Ecovyst Inc.ECVT
Ecovyst Inc. Income Taxes Disclosure
18. Income Taxes:
Income from continuing operations before income taxes is shown below:
| Years ended December 31, | ||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||
| $ | 25,786 | $ | 45,205 | $ | 56,949 | |||||||||
The provision (benefit) for income taxes as shown in the accompanying consolidated statements of (loss) income consists of the following:
| Years ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (10,251) | $ | 3,287 | $ | 16,707 | |||||||||||
| State | (2,457) | 1,423 | 2,401 | ||||||||||||||
| (12,708) | 4,710 | 19,108 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 17,381 | (2,973) | (132) | ||||||||||||||
| State | 14,825 | (2,036) | (10,250) | ||||||||||||||
| 32,206 | (5,009) | (10,382) | |||||||||||||||
| Provision (benefit) for income taxes | $ | 19,498 | $ | (299) | $ | 8,726 | |||||||||||
During the year ended December 31, 2025, the Company has adopted ASU 2023-09 to enhance the income taxes disclosure regarding income taxes paid and the rate reconciliation disclosure. The Company has elected to apply the guidance in ASU 2023-09 prospectively. The income taxes paid by the Company, from both continuing and discontinued operations, are as follows:
| Year ended December 31, | ||||||||
| 2025 | ||||||||
| Federal | $ | 5,600 | ||||||
| State | 208 | |||||||
| Foreign | 5,240 | |||||||
| Income taxes paid, net of refunds | $ | 11,048 | ||||||
Income taxes paid (net of refunds) exceeds 5 percent of total income taxes paid (net of refunds) in the following jurisdictions:
| Year ended December 31, | ||||||||
| 2025 | ||||||||
| State and local taxes | ||||||||
| Louisiana | $ | (557) | ||||||
| Other states | 765 | |||||||
| Foreign taxes | ||||||||
| United Kingdom | 4,606 | |||||||
| Other foreign | 634 | |||||||
Cash payments for income taxes, net of refunds, which includes activity from both continuing and discontinued operations, prior to the adoption of the guidance in ASU 2023-09 is as follows:
| Years ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Domestic | $ | 22,860 | $ | 21,973 | |||||||
| Foreign | 3,399 | 464 | |||||||||
| Cash payments for income taxes, net of refunds | $ | 26,259 | $ | 22,437 | |||||||
The differences between income taxes expected at the U.S. federal statutory income tax rate and income taxes reported were as follows:
| Year ended December 31, | ||||||||
| 2025 | ||||||||
| Income from continuing operations before income taxes | $ | 25,786 | ||||||
| U.S. federal statutory tax rate | 5,415 | 21.0 | % | |||||
State and local income taxes, net of federal income tax effect (1) | 12,884 | 50.0 | % | |||||
| Nontaxable or nondeductible items | ||||||||
| Sec. 162(m) compensation disallowance | 278 | 1.1 | % | |||||
| Stock compensation | 819 | 3.2 | % | |||||
| Other | 218 | 0.8 | % | |||||
| Changes in unrecognized tax benefits | (116) | (0.4) | % | |||||
| Provision for income taxes | $ | 19,498 | 75.6 | % | ||||
(1) Kansas makes up the majority (greater than 50%) of the state income tax expense (benefit), net of federal income tax effect category. Additionally, this line item includes tax expense of $13,305 related to the establishment of a valuation allowance on the Company’s Kansas Investment Tax Credits (“ITCs”). After the Advanced Materials & Catalysts divestiture, the Company determined that it is no longer more likely than not that these credits will be realized as it no longer owns the Kansas property which previously qualified for the respective ITCs.
A reconciliation of income tax expense at the U.S. federal statutory income tax rate to actual income tax (benefit) expense prior to the adoption of the guidance in ASU 2023-09 is as follows:
| Years ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Tax at statutory rate | $ | 9,493 | $ | 11,959 | |||||||
| State income taxes, net of federal income tax benefit | (919) | 1,859 | |||||||||
| Changes in uncertain tax positions | (9,413) | 985 | |||||||||
| State credit - valuation allowance release | — | (10,203) | |||||||||
| Stock compensation | 222 | 1,624 | |||||||||
| Compensation disallowance under 162(m) | 148 | 2,088 | |||||||||
| Other, net | 170 | 414 | |||||||||
| (Benefit) provision for income taxes | $ | (299) | $ | 8,726 | |||||||
Deferred tax assets (liabilities) are comprised of the following:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 13,300 | $ | 13,667 | |||||||
| Interest disallowance carryforward | — | 2,968 | |||||||||
| Pension | — | 280 | |||||||||
| Inventory | 1,389 | — | |||||||||
| Operating lease liability | 10,424 | 8,163 | |||||||||
| Other | 10,811 | 17,795 | |||||||||
| State credits | 13,305 | 14,359 | |||||||||
| Total deferred tax assets, gross | 49,229 | 57,232 | |||||||||
| Valuation allowance | (20,790) | (7,588) | |||||||||
| Total deferred tax assets, net | 28,439 | 49,644 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation | $ | (69,470) | $ | (67,888) | |||||||
| Pension | (57) | — | |||||||||
| Inventory | — | (3,306) | |||||||||
| Intangibles | (58,478) | (70,677) | |||||||||
| Operating lease right-of-use assets | (10,363) | (8,189) | |||||||||
| Other | (3,359) | (4,979) | |||||||||
| Total deferred tax liabilities | (141,727) | (155,039) | |||||||||
| Net deferred tax liabilities | $ | (113,288) | $ | (105,395) | |||||||
Under the tax laws of various jurisdictions in which we operate, deductions or credits that cannot be fully utilized for tax purposes during the year may be carried forward, subject to statutory limitations, to reduce taxable income or taxes payable in a future year. As of December 31, 2025, the Company has $13,305 of deferred tax assets related to state tax credits, which are subject to a 16-year carryforward period. The Company has recorded a full valuation allowance against the state tax credits as it is more likely than not that the benefit from these state tax credits will not be realized. The Company has $13,300 of deferred tax assets related to state net operating losses, which are subject to various carryforward periods of 5 to 20 years. A partial valuation allowance of $7,485 has been recorded due to the expected expiration of these state net operating losses before they are able to be utilized.
The change in net deferred tax liabilities for the years ended December 31, 2025 and 2024 was primarily driven by the Advanced Materials & Catalysts sale and reversal of the related deferred balances, differences between book and tax basis depreciation, activity with respect to tax deductible goodwill, activity with respect to interest rate caps recorded against other comprehensive income, activity with respect to the interest disallowance carryforward and activity with respect to the amortization of previously capitalized research and experimentation costs.
The net change in the total valuation allowance was an increase of $13,202 in 2025. The valuation allowance at December 31, 2025 was related to state net operating loss carryforwards and state tax credits that, in the judgment of management, are not more likely than not to be realized. In assessing the ability to realize deferred tax assets, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considered the scheduled reversal of
deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies that are prudent in making this assessment. In order to fully realize deferred tax assets, the Company will need to generate future taxable income prior to the expiration of the net operating loss and credit carryforwards. The amount of the deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.
The following table summarizes the activity related to the Company’s gross unrecognized tax benefits. The amounts listed in the below table also represents the total unrecognized tax benefits that, if recognized, would impact the effective tax rate as of December 31, 2025 and 2024, respectively:
| Years ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Balance at beginning of period | $ | 87 | $ | 8,110 | |||||||
| Uncertain tax benefit sustained due to lapsing of statue of limitations | (87) | (8,023) | |||||||||
| Balance at end of period | $ | — | $ | 87 | |||||||
To the extent interest and penalties are not assessed with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision in the period for which the event occurs requiring the adjustment. There were no interest and penalties recognized in provision (benefit) for income taxes on continuing operations for the year ended December 31, 2025. The total amount of interest and penalties recognized in provision (benefit) for income taxes on continuing operations was $1,390 for the year ended December 31, 2024. There were no accrued interest and penalties as of December 31, 2025.
The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction. The following describes the open tax years, by significant tax jurisdiction, as of December 31, 2025:
| Jurisdiction | Period | |||||||
| United States-Federal | 2022-2025 | |||||||
| United States-State | 2020-2025 | |||||||
Given that the Company has utilized state net operating losses in the current and prior years, the statute for examination by the state taxing authorities will typically remain open for a period following the use of such net operating loss carryforwards, extending the period for examination beyond the years indicated above.
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.