COMPASS MINERALS INTERNATIONAL INCCMP
COMPASS MINERALS INTERNATIONAL INC Income Taxes Disclosure
INCOME TAXES
The Company files tax returns in the U.S., Canada, the UK and Brazil at the federal and local taxing jurisdictional levels. The Company’s U.S. federal tax returns for tax years 2017 forward remain open and subject to examination. Generally, the Company’s state, local and foreign tax returns for years as early as 2002 forward remain open and subject to examination, depending on the jurisdiction.
The following table summarizes the Company’s income tax provision (in millions):
| Fiscal Year Ended | ||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | (0.2) | $ | (0.3) | $ | (1.4) | ||||||||||||||
| State | (0.1) | (0.4) | 0.9 | |||||||||||||||||
| Foreign | 27.9 | 21.3 | 22.6 | |||||||||||||||||
| Total current | 27.6 | 20.6 | 22.1 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | 3.2 | 6.8 | (0.8) | |||||||||||||||||
| State | (4.9) | (8.8) | (2.0) | |||||||||||||||||
| Foreign | 0.2 | (0.7) | (2.2) | |||||||||||||||||
| Total deferred | (1.5) | (2.7) | (5.0) | |||||||||||||||||
| Total provision for income taxes | $ | 26.1 | $ | 17.9 | $ | 17.1 | ||||||||||||||
The following table summarizes components of (loss) income before income taxes and shows the tax effects of significant adjustments from the expected income tax expense computed at the federal statutory rate (in millions):
| Fiscal Year Ended | ||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||
| U.S. loss | $ | (127.3) | $ | (226.2) | $ | (22.7) | ||||||||||||||
| Foreign income | 73.6 | 38.0 | 50.3 | |||||||||||||||||
(Loss) income before income taxes | $ | (53.7) | $ | (188.2) | $ | 27.6 | ||||||||||||||
Computed tax at the U.S. federal statutory rate of 21% | $ | (11.3) | $ | (39.5) | $ | 5.8 | ||||||||||||||
| Foreign income rate differential, mining, and withholding taxes, net of U.S. federal deduction | 12.7 | 11.3 | 9.6 | |||||||||||||||||
Benefit recognized on Canadian law change | — | — | (6.2) | |||||||||||||||||
| Percentage depletion in excess of basis | (3.0) | (2.4) | (2.7) | |||||||||||||||||
| Non-deductible compensation | 1.2 | 2.0 | 3.1 | |||||||||||||||||
| Other domestic tax reserves, net of reversals | 0.2 | 0.2 | (2.6) | |||||||||||||||||
| State income taxes, net of federal income tax benefit | (5.0) | (8.4) | (1.3) | |||||||||||||||||
| Change in valuation allowance on deferred tax asset | 33.0 | 46.9 | 11.1 | |||||||||||||||||
| Global Intangible Low-Taxed Income and Base Erosion and Anti-Abuse Tax | — | — | 1.1 | |||||||||||||||||
Goodwill impairment | — | 8.5 | — | |||||||||||||||||
| Tax on repatriated amounts | — | — | (0.7) | |||||||||||||||||
Share based payment awards | 1.3 | — | — | |||||||||||||||||
| Other, net | (3.0) | (0.7) | (0.1) | |||||||||||||||||
| Provision for income taxes | $ | 26.1 | $ | 17.9 | $ | 17.1 | ||||||||||||||
| Effective tax rate | (49) | % | (10) | % | 62 | % | ||||||||||||||
Under U.S. GAAP, deferred tax assets and liabilities are recognized for the estimated future tax effects, based on enacted tax law, of temporary differences between the values of assets and liabilities recorded for financial reporting and tax purposes, and of net operating losses and other carryforwards. The significant components of the Company’s deferred tax assets and liabilities were as follows (in millions):
| September 30, 2025 | September 30, 2024 | |||||||||||||
| Deferred tax assets to be netted with deferred tax liabilities: | ||||||||||||||
U.S. intangible asset | $ | 14.4 | $ | 3.9 | ||||||||||
Net operating loss carryforwards | 24.0 | 22.3 | ||||||||||||
| Excess interest expense | 84.1 | 63.0 | ||||||||||||
| Foreign tax credit | 39.5 | 39.4 | ||||||||||||
| Stock-based compensation | 1.3 | 2.1 | ||||||||||||
Research and development costs | 3.6 | 4.3 | ||||||||||||
Federal and state capital losses | 3.5 | 3.6 | ||||||||||||
| Right of use lease liability | 13.5 | 12.7 | ||||||||||||
| State tax credits | 9.5 | 8.9 | ||||||||||||
Inventory | 6.7 | 7.3 | ||||||||||||
Other, net | 15.9 | 18.1 | ||||||||||||
| Total deferred tax assets before valuation allowance | 216.0 | 185.6 | ||||||||||||
Valuation allowance | (198.9) | (167.3) | ||||||||||||
| Total deferred tax assets to be netted with deferred tax liabilities | 17.1 | 18.3 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Property, plant and equipment | 51.1 | 53.9 | ||||||||||||
Foreign intangible asset | 3.8 | 4.3 | ||||||||||||
| Right of use lease asset | 13.1 | 12.7 | ||||||||||||
| Unrealized foreign exchange gain | 1.1 | 1.2 | ||||||||||||
| Other, net | 1.9 | 2.7 | ||||||||||||
| Total deferred tax liabilities | 71.0 | 74.8 | ||||||||||||
| Net deferred tax liabilities | $ | 53.9 | $ | 56.5 | ||||||||||
At September 30, 2025 and September 30, 2024, the Company had $80.5 million and $76.4 million, respectively, of gross federal net operating loss (“NOL”) carryforwards that have no expiration date and $7.1 million and $6.1 million, respectively, of net operating tax-effected state NOL carryforwards which will expire beginning in 2031. At September 30, 2025 and September 30, 2024, the Company also had $1.9 million and $2.0 million, respectively, of tax-effected state capital losses which will expire beginning in 2027 and $1.6 million and $1.6 million, respectively, of tax-effected federal capital losses, which will expire beginning in 2025.
The Company has recorded a valuation allowance for a portion of its deferred tax asset relating to various tax attributes that it does not believe are more likely than not to be realized. As of September 30, 2025 and September 30, 2024, the Company’s valuation allowance was $198.9 million and $167.3 million, respectively. Management assesses the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred in the U.S. over the three-year period ended September 30, 2025. Such objective evidence limits the ability to consider other subjective evidence, such as management’s projections for future income. On the basis of this evaluation, for the fiscal year ended September 30, 2025, an additional valuation allowance of $33.1 million has been recorded to recognize only the portion of the U.S. deferred tax assets that are more likely than not to be realized. The amount of the deferred tax assets considered realizable, however, could be adjusted if objective negative evidence in the form of cumulative losses is no longer present and additional weight is given to subjective evidence such as management’s projections for income. In the future, if the Company determines, based on existence of sufficient evidence, that it should realize more or less of its deferred tax assets, an adjustment to the valuation allowance will be made in the period such a determination is made.
The calculation of the Company’s tax liabilities involves dealing with uncertainties in the application of complex tax regulations in multiple jurisdictions. The Company recognizes potential liabilities for unrecognized tax benefits in the U.S. and other tax jurisdictions in accordance with applicable U.S. GAAP, which requires uncertain tax positions to be recognized only if they are more likely than not to be upheld based on their technical merits. The measurement of the uncertain tax position is based on the largest benefit amount that is more likely than not (determined on a cumulative probability basis) to be realized upon settlement of the matter. If payment of these amounts ultimately proves to be unnecessary, the reversal of the liabilities would result in tax benefits being recognized in the period when the Company determines the liabilities are no longer necessary. If the Company’s estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense may result.
The Company’s uncertain tax positions primarily relate to transactions and deductions involving U.S. and Canadian operations. If favorably resolved, a maximum of $27.9 million of unrecognized tax benefits would decrease the Company’s effective tax rate. Management believes that it is reasonably possible that $23.6 million of the unrecognized tax benefits will decrease in the next twelve months. For the fiscal year ended September 30, 2025, the Company’s income tax expense included a benefit of approximately $0.1 million related to the release of uncertain tax positions due to the expiration of statutes of limitations.
The following table shows a reconciliation of the beginning and ending amount of unrecognized tax benefits (in millions):
| Fiscal Year Ended | ||||||||||||||||||||
| September 30, 2025 | September 30, 2024 | September 30, 2023 | ||||||||||||||||||
| Unrecognized tax benefits: | ||||||||||||||||||||
| Balance at beginning of period | $ | 37.1 | $ | 35.4 | $ | 33.6 | ||||||||||||||
| Additions resulting from current year tax positions | (0.4) | 1.7 | 3.8 | |||||||||||||||||
| Additions relating to tax positions taken in prior years | 0.3 | 0.2 | 0.5 | |||||||||||||||||
| Reductions relating to tax positions taken in prior years | (1.6) | — | — | |||||||||||||||||
| Reductions due to expiration of tax years | (0.1) | (0.2) | (2.5) | |||||||||||||||||
| Balance at end of period | $ | 35.3 | $ | 37.1 | $ | 35.4 | ||||||||||||||
The Company accrues interest and penalties related to its uncertain tax positions within its tax provision. During the fiscal years ended September 30, 2025, September 30, 2024, and September 30, 2023, the Company accrued interest and penalties, net of reversals, of $4.2 million, $5.1 million and $(3.0) million, respectively. As of September 30, 2025 and September 30, 2024, accrued interest and penalties included in Other noncurrent liabilities in the Consolidated Balance Sheets totaled $32.0 million and $27.8 million, respectively.
In fiscal 2022, the Company revised its permanently reinvested assertion, expecting to repatriate an additional $10 million of unremitted foreign earnings from its UK operations and in fiscal 2023 the Company revised it again expecting to repatriate an additional approximately $6 million of unremitted foreign earnings from its UK operations. During the first quarter of fiscal 2023, $89.2 million was repatriated from Canada and in the third quarter of fiscal 2023, $15.6 million was repatriated from the UK. Net income tax expense of $3.8 million has been recorded for foreign withholding tax, state income tax and foreign exchange losses on these changes in assertion as of September 30, 2025, consisting of a tax benefit of $0.0 million recorded during fiscal year ended September 30, 2025, a $0.0 million tax benefit recorded during fiscal year ended September 30, 2024, and a $0.7 million tax benefit recorded in fiscal year ended September 30, 2023. The Company intends to continue its permanently reinvested assertion on the remaining undistributed earnings of its foreign subsidiaries indefinitely. As of September 30, 2025, the Company has approximately $242.8 million of outside basis differences on which no deferred taxes have been recorded as the determination of the unrecognized deferred taxes is not practicable.
A Canadian provincial tax authority has challenged tax positions claimed by one of the Company’s Canadian subsidiaries and have issued tax reassessments for fiscal years 2002-2019. The reassessments are a result of ongoing audits and total approximately $209.8 million, including interest, through September 30, 2025. The Company disputes these reassessments and plans to continue to work with the appropriate authorities in Canada to resolve the dispute. In connection with this dispute, local regulations require the Company to post security with the tax authority until the dispute is resolved. The Company has posted collateral in the form of a $157.4 million performance bond and has paid $35.8 million (most of which is recorded in other assets in the Consolidated Balance Sheets at September 30, 2025), which was required to pursue appeals or litigation.
The Company expects that the ultimate outcome of these matters will not have a material impact on its results of operations or financial condition. As of September 30, 2025, the Company believes it has adequately reserved for these reassessments.
See Note 18. Subsequent Event for information concerning the settlement of Canadian provincial tax disputes for years 2002-2018.
Additionally, the Company has other uncertain tax positions as well as assessments and disputed positions with taxing authorities in its various jurisdictions.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Dec 12, 2025 | Showing above |
| 2024 | Dec 16, 2024 | |
| 2023 | Nov 29, 2023 | |
| 2022 | Dec 14, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 22, 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.