Helmerich & Payne, Inc.HP
Helmerich & Payne, Inc. Income Taxes Disclosure
NOTE 8 INCOME TAXES | ||||||||||||||
Income Tax Provision and Rate
The components of the provision for income taxes are as follows:
| Year Ended September 30, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 114,973 | $ | 136,110 | $ | 150,273 | |||||||||||
| Foreign | 35,588 | 7,756 | 12,883 | ||||||||||||||
| State | 13,935 | 16,180 | 16,523 | ||||||||||||||
| 164,496 | 160,046 | 179,679 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (44,564) | (18,785) | (20,337) | ||||||||||||||
| Foreign | (30,174) | (2,102) | (1,254) | ||||||||||||||
| State | (3,923) | (2,304) | 1,191 | ||||||||||||||
| (78,661) | (23,191) | (20,400) | |||||||||||||||
Total provision | $ | 85,835 | $ | 136,855 | $ | 159,279 | |||||||||||
The amounts of domestic and foreign income (loss) before income taxes are as follows:
| Year Ended September 30, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Domestic | $ | 339,966 | $ | 433,553 | $ | 584,891 | |||||||||||
| Foreign | (414,079) | 47,467 | 8,488 | ||||||||||||||
| $ | (74,113) | $ | 481,020 | $ | 593,379 | ||||||||||||
The reconciliation of our effective income tax rates to the U.S. Federal income tax rate is as follows:
| Year Ended September 30, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. Federal income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| Effect of foreign taxes | (54.6) | 1.3 | 2.1 | ||||||||||||||
| State income taxes, net of federal tax benefit | (9.6) | 2.2 | 2.4 | ||||||||||||||
| Other impact of foreign operations | (15.8) | 1.7 | 0.2 | ||||||||||||||
| Non-deductible meals and entertainment | (5.6) | 0.9 | 0.6 | ||||||||||||||
| Equity compensation | (0.6) | (0.1) | (0.1) | ||||||||||||||
| Excess officer's compensation | (4.8) | 0.8 | 0.4 | ||||||||||||||
Goodwill impairment | (54.6) | — | — | ||||||||||||||
| Other | 8.8 | 0.7 | 0.2 | ||||||||||||||
| Effective income tax rate | (115.8) | % | 28.5 | % | 26.8 | % | |||||||||||
Deferred Taxes
Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of our assets and liabilities. Recoverability of any tax assets are evaluated and necessary valuation allowances are provided. The carrying value of the net deferred tax assets is based on management’s judgments using certain estimates and assumptions that we will be able to generate sufficient future taxable income in certain tax jurisdictions to realize the benefits of such assets. If these estimates and related assumptions change in the future, additional valuation allowances may be recorded against the deferred tax assets resulting in additional income tax expense in the future.
The components of our net deferred tax liabilities are as follows:
| September 30, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property, plant and equipment | $ | 590,133 | $ | 534,161 | |||||||
| Marketable securities | — | 18,877 | |||||||||
Lease assets | 26,606 | — | |||||||||
| Other | 22,888 | 29,044 | |||||||||
| Total deferred tax liabilities | 639,627 | 582,082 | |||||||||
| Deferred tax assets: | |||||||||||
| Pension reserves | 11,889 | 1,477 | |||||||||
Marketable securities | 8,517 | — | |||||||||
| Self-insurance reserves | 4,909 | 4,619 | |||||||||
Net operating loss and other tax carryforwards | 301,813 | 11,296 | |||||||||
Accrued liabilities | 42,389 | 47,838 | |||||||||
Lease liability | 29,443 | — | |||||||||
| Other | 35,307 | 33,126 | |||||||||
| Total deferred tax assets | 434,267 | 98,356 | |||||||||
| Valuation allowance | (418,640) | (11,755) | |||||||||
| Net deferred tax assets | 15,627 | 86,601 | |||||||||
| Net deferred tax liabilities | $ | 624,000 | $ | 495,481 | |||||||
The change in our net deferred tax assets and liabilities is impacted by foreign currency remeasurement.
As of September 30, 2025, we had state and foreign tax net operating loss carryforwards of approximately $18.7 million and $429.6 million, respectively, foreign interest expense carryforward of $194.4 million, and federal research and development tax credits of approximately $0.3 million, which will expire in fiscal 2026 through 2044 and some of which can be carried forward indefinitely. Certain of these carryforwards are subject to various rules which impose limitations on their utilization. The valuation allowance is primarily attributable to a foreign interest expense limitation carryforward of $194.4 million, unrecognized foreign deferred net tax assets of $129.6 million, foreign net operating loss carryforwards of $88.9 million and equity compensation of $5.7 million which more likely than not will not be recognized.
Unrecognized Tax Benefits
We recognize accrued interest related to unrecognized tax benefits in interest expense, and penalties in other expense in the Consolidated Statements of Operations. As of September 30, 2025, 2024 and 2023, we had accrued interest and penalties of $3.4 million, $0.6 million and $2.9 million, respectively. A reconciliation of the change in our gross unrecognized tax benefits are as follows:
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Unrecognized tax benefits at October 1, | $ | 156 | $ | 247 | $ | 960 | |||||||||||
| Gross decreases - current period effect of tax positions | (1) | (14) | (534) | ||||||||||||||
Gross increases - current period effect of tax positions1 | 20,485 | — | 6 | ||||||||||||||
| Expiration of statute of limitations for assessments | (121) | (77) | (185) | ||||||||||||||
| Unrecognized tax benefits at September 30, | $ | 20,519 | $ | 156 | $ | 247 | |||||||||||
(1)Gross increases - current period effect of tax positions for the year ended September 30, 2025 are related to the acquisition of KCA Deutag.
As of September 30, 2025, we have recorded approximately $23.9 million of unrecognized tax benefits, interest, and penalties. We believe approximately $6.9 million of the unrecognized tax benefits, interest, and penalties will be recognized as of December 31, 2025, as the result of payment of an assessed amount. We cannot predict with certainty if we will achieve ultimate resolution of any additional uncertain tax positions associated with our U.S. and international operations resulting in any additional material increases or decreases of our unrecognized tax benefits for the next twelve months.
Tax Returns
We file a consolidated U.S. federal income tax return, as well as income tax returns in various states and foreign jurisdictions. The tax years that remain open to examination by U.S. federal and state jurisdictions include fiscal years 2020 through 2024 with exception of certain state jurisdictions currently under audit. The tax years remaining open to examination by foreign jurisdictions include 2014 through 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 21, 2025 | Showing above |
| 2024 | Nov 13, 2024 | |
| 2023 | Nov 8, 2023 | |
| 2022 | Nov 17, 2022 | |
| 2021 | Nov 18, 2021 | |
| 2020 | Nov 20, 2020 | |
| 2019 | Nov 15, 2019 | |
| 2018 | Nov 16, 2018 | |
| 2017 | Nov 22, 2017 | |
| 2016 | Nov 23, 2016 | |
| 2015 | Nov 25, 2015 | |
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.