 56.2 | |||||||||
| Valuation allowance | (8.8) | (8.0) | |||||||||
| Deferred tax assets, net of valuation allowance | 85.1 | 48.2 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property, plant and equipment, net | (137.2) | (124.6) | |||||||||
| Operating leases | (10.3) | (6.8) | |||||||||
| Other | (4.3) | (4.7) | |||||||||
| Total deferred tax liabilities | (151.9) | (136.2) | |||||||||
| Net deferred tax liabilities | $ | (66.8) | $ | (88.0) | |||||||
| Net deferred tax assets (liabilities) consist of: | |||||||||||
Non-current deferred tax assets1 | $ | 1.4 | $ | 1.7 | |||||||
| Non-current deferred tax liabilities | (68.2) | (89.7) | |||||||||
| Net non-current deferred tax liabilities | (66.8) | (88.0) | |||||||||
| Net deferred tax liabilities | $ | (66.8) | $ | (88.0) | |||||||
1Included in "Other assets, net" on our accompanying December 31, 2025 and 2024 Consolidated Balance Sheets.
We are required to evaluate the realizability of our deferred tax assets in U.S. jurisdictions on an ongoing basis to determine whether there is a need for a valuation allowance with respect to such deferred tax assets. As of December 31, 2025, we maintained a valuation allowance of $8.8 million, primarily related to Idaho deferred tax assets, due to uncertainty about the future realization of these assets. We believe that future reversals of taxable temporary differences, and our forecast of continued earnings support our decision to not record a valuation allowance on other deferred tax assets.
Uncertain Tax Positions
The following table provides a roll forward of our unrecognized tax benefits.
| For The Years Ended December 31, | |||||||||||
| 2025 | 2024 | 2023 | |||||||||
| Beginning balance | $ | 2.4 | $ | 80.9 | $ | 70.4 | |||||
| Increases: | |||||||||||
| Tax position taken in current year | 1.1 | 0.9 | 0.4 | ||||||||
| Tax position taken in prior years | 0.6 | — | 10.4 | ||||||||
| Decreases: | |||||||||||
| Settlements during the year | — | — | (0.3) | ||||||||
| Tax position taken in prior years | — | (78.4) | — | ||||||||
| Lapse of statutes in current year | (0.2) | (1.0) | — | ||||||||
| Ending balance | $ | 3.9 | $ | 2.4 | $ | 80.9 | |||||
During 2022, we ceased operations in our wholly owned subsidiary, Cellu Tissue Holdings, Inc. and recorded a $68.4 million reserve for an estimated uncertain tax position relating to a worthless stock deduction for our investment which represented a full reserve of the tax effects of that position. During 2023, an additional $10.4 million was recorded as a reserve for uncertain tax positions relating to state income tax effects of the worthless stock deduction. During the year ended December 31, 2023, we filed our U.S. 2022 tax return reflecting this position and requested a tax refund which was generated primarily due to the worthless stock deduction. Prior to December 31, 2023, we received this refund. In 2023, we requested a ruling from the IRS in connection with the worthless stock deduction.
Due to the sale of our tissue operations during 2024, we have determined that it is more likely than not that we will sustain the value of the worthless stock deduction either as recorded or as a capital gain. Based upon this conclusion, we have removed the uncertain tax position and reversed any associated interest with this position. In 2025, based on updated conversations with the IRS we determined it was more likely than not the position would not be sustained and therefore recorded an RTP in discontinued operations to reverse the position previously taken.
On July 4, 2025, the One Big Beautiful Bill Act (Act) was signed into law. The Act makes permanent key elements of the Tax Cuts and Jobs Act, including 100 percent bonus depreciation, domestic research cost expensing and increases the AMIC to 35 percent from 25 percent. The Act includes multiple effective dates, with certain provisions effective in 2025 and others phased in through 2027. The Act had no material impact on our results of operations for the year ended December 31, 2025. We continue to evaluate the impact of the Act's provisions that will take effect in future years.
We have operations in many states within the U.S. and are subject, at times, to tax audits in these jurisdictions. During 2023, we effectively settled federal tax years 2015 through 2019, however such years remain subject to exam until the U.S. federal exam is formally closed. With a few exceptions, we are no longer subject to state and local tax examination for years prior to 2018.
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.