HALLADOR ENERGY CO Income Taxes Disclosure
(7) INCOME TAXES
Effective January 1, 2025, the Company adopted an accounting standards update that provides guidance for reporting on income taxes and requires additional disclosures related to cash paid (received) for income taxes – net and the effective income tax rate. The Company adopted the updated standard for income taxes using the full retrospective approach, which changed the presentation of certain information below.
Net income (loss) before income taxes consisted of the following (in thousands):
| 2025 | | 2024 | |||
United States | $ | 43,704 | $ | (235,542) | ||
Foreign |
| — |
| — | ||
Net Income (Loss) before income taxes | $ | 43,704 | $ | (235,542) | ||
The federal and state income tax provision (benefit) is summarized as follows (in thousands):
2025 | | 2024 | ||||
Current tax expense: | ||||||
Federal | $ | — | $ | — | ||
State and local | — | (169) | ||||
Total current tax expense | — | (169) | ||||
Deferred tax expense (benefit): | ||||||
Federal | 1,833 | (9,247) | ||||
State and local | — | 12 | ||||
Total deferred tax expense (benefit) | 1,833 | (9,235) | ||||
Total income tax expense (benefit): | ||||||
Federal | 1,833 | (9,247) | ||||
State and local | — | (157) | ||||
Total income tax expense (benefit) | $ | 1,833 | $ | (9,404) | ||
Deferred income taxes reflect the net tax effects of (a) temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and (b) operating losses and tax credit carryforwards.
The tax effects of significant items comprising the Company’s deferred taxes as of the years presented are as follows (in thousands):
| 2025 | | 2024 | |||
Deferred tax assets: | ||||||
Net operating loss | $ | 28,320 | $ | 32,725 | ||
Power contracts |
| 13,243 |
| 10,828 | ||
Compensation |
| 1,407 |
| 1,955 | ||
Accrued liabilities |
| 463 |
| 423 | ||
ARO liabilities | 2,436 | 2,293 | ||||
Lease liabilities | 2,196 | 3,938 | ||||
Coal properties | 20,909 | 26,191 | ||||
Other |
| 1,875 |
| 5,215 | ||
Total deferred tax assets |
| 70,849 |
| 83,568 | ||
Valuation allowance |
| (41,438) |
| (49,695) | ||
Deferred tax assets, net of valuation allowance |
| 29,411 |
| 33,873 | ||
Deferred tax liabilities: | ||||||
Coal properties |
| — |
| — | ||
Power properties |
| (27,601) |
| (27,960) | ||
Investment partnerships |
| (512) |
| (531) | ||
ROU assets |
| (3,131) |
| (5,382) | ||
Total deferred tax liabilities |
| (31,244) |
| (33,873) | ||
Net deferred tax liability | $ | (1,833) | $ | — | ||
ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is more likely than not. Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets is currently not likely to be realized and, accordingly, has provided a valuation allowance. The valuation allowance decreased by $8.3 million during 2025 and increased $49.7 million during 2024.
Net operating losses and tax credit carryforwards as of the financial statement date are as follows (in thousands):
| Amount | Expiration Years | ||||
Net operating losses, federal (Post December 31, 2017) | $ | 102,067 | Do not Expire | |||
Net operating losses, federal (Pre January 1, 2018) | 4,928 | |||||
Net operating losses, state | 151,604 | - | ||||
Tax credits, federal | 32 | - | ||||
Tax credits, state | — | |||||
Net operating losses, foreign | — | |||||
Tax credits, foreign | $ | — | ||||
The effective tax rate of the Company’s provision (benefit) for income taxes differs from the federal statutory rate as follows (amounts in thousands):
| 2025 | 2024 | ||||||||||
Amount | Percent | Amount | Percent | |||||||||
U.S. federal statutory tax rate | $ | 9,178 | 21.00 | % | $ | (49,464) | 21.00 | % | ||||
State and local income taxes, net of federal income tax effect | — | — | (124) | 0.05 | ||||||||
Enactment of new tax laws | — | — | — | — | ||||||||
Effect of cross-borders tax laws | — | — | — | — | ||||||||
Tax credits: | — | — | — | — | ||||||||
Mine rescue credits | 10 | 0.02 | 20 | (0.01) | ||||||||
Indiana EDGE credit | — | — | (169) | 0.07 | ||||||||
Change in valuation allowance | (6,605) | (15.11) | 40,327 | (17.12) | ||||||||
Nondeductible items | (1,112) | (2.54) | 296 | (0.13) | ||||||||
Worldwide changes in unrecognized tax benefits | — | — | — | — | ||||||||
Other | — | — | — | — | ||||||||
Prior period true-ups and other | 362 | 0.82 | (290) | 0.12 | ||||||||
Foreign tax effects | — | — | — | — | ||||||||
$ | 1,833 | 4.19 | % | $ | (9,404) | 3.99 | % | |||||
In each year, the state and local income taxes which comprise the majority of the state and local income taxes, net of federal effect category are Indiana.
The cash paid for income taxes (net of refunds) during the year was as follows (in dollars) (in thousands):
| 2025 | | 2024 | |||
Federal | $ | — | $ | — | ||
— | — | |||||
Foreign | — | — | ||||
Total income taxes paid | $ | — | $ | — | ||
On July 4, 2025, the United States Congress passed budget reconciliation bill H.R.1, referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA contains several changes to corporate taxation, such as (i) the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017, including 100% expensing of qualified depreciable assets, (ii) interest deductibility, (iii) the repeal or acceleration of the sunset of certain tax credits under the 2022 Inflation Reduction Act and (iv) the elimination of certain penalties for violations of certain regulatory credit programs. The OBBBA has multiple effective dates with certain provisions effective in 2025 and others implemented through 2027. The Company continues to analyze the impact of this legislation on its business and does not anticipate a material impact as a result.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 12, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Mar 14, 2024 | |
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.