California Resources CorpCRC
California Resources Corp Income Taxes Disclosure
INCOME TAXES
Income before income taxes, for all periods presented, was generated from domestic operations. The provision (benefit) for income taxes includes the following components:
Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
U.S. federal | $ | 30 | $ | 42 | $ | 146 | |||||||||||
State and local | 24 | 27 | 3 | ||||||||||||||
Current tax provision | 54 | 69 | 149 | ||||||||||||||
U.S. federal | $ | 61 | $ | 51 | $ | (12) | |||||||||||
State and local | 24 | 20 | 47 | ||||||||||||||
Deferred tax provision | 85 | 71 | 35 | ||||||||||||||
Income tax provision | $ | 139 | $ | 140 | $ | 184 | |||||||||||
Income taxes paid, net of refunds, by jurisdiction are as follows:
| Year ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
(in millions) | |||||||||||||||||
Federal | $ | 31 | $ | 73 | $ | 120 | |||||||||||
State and local | 5 | 32 | 1 | ||||||||||||||
Total taxes paid | $ | 36 | $ | 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, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||
| U.S. federal statutory tax rate | $ | 106 | 21 | % | $ | 108 | 21 | % | $ | 157 | 21 | % | ||||||||||||||
State and local income taxes, net of federal income tax effect(a) | 38 | 7 | 38 | 7 | 40 | 5 | ||||||||||||||||||||
Tax credits | ||||||||||||||||||||||||||
| Marginal well credit | (12) | (2) | (12) | (2) | — | — | ||||||||||||||||||||
| Other tax credit | (1) | — | — | — | (1) | — | ||||||||||||||||||||
Nontaxable or nondeductible items(b) | 8 | 2 | 9 | 2 | 6 | 1 | ||||||||||||||||||||
Change in valuation allowance | — | — | — | — | (17) | (2) | ||||||||||||||||||||
Other adjustments | — | — | (3) | (1) | (1) | — | ||||||||||||||||||||
| Effective tax rate | $ | 139 | 28 | % | $ | 140 | 27 | % | $ | 184 | 25 | % | ||||||||||||||
(a)State and local income taxes are predominately in California and, with the closing of the Berry Merger, Utah.
(b)Nontaxable or nondeductible items include executive compensation where the deduction is limited and transaction costs which must be capitalized. These transaction costs are generally only deductible upon the disposition on the acquired stock.
During the year ended December 31, 2023, we released a valuation allowance for a portion of the tax loss on the sale of assets after we jointly agreed to amend the original tax treatment with the buyer. This valuation allowance was initially recorded during the year ended December 31, 2022 for the realizability of a capital loss on the asset sale, 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, 2025 and 2024 were as follows:
| 2025 | 2024 | ||||||||||||||||||||||
| Deferred Tax Assets | Deferred Tax Liabilities | Deferred Tax Assets | Deferred Tax Liabilities | ||||||||||||||||||||
| (in millions) | |||||||||||||||||||||||
| Property, plant and equipment | $ | — | $ | (698) | $ | — | $ | (700) | |||||||||||||||
| Deferred compensation and benefits | 70 | — | 66 | — | |||||||||||||||||||
| Asset retirement obligations | 315 | — | 342 | — | |||||||||||||||||||
Operating loss and tax credit carryforwards | 63 | — | 33 | — | |||||||||||||||||||
Business interest carryforward | 167 | — | 158 | — | |||||||||||||||||||
All other | 106 | (101) | 136 | (75) | |||||||||||||||||||
| Total deferred taxes | $ | 721 | $ | (799) | $ | 735 | $ | (775) | |||||||||||||||
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 in 2025 includes an increase in our deferred tax asset of $121 million related to the Berry Merger and an increase in our deferred tax liability of $70 million related to finalizing the purchase accounting for the Aera Merger. See Note 2 Business Combinations for additional information on these transactions. Additionally, we allocated $5 million income tax benefit to accumulated other comprehensive income during 2025.
Carryforwards
As of December 31, 2025, our U.S. federal net operating loss carryforwards were $19 million, which begin to expire in 2037, and our federal tax credit carryforwards were $85 million, which begin to expire in 2037.
As of December 31, 2025, our California net operating loss carryforwards were $2 billion, which begins to expire in 2029, and our tax credit carryforwards were $21 million, which begin to expire in 2038. California has suspended the use of net operating loss carryforwards for tax years 2024 through 2026 and limited the amount of tax credits that may be claimed to $5 million per year for the same period.
Our ability to utilize a portion of our net operating loss, tax credit and business interest carryforwards is subject to an annual limitation. As a result, we recognized a deferred tax asset of $3 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 $28 million for U.S federal tax credit carryforwards and $8 million for our California tax credit carryforwards. We expect our remaining tax credit carryforwards will expire unused.
Our carryforward for federal disallowed business interest expense of $794 million does not expire and may be utilized in future periods to the extent we generate sufficient taxable income and interest capacity. Although our business interest carryforwards are subject to an annual limitation, we recognized a deferred tax asset of $167 million included in the accompanying consolidated balance sheet because these carryforwards do not expire.
Other
On July 4, 2025, An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14th and commonly referred to as the One Big Beautiful Bill Act was signed into law. This law contains several legislative changes including the reinstatement of full expensing for qualified assets placed in service after January 19, 2025. This law also reinstated the expensing of all domestic research and development costs, including favorable transition rules, and increases the limitation on the amount of annual business interest expense which can be deducted each year. As a result of these changes, we are able to accelerate deductions related to property, plant and equipment, research and development expenses and interest expense carryforwards resulting in a current income tax benefit, and corresponding reduction in our cash tax liability, of approximately $40 million in 2025.
We did not record a liability for unrecognized tax benefits as of December 31, 2025 and 2024. We remain subject to audit by the Internal Revenue Service for calendar years 2022 through 2024 and by California for calendar years 2021 through 2024.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Mar 11, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 29, 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.