California Resources CorpCRC

California Resources Corp Income Taxes Disclosure

10-KFiled Mar 3, 20254 min read
INCOME TAXES
Net income before income taxes, for all periods presented, was generated from domestic operations. The following table summarizes components of our income tax provision:
 
Year ended December 31,
 2024
2023
2022
(in millions)
Federal$42 $146 $10 
State and local
27 3 1 
Current
69 149 11 
Federal$51 $(12)$141 
State and local
20 47 85 
Deferred tax provision
71 35 226 
Total income tax provision
$140 $184 $237 

Income taxes paid by jurisdiction are as follows:

Year ended December 31,
2024
2023
(in millions)
Federal
$73 $120 
State and local
321
Total taxes paid
$105 $121 

Our effective tax rate differs from the amount computed by applying the U.S. federal income tax statutory rate to income before income taxes as follows:
 
Year ended December 31,
 202420232022
AmountPercentAmountPercentAmountPercent
U.S. federal statutory tax rate$108 21 %$157 21 %$160 21 %
State and local income taxes, net of federal income tax effect(a)
38 7 40 5 68 9 
Tax credits
Marginal well credit(12)(2)— — (8)(1)
Other tax credit— — (1)— (5)(1)
Nontaxable or nondeductible items
9 2 6 1 4 1 
Change in valuation allowances
— — (17)(2)17 2 
Other adjustments
(3)(1)(1)— 1 — 
Effective tax rate$140 27 %$184 25 %$237 31 %
(a)State and local income taxes are predominately in California.
During the year ended December 31, 2023, we released a valuation allowance for a portion of the tax loss on the sale of our Lost Hills assets after we jointly agreed to amend the original tax treatment with the buyer. See Note 9 Divestitures and Acquisitions for more information on the Lost Hills transaction. This valuation allowance was initially recorded during the year ended December 31, 2022 for the realizability of a capital loss on the sale of Lost Hills, the deductibility of which was limited. Changes related to the valuation allowance related to state taxes is included as state and local income taxes, net of federal income tax effect in our rate reconciliation above.

The tax effects of temporary differences resulting in deferred income tax assets and liabilities at December 31, 2024 and 2023 were as follows:
 20242023
Deferred Tax
Assets		Deferred Tax
Liabilities		Deferred Tax
Assets		Deferred Tax
Liabilities
(in millions)
Property, plant and equipment$— $(700)$19 $(286)
Deferred compensation and benefits66 — 40 — 
Asset retirement obligations342 — 157 — 
Interest expense carryforward
158 — 161 — 
All other
169 (75)96 (55)
Total deferred taxes$735 $(775)$473 $(341)

We expect to realize our deferred tax assets through future operating income and reversal of taxable temporary differences. The amount of deferred tax assets considered realizable is not assured and could be adjusted if estimates change.

Changes in our deferred tax assets and liabilities during 2024 primarily relates to the acquisition of Aera as described in Note 2 Aera Merger. We recorded a net deferred tax liability of $101 million in purchase accounting related to the Aera acquisition and a deferred tax liability of $1 million was recorded to accumulated other comprehensive income related to our pension and other postretirement benefit plans.

Net Operating Loss and Tax Credit Carryforwards

As of December 31, 2024, our U.S. federal net operating loss carryforwards was $29 million, which begins to expire in 2037. Our carryforward for disallowed interest expense of $753 million does not expire.

As of December 31, 2024, our California net operating loss carryforwards was $2 billion, which begins to expire in 2029, and our tax credit carryforwards were $21 million, which begin to expire in 2041. California has suspended the use of net operating loss carryforwards for tax years 2024 through 2026 and also limited the utilization of tax credits up to $5 million per year for the same period.

Our ability to utilize a portion of our net operating loss, tax credit and interest expense carryforwards is subject to an annual limitation. As a result, we recognized a deferred tax asset of $2 million for U.S. federal net operating loss carryforwards (that do not expire) and $24 million for California net operating loss carryforwards. Additionally, we recognized a deferred tax asset for $7 million of our California tax credit carryforwards, included in the all other category in the deferred tax table above. We expect our remaining carryforwards will expire unused.

Other
We did not record a liability for unrecognized tax benefits as of December 31, 2024 and 2023. We remain subject to audit by the Internal Revenue Service for calendar years 2021 through 2023 and by California for calendar years 2020 through 2023.
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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.

Other Available Disclosures

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