INFINITY NATURAL RESOURCES, INC.INR
INFINITY NATURAL RESOURCES, INC. Income Taxes Disclosure
Income Taxes and Tax Receivable Agreement
Tax Provision. As a result of the IPO and related Corporate Reorganization, Infinity became the sole managing member of INR Holdings, which is treated as a partnership for U.S. federal and certain state and local income tax purposes. As a partnership, INR Holdings is not subject to U.S. federal income tax at the entity level. Instead, taxable income or loss generated by INR Holdings is allocated to its members, including the Company, and is reported on the respective tax returns of those members.
Our predecessor, INR Holdings, is a limited liability company treated as a partnership for U.S. federal income tax purposes and, therefore, has not been subject to U.S. federal income tax at an entity level. As a result, the consolidated net income (loss) in our historical financial statements for periods prior to the IPO and Corporate Reorganization does not reflect the tax expense (benefit) we would have incurred if we were subject to U.S. federal income tax at an entity level during those periods.
Beginning with the IPO, the Company is subject to U.S. federal income taxes and state and local income taxes with respect to its allocable share of taxable income or loss of INR Holdings, as well as any stand‑alone income or loss generated at the Company level. Prior to the IPO and Corporate Reorganization, INR Holdings operated as a limited liability company treated as a partnership for U.S. federal income tax purposes and was not subject to U.S. federal income tax at the entity level. As a result, the consolidated net income (loss) in the historical financial statements for periods prior to the IPO does not reflect the income tax expense (benefit) that would have been incurred if the Company had been subject to U.S. federal income tax during those periods.
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current tax expense (benefit) | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | $ | — | $ | — | $ | — | |||||||||||
| Total current tax expense (benefit) | $ | — | $ | — | $ | — | |||||||||||
| Deferred tax expense (benefit) | |||||||||||||||||
| Federal | $ | (4,668) | $ | — | $ | — | |||||||||||
| State | $ | (190) | $ | — | $ | — | |||||||||||
| Total deferred tax expense (benefit) | $ | (4,858) | $ | — | $ | — | |||||||||||
| Total income tax expense (benefit) | $ | (4,858) | $ | — | $ | — | |||||||||||
Effective Tax Rate. The Company's overall effective tax rate differs from the U.S statutory rate primarily due to the fact that prior to the IPO, INR Holdings was structured as a partnership for U.S. federal income tax and subsequent to the IPO, the income (loss) attributable to the non-controlling interests in INR Holdings is not subject to U.S. federal income tax at the Company or INR Holdings. In addition, the Company reduced its valuation allowance with respect to investment in INR Holdings as discussed further below. As a result of the Company’s Up‑C organizational structure, the allocation of income to non‑controlling interests, and valuation allowance activity, the Company’s effective tax rate for the year ended December 31, 2025 is not indicative of the effective tax rate that may be expected in future periods.
In connection with the IPO, the Company recorded a deferred tax asset of $16.8 million resulting from its purchase of INR Units in INR Holdings. The deferred tax asset results from the difference between the Company's outside basis in its investment in INR Holdings compared to its share of the net financial statement carrying value of the assets of INR Holdings. At the time of the IPO, we determined that the deferred tax asset associated with the investment in INR Holdings was not more likely than not to be realized and recorded a valuation allowance of $16.8 million. The initial deferred tax asset of $16.8 million for the investment in INR Holdings and the related valuation allowance of $16.8 million are recorded against additional paid-in capital in the condensed consolidated statements of redeemable non-controlling interest and stockholders’ / members’ equity.
During the year ended December 31, 2025, the Company’s taxable income attributable to its interest in INR Holdings was lower than its share of book income, which reduced the Company’s deferred tax asset related to its investment in INR
Holdings. As a result, a corresponding reduction in the valuation allowance was recorded through income tax benefit in the consolidated statements of operations.
The reconciliation of income taxes at the federal statutory level to provision for income taxes is as follows:
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| $ | % | $ | % | $ | % | |||||||||||||||||||||
| U.S. federal tax expense (benefit) at statutory rate | $ | 12,429 | 21 | % | $ | — | 21 | % | $ | — | 21 | % | ||||||||||||||
| State tax, net of federal benefit | $ | (150) | — | % | $ | — | — | % | $ | — | — | % | ||||||||||||||
| Pre-Offering non-taxable/deductible income | $ | 24,407 | 41 | % | $ | — | — | % | $ | — | — | % | ||||||||||||||
| Non-controlling interests | $ | (27,520) | (47) | % | $ | — | — | % | $ | — | — | % | ||||||||||||||
| IPO Underwriting Fees | $ | — | — | % | $ | — | — | % | $ | — | — | % | ||||||||||||||
| Non-Deductible expenses | $ | 291 | 1 | % | $ | — | — | % | $ | — | — | % | ||||||||||||||
| Percentage Depletion | $ | (575) | (1) | % | $ | — | — | % | $ | — | — | % | ||||||||||||||
| Change in Valuation Allowance | $ | (13,741) | (23) | % | $ | — | — | % | $ | — | — | % | ||||||||||||||
| Total income tax expense (benefit) | $ | (4,858) | (8) | % | $ | — | 21 | % | $ | — | 21 | % | ||||||||||||||
Deferred Tax Assets and Liabilities. The Company recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits of utilizing net operating losses and other tax carryforwards, using enacted tax rates in effect for the taxing jurisdictions in which the Company operates for the year in which those temporary differences are expected to be recovered or settled.
The tax effects of each temporary difference and carryforward as of December 31, 2025 and December 31, 2024 are as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating losses | $ | 4,054 | $ | — | |||||||
| Investment in partnership | $ | 2,298 | $ | — | |||||||
| Disallowed depletion carryforward | $ | 804 | $ | — | |||||||
| Total deferred tax assets: | $ | 7,157 | $ | — | |||||||
| Deferred tax liabilities: | |||||||||||
| Valuation allowance | $ | (2,298) | $ | — | |||||||
| Net deferred tax asset (liabilities) | $ | 4,858 | $ | — | |||||||
The Company evaluates all deferred tax assets as to their future realization using positive and negative evidence. As of December 31, 2025, the Company has recorded a full valuation allowance against its deferred tax asset associated with its investment in INR Holdings. The Company carries a deferred tax asset on its net operating losses at the federal and Pennsylvania level. These net operating losses do not expire. The Company has determined that it is more likely than not to realize all of the tax benefits associated with its net operating losses due to the lack of expiration of the net operating losses, positive book income in 2025, and projected income in future years.
During the year ended December 31, 2025, members of INR Holdings redeemed 0.4 million INR Holdings Units (together with the cancellation of 0.4 million shares of Class B common stock) for an equivalent number of shares of Class A common stock. As a result of this redemption, there was minimal change in the Company's deferred tax asset position. Because the deferred tax change arose in connection with a transaction between the Company and stockholders, the initial change in deferred tax asset, as well as the impact on the Company's valuation allowance, is recorded in additional paid-in capital in the condensed consolidated statements of redeemable non-controlling interest and stockholders’ / members’ equity.
The Company evaluates uncertain tax positions for recognition and measurement in the financial statements. To recognize a tax position, the Company determines whether it is more likely than not that the tax position will be sustained upon examination. A tax position that meets the more likely than not threshold is measured to determine the amount of benefit to be recognized in the financial statements. As of December 31, 2025, the Company has no significant uncertain tax positions.
The Company files income tax returns in the U.S. federal jurisdiction and Pennsylvania on a separate basis. There are currently no federal or state income tax examinations underway for these jurisdictions. The Company's federal and state returns remain open to examination for tax years 2024 and 2025.
Taxes Paid by Jurisdiction. For the years ended December 31 2025, 2024 and 2023, neither INR Holdings nor the Company paid any entity level U.S. federal, state or foreign income taxes.
Tax Receivable Agreement. We entered into the TRA with the Legacy Owners in connection with the IPO. This agreement generally provides for the payment by us to the Legacy Owners of 85% of the net cash savings, if any, in U.S. federal, state and local income tax that we (a) actually realize with respect to taxable periods ending after the IPO or (b) are deemed to realize in the event of a change of control (as defined under the TRA, which includes certain mergers, asset sales and other forms of business combinations and certain changes to the composition of our board of directors) or the TRA terminates early (at our election or as a result of our breach) with respect to any taxable periods ending on or after such change of control or early termination event, in each case, as a result of (i) the tax basis increases resulting from the exchange of INR Units and the corresponding surrender of an equivalent number of shares of Class B common stock by the Legacy Owners for a number of shares of Class A common stock on a one-for-one basis or, at our option, the receipt of an equivalent amount of cash pursuant to the INR Holdings LLC Agreement and (ii) deductions arising from imputed interest deemed to be paid by us as a result of, and additional tax basis arising from, any payments we make under the TRA. We will retain the benefit of the remaining 15% of these cash savings, if any.
On August 15, 2025 a Legacy Owner redeemed 390,915 INR Units for shares of Class A common stock on a one-for-one basis. Concurrently with the redemption of the INR Units, an equal number of shares of Class B common stock were cancelled. The Company recognizes a liability for the estimated amounts payable under the TRA when it is probable that taxable income will be sufficient to realize the related tax benefits and the amounts can be reasonably estimated. The estimation of liability under the TRA is by its nature imprecise and subject to significant assumptions regarding the amount, character, and timing of the taxable income of the Company in the future. Changes in tax laws or rates could also materially impact the estimated liability. As of December 31, 2025, the Company recorded a TRA liability of $1.5 million, all of which has been classified as a non-current liability.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.