COMMERCIAL METALS CoCMC
COMMERCIAL METALS Co Income Taxes Disclosure
NOTE 12. INCOME TAX
The components of earnings before income taxes were as follows:
| Year Ended August 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| United States | $ | 61,897 | $ | 631,592 | $ | 1,095,099 | ||||||||||||||
| Foreign | 45,648 | 4,079 | 26,868 | |||||||||||||||||
| Total | $ | 107,545 | $ | 635,671 | $ | 1,121,967 | ||||||||||||||
The income taxes included in the consolidated statements of earnings were as follows:
| Year Ended August 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Current: | ||||||||||||||||||||
| United States | $ | 83,897 | $ | 143,462 | $ | 168,399 | ||||||||||||||
| Foreign | 8,371 | 163 | 6,089 | |||||||||||||||||
| State and local | 20,669 | 18,035 | 32,916 | |||||||||||||||||
| Current taxes | 112,937 | 161,660 | 207,404 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| United States | (76,005) | (8,075) | 46,008 | |||||||||||||||||
| Foreign | 1,126 | (7,684) | (847) | |||||||||||||||||
| State and local | (15,175) | 4,279 | 9,642 | |||||||||||||||||
| Deferred taxes | (90,054) | (11,480) | 54,803 | |||||||||||||||||
| Total income taxes | $ | 22,883 | $ | 150,180 | $ | 262,207 | ||||||||||||||
A reconciliation of the federal statutory rate to the Company's effective income tax rate, including material items impacting the effective income tax rate, is presented below:
| Year Ended August 31, | ||||||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Income tax expense at statutory rate | $ | 22,584 | $ | 133,491 | $ | 235,613 | ||||||||||||||
State and local taxes(1) | 4,341 | 17,629 | 33,621 | |||||||||||||||||
Research and development credit(1) | (7,255) | (1,151) | (7,986) | |||||||||||||||||
Foreign rate differential | (1,344) | 513 | (1,365) | |||||||||||||||||
Interest expense related to uncertain tax positions | 1,314 | 2,154 | 1,052 | |||||||||||||||||
Non-deductible compensation | 1,300 | 1,651 | 1,825 | |||||||||||||||||
Nontaxable gain | (2,131) | (1,786) | (1,055) | |||||||||||||||||
TCJA - Toll charge and related foreign tax credits | (2,766) | — | — | |||||||||||||||||
| Other | 6,840 | (2,321) | 502 | |||||||||||||||||
| Income tax expense | $ | 22,883 | $ | 150,180 | $ | 262,207 | ||||||||||||||
| Effective income tax rate | 21.3 | % | 23.6 | % | 23.4 | % | ||||||||||||||
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(1) 2025, 2024 and 2023 include impacts of uncertain tax positions.
The Company plans to repatriate the current and future earnings from the Europe Steel Group segment and certain immaterial foreign jurisdictions in the Emerging Businesses Group segment and has recorded an immaterial amount of tax expense related to such earnings. The Company considers the undistributed earnings of the Europe Steel Group segment prior to August 31, 2019 and all other undistributed earnings of the Emerging Businesses Group segment to be indefinitely reinvested and has not recorded deferred tax liabilities on such earnings.
The income tax effects of significant temporary differences giving rise to deferred tax assets and liabilities were as follows:
| August 31, | ||||||||||||||
| (in thousands) | 2025 | 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Net operating losses and credits | $ | 273,140 | $ | 278,855 | ||||||||||
| Capitalized research and development | 53,651 | 57,597 | ||||||||||||
| ROU operating lease liabilities | 41,352 | 41,838 | ||||||||||||
| Deferred compensation and employee benefits | 33,905 | 32,377 | ||||||||||||
| Reserves and other accrued expenses | 11,924 | 13,839 | ||||||||||||
| Litigation-related reserve | 88,756 | — | ||||||||||||
| Other | 7,300 | 19,122 | ||||||||||||
| Total deferred tax assets | 510,028 | 443,628 | ||||||||||||
| Valuation allowance for deferred tax assets | (253,196) | (256,826) | ||||||||||||
| Deferred tax assets, net | 256,832 | 186,802 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Property, plant and equipment | (335,705) | (353,439) | ||||||||||||
| Intangible assets | (32,444) | (37,233) | ||||||||||||
| ROU operating lease assets | (40,922) | (41,463) | ||||||||||||
| Derivatives | (11,889) | (6,850) | ||||||||||||
| Other | (13,349) | (13,093) | ||||||||||||
| Total deferred tax liabilities | (434,309) | (452,078) | ||||||||||||
| Net deferred tax liabilities | $ | (177,477) | $ | (265,276) | ||||||||||
Net operating losses giving rise to deferred tax assets consist of $269.3 million of state net operating losses and $915.0 million of foreign net operating losses that expire in varying amounts beginning in 2026 (with certain amounts having indefinite carryforward periods). These assets will be reduced as income tax expense is recognized in future periods.
The Company maintains a valuation allowance to reduce certain deferred tax assets to amounts that are more likely than not to be realized. The Company's valuation allowances primarily relate to net operating loss and credit carryforwards in certain state and foreign jurisdictions for which utilization is uncertain.
A reconciliation of the beginning and ending amounts of unrecognized income tax benefits is presented below:
| (in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Balance at September 1, | $ | 45,721 | $ | 44,165 | $ | 29,747 | ||||||||||||||
| Change for tax positions of current year | — | — | 14,792 | |||||||||||||||||
| Change for tax positions of prior years | 8,000 | 1,556 | (374) | |||||||||||||||||
| Reductions due to lapse of statute of limitations | (9,486) | — | — | |||||||||||||||||
Balance at August 31,(1) | $ | 44,235 | $ | 45,721 | $ | 44,165 | ||||||||||||||
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(1) The full balance of unrecognized income tax benefits in each year, if recognized, would have impacted the Company’s effective income tax rate at the end of each respective year.
At August 31, 2025 and 2024, the Company had accrued interest and penalties related to uncertain tax positions of $5.8 million and $4.1 million, respectively.
During 2026, the Company anticipates the statute of limitations relating to positions of the Company in prior year income tax returns may lapse. As a result, it is reasonably possible that the amount of unrecognized tax benefits may decrease by $12.6 million.
The Company files income tax returns in the U.S. and multiple foreign jurisdictions with varying statutes of limitations. In the normal course of business, the Company and its subsidiaries are subject to examination by various taxing authorities. A summary of fiscal years open to examination is presented below.
U.S. Federal — 2022 and forward
U.S. States — 2021 and forward
Foreign — 2020 and forward
One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill Act (the "OBBBA") was enacted into law, introducing significant amendments to U.S. tax legislation with varying effective dates. Key provisions that impact CMC include the expansion of bonus depreciation, accelerated expensing of research and development costs and revisions to international tax regimes. CMC has incorporated these amendments into its fiscal 2025 tax provision, as applicable, and there was no material impact to the Company's income tax expense or effective tax rate. The Company continues to evaluate the legislation.
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.