CASELLA WASTE SYSTEMS INCCWST
CASELLA WASTE SYSTEMS INC Income Taxes Disclosure
INCOME TAXES
All pretax income from continuing operations is domestic. The components of the provision for income taxes are summarized as follows:
| Fiscal Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | |||||||||||||||||
| Current | $ | (170) | $ | 911 | $ | — | |||||||||||
| Deferred | 5,031 | 8,652 | 8,155 | ||||||||||||||
| 4,861 | 9,563 | 8,155 | |||||||||||||||
| State | |||||||||||||||||
| Current | 2,546 | (297) | 4,385 | ||||||||||||||
| Deferred | (2,226) | (1,754) | (894) | ||||||||||||||
| 320 | (2,051) | 3,491 | |||||||||||||||
| Provision for income taxes | $ | 5,181 | $ | 7,512 | $ | 11,646 | |||||||||||
We adopted ASU 2023-09 on a prospective basis in fiscal year 2025. The differences in the provision for income taxes and the amounts determined by applying the federal statutory rate to income taxes are as follows:
| Fiscal Year Ended December 31, 2025 | |||||||||||
| Amount | Rate | ||||||||||
United States federal statutory income tax | $ | 2,741 | 21.00 | % | |||||||
| Domestic state and local income taxes, net of federal effect | 253 | 1.94 | % | ||||||||
| Nontaxable and nondeductible items: | |||||||||||
| Meals and entertainment | 306 | 2.35 | % | ||||||||
| Officers’ compensation | 1,135 | 8.69 | % | ||||||||
| Fines and penalties | 306 | 2.34 | % | ||||||||
| Lobbying expense | 347 | 2.66 | % | ||||||||
| Transaction related costs | 230 | 1.76 | % | ||||||||
| Stock based compensation | (258) | (1.97) | % | ||||||||
| Other | (65) | (0.50) | % | ||||||||
| Other reconciling items: | |||||||||||
| Other | 186 | 1.42 | % | ||||||||
| Total | $ | 5,181 | 39.69 | % | |||||||
Below is a tabular reconciliation of our effective tax rate to the United States federal income tax rate, as previously disclosed, and prior to the adoption of ASU 2023-09, for fiscal years 2024 and 2023, respectively.
| Fiscal Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Federal statutory rate | 21 | % | 21 | % | |||||||
| Tax at statutory rate | $ | 4,420 | $ | 7,779 | |||||||
| State income taxes, net of federal benefit | (1,660) | 620 | |||||||||
| Change in valuation allowance | 68 | 1,675 | |||||||||
| Federal effect of change in state valuation allowance | — | (312) | |||||||||
| Expired tax attributes | 497 | — | |||||||||
| Non-deductible officer compensation | 1,172 | 996 | |||||||||
| Other non-deductible expenses | 2,931 | 809 | |||||||||
| Deductible stock awards | 103 | (963) | |||||||||
| Tax credits | 63 | (60) | |||||||||
| Reversal of disproportionate tax effects in other comprehensive (loss) income | — | 938 | |||||||||
| Other, net | (82) | 164 | |||||||||
| Provision for income taxes | $ | 7,512 | $ | 11,646 | |||||||
In July 2025, H.R.1 - One Big Beautiful Bill Act (the “OBBB Act”) was enacted. The OBBB Act addresses a wide range of changes including reinstating 100% bonus depreciation eligible for qualified assets. The OBBB Act also restores the EBITDA-based computation of interest expense limitations under Section 163(j) of the Internal Revenue Code among other income tax items; any interest expense limited may be carried forward indefinitely and utilized in later years subject to the interest limitation. We have evaluated the impacts of the OBBB Act, both federal and state, for those provisions that impact fiscal year 2025.
Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized for financial reporting purposes and such amounts recognized for income tax purposes. A summary of deferred tax assets and liabilities is as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Accrued expenses and reserves | $ | 67,293 | $ | 60,319 | |||||||
| Net operating loss carryforwards | 35,374 | 26,544 | |||||||||
| General business and state tax credit carryforwards | 5,560 | 3,900 | |||||||||
| Interest expense limitation | 3,606 | 10,089 | |||||||||
| Stock awards | 4,311 | 3,256 | |||||||||
| Unrealized loss on swaps | 1,533 | — | |||||||||
| Other | 158 | 1,024 | |||||||||
| Total deferred tax assets | 117,835 | 105,132 | |||||||||
| Less: valuation allowance | (9,056) | (8,456) | |||||||||
| Total deferred tax assets after valuation allowance | 108,779 | 96,676 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Tax over book depreciation of property and equipment | (86,659) | (71,467) | |||||||||
| Amortization of intangibles | (41,085) | (42,961) | |||||||||
| Unrealized gain on swaps | — | (1,337) | |||||||||
| Total deferred tax liabilities | (127,744) | (115,765) | |||||||||
| Net deferred tax liability | $ | (18,965) | $ | (19,089) | |||||||
The net deferred tax liability at December 31, 2025 is reflected on the consolidated balance sheet as a long-term deferred federal and state tax liability of $(18,965).
As of December 31, 2025, we have net operating loss carryforwards for federal income tax purposes of approximately $124,227, of which $122,907 does not expire. We have state net operating loss carryforwards of approximately $156,096 that expire in the fiscal years ending December 31, 2026 through 2045 or that do not expire in certain jurisdictions. In addition, we have $4,291 general business credit carryforwards which expire in the fiscal years ending December 31, 2026 through 2045 and $1,606 state credit carryforwards, which are expected to begin expiring in fiscal years ending December 31, 2030 through 2040. Sections 382 and 383 of the Internal Revenue Code can limit the amount of net operating loss and credit carryforwards which may be used in a tax year in the event of certain stock ownership changes.
On a periodic basis, we reassess the valuation allowance on our deferred income tax assets, weighing positive and negative evidence to assess the recoverability of the deferred tax assets. In the fourth quarter of fiscal year 2025, we assessed the valuation allowance and considered positive evidence, including significant cumulative consolidated income over the three years ended December 31, 2025, revenue growth and expectations of future profitability, and negative evidence, including the impact of significant risks and uncertainties in the business and restrictions on tax loss utilization in certain state jurisdictions. After assessing both the positive evidence and the negative evidence, we determined it is more likely than not that certain state deferred tax assets would not be realized in the future. As of December 31, 2025, we maintained a valuation allowance of $9,056 primarily related to certain state net operating losses.
In assessing the realizability of carryforwards and other deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. We adjust the valuation allowance in the period management determines it is more likely than not that deferred tax assets will or will not be realized. The change in the valuation allowance for fiscal year 2025 was an increase of $600. In determining the need for a valuation allowance, we have assessed the available means of recovering deferred tax assets, including the ability to carryback net operating losses, the existence of reversing temporary differences, and available sources of future taxable income. We have also considered the ability to implement certain strategies, such as a potential sale of assets that would, if necessary, be implemented to accelerate taxable income and use expiring deferred tax assets.
The provisions of FASB ASC 740-10-25-5 prescribe the minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. Additionally, FASB ASC 740-10-25-5 provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. Under FASB ASC 740-10-25-5, an entity may only recognize or continue to recognize tax positions that meet a “more likely than not” threshold. To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued are reflected as a reduction of the overall income tax provision. As of December 31, 2025 and 2024, we did not have any uncertain tax positions.
We are subject to U.S. federal income tax, as well as the income tax of multiple state jurisdictions. For federal tax purposes, income tax returns from years ending 2022 through 2025 are open for assessment. Tax years 2000 through 2021 are open for examination to the extent of any NOLs or credits that have been carried forward from those years.
In fiscal year 2025, state and local income taxes in Connecticut, Delaware and New York comprise the majority of the state and local income taxes, net of the federal effect category.
A summary of income taxes paid (refunded), net is as follows (in thousands):
| Fiscal Year Ended December 31, 2025 | |||||
| United States federal | $ | 803 | |||
| United States: state and local | |||||
| Connecticut | (421) | ||||
| Delaware | 325 | ||||
| New York | (1,018) | ||||
| Other | 157 | ||||
| Total | $ | (154) | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 17, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Mar 2, 2018 | |
| 2016 | Mar 2, 2017 | |
| 2015 | Mar 2, 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.