KINDER MORGAN, INC.KMI
KINDER MORGAN, INC. Income Taxes Disclosure
| 4. | Income Taxes | ||||
The components of “Income Before Income Taxes” are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In millions) | |||||||||||||||||
| U.S. | $ | 3,990 | $ | 3,402 | $ | 3,192 | |||||||||||
| Foreign | 2 | 5 | 9 | ||||||||||||||
| Total Income Before Income Taxes | $ | 3,992 | $ | 3,407 | $ | 3,201 | |||||||||||
Components of the income tax provision applicable for federal, foreign and state taxes are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In millions) | |||||||||||||||||
| Current tax expense | |||||||||||||||||
| Federal | $ | 23 | $ | 11 | $ | — | |||||||||||
| State | 25 | 26 | 5 | ||||||||||||||
| Foreign | 4 | 3 | — | ||||||||||||||
| Total | 52 | 40 | 5 | ||||||||||||||
| Deferred tax expense | |||||||||||||||||
| Federal | 729 | 602 | 619 | ||||||||||||||
| State | 51 | 45 | 91 | ||||||||||||||
| Total | 780 | 647 | 710 | ||||||||||||||
| Total tax provision | $ | 832 | $ | 687 | $ | 715 | |||||||||||
The difference between the statutory federal income tax rate and our effective income tax rate is summarized as follows:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
(In millions, except percentages) | |||||||||||||||||||||||||||||||||||
| Federal income tax | $ | 838 | 21.0 | % | $ | 716 | 21.0 | % | $ | 672 | 21.0 | % | |||||||||||||||||||||||
| Increase (decrease) as a result of: | |||||||||||||||||||||||||||||||||||
| State income tax, net of federal benefit(a) | 69 | 1.7 | % | 64 | 1.9 | % | 97 | 3.0 | % | ||||||||||||||||||||||||||
Foreign tax effects | 3 | 0.1 | % | 2 | 0.1 | % | — | — | % | ||||||||||||||||||||||||||
| Tax Credits | |||||||||||||||||||||||||||||||||||
| Investment tax credit(b) | (21) | (0.5) | % | (42) | (1.2) | % | (1) | — | % | ||||||||||||||||||||||||||
| Other credit | — | — | % | (1) | — | % | (5) | (0.1) | % | ||||||||||||||||||||||||||
Changes in Valuation Allowances | — | — | % | — | — | % | 4 | 0.1 | % | ||||||||||||||||||||||||||
| Nontaxable or Nondeductible Items | |||||||||||||||||||||||||||||||||||
| Dividend received deduction | (36) | (0.9) | % | (34) | (1.0) | % | (34) | (1.1) | % | ||||||||||||||||||||||||||
| Other | (23) | (0.7) | % | (19) | (0.6) | % | (16) | (0.5) | % | ||||||||||||||||||||||||||
Changes in unrecognized tax benefits | 2 | 0.1 | % | 1 | — | % | (2) | (0.1) | % | ||||||||||||||||||||||||||
| Total | $ | 832 | 20.8 | % | $ | 687 | 20.2 | % | $ | 715 | 22.3 | % | |||||||||||||||||||||||
(a)State taxes in Texas, California, Arizona, North Dakota, and New Jersey made up the majority (greater than 50%) of the tax effect in this category for 2025. Pennsylvania, Texas, New Jersey, and Mississippi made up the majority of state tax expense in 2024. Louisiana, Pennsylvania, Georgia, Utah, Colorado, and California made up the majority of state tax expense in 2023.
(b)Recognition of investment tax credits generated by biogas projects.
Deferred tax assets and liabilities result from the following:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In millions) | |||||||||||
| Deferred tax assets | |||||||||||
| Employee benefits | $ | 67 | $ | 81 | |||||||
| Net operating loss carryforwards | 1,017 | 1,416 | |||||||||
| Tax credit carryforwards | 265 | 312 | |||||||||
| Interest expense limitation | 346 | 372 | |||||||||
| Other | 183 | 179 | |||||||||
| Valuation allowances | (72) | (64) | |||||||||
| Total deferred tax assets | 1,806 | 2,296 | |||||||||
| Deferred tax liabilities | |||||||||||
| Property, plant, and equipment | 231 | 217 | |||||||||
Investments(a) | 4,436 | 4,124 | |||||||||
| Other | 30 | 25 | |||||||||
| Total deferred tax liabilities | 4,697 | 4,366 | |||||||||
| Net deferred tax liability | $ | (2,891) | $ | (2,070) | |||||||
(a)Amounts as of December 31, 2025 and 2024 are primarily associated with KMI’s investment in KMP.
Deferred Tax Assets and Valuation Allowances
A reconciliation of our valuation allowances for the year ended December 31, 2025 is as follows:
Year Ended December 31, 2025 | ||||||||
| (In millions) | ||||||||
| Balance at beginning of period | $ | 64 | ||||||
| Addition for state NOL | 6 | |||||||
| State rate changes | (1) | |||||||
| Currency fluctuation | 3 | |||||||
| Balance at end of period | $ | 72 | ||||||
The following table provides details related to our deferred tax assets and valuation allowances as of December 31, 2025:
| Unused Amount | Deferred Tax Asset | Valuation Allowance | Expiration Period | |||||||||||||||||||||||
| (In millions) | ||||||||||||||||||||||||||
| Net Operating Loss | ||||||||||||||||||||||||||
| U.S. federal net operating loss | $ | 3,899 | $ | 819 | $ | — | Indefinite | |||||||||||||||||||
| State losses | 4,137 | 171 | (45) | 2025 - 2045 | ||||||||||||||||||||||
| Foreign losses | 79 | 27 | (27) | Indefinite | ||||||||||||||||||||||
| Tax Credits | ||||||||||||||||||||||||||
| General business credits | 265 | 265 | — | 2037 - 2045 | ||||||||||||||||||||||
Use of a portion of our U.S. federal carryforwards is subject to the limitations provided under Sections 382 and 383 of the Internal Revenue Code as well as the separate return limitation rules of Internal Revenue Service regulations. If certain substantial changes in our ownership occur, there would be an annual limitation on the amount of carryforwards that could be utilized.
Unrecognized Tax Benefits: We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based not only on the technical merits of the tax position based on tax law, but also the past administrative practices and precedents of the taxing authority. The tax benefits
recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.
A reconciliation of our gross unrecognized tax benefit excluding interest and penalties is as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (In millions) | ||||||||||||||||||||
| Balance at beginning of period | $ | 19 | $ | 18 | $ | 23 | ||||||||||||||
| Reductions based on statute expirations | (2) | (3) | (5) | |||||||||||||||||
| Audit settlement | (1) | — | (1) | |||||||||||||||||
| Additions to state reserves for prior years | 5 | 4 | 1 | |||||||||||||||||
| Balance at end of period | $ | 21 | $ | 19 | $ | 18 | ||||||||||||||
| Amounts which, if recognized, would affect the effective tax rate | $ | 21 | ||||||||||||||||||
In addition, we believe it is reasonably possible that our liability for unrecognized tax benefits will remain the same during the next year, primarily due to additions for state filing positions taken in prior years, offset by releases from statute expirations.
The following table summarizes information of our open tax years:
| Jurisdiction | Open Tax Year | |||||||
| U.S. | 2021 - 2025 | |||||||
| Various states | 2012 - 2025 | |||||||
| Foreign | 2021 - 2025 | |||||||
Income Taxes Paid
The components of total income taxes paid net of refunds by jurisdiction are as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (In millions) | ||||||||||||||||||||
Federal | $ | 20 | $ | 10 | $ | — | ||||||||||||||
| States(a) | ||||||||||||||||||||
| Texas | 12 | 9 | 6 | |||||||||||||||||
| Pennsylvania | 3 | 4 | 2 | |||||||||||||||||
| Louisiana | 3 | 2 | — | |||||||||||||||||
| California | 3 | 2 | — | |||||||||||||||||
| New Hampshire | — | — | 1 | |||||||||||||||||
| Utah | — | 1 | 1 | |||||||||||||||||
| New Mexico | — | — | (2) | |||||||||||||||||
| Other States | 3 | 4 | — | |||||||||||||||||
Foreign | ||||||||||||||||||||
| Mexico | 3 | 1 | 3 | |||||||||||||||||
Total Income Taxes Paid | $ | 47 | $ | 33 | $ | 11 | ||||||||||||||
(a)2025 tax payments include $4 million of transferrable state tax credits purchased.
On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA) that includes tax reform provisions that amend, eliminate, and extend tax rules under the Inflation Reduction Act and Tax Cuts and Jobs Act. The most significant impact to the Company of the OBBBA at this time is the permanent reinstatement of bonus depreciation on qualified property and modifications to the calculation for excess business interest expense limitation under §163(j) to the current tax estimate. Based on our current projections, we anticipate the impact will defer the payment of a significant portion of our
current federal tax for multiple years. The impact to current and deferred tax has been recorded with no overall impact to our income statement.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 8, 2023 | |
| 2021 | Feb 7, 2022 | |
| 2020 | Feb 5, 2021 | |
| 2019 | Feb 12, 2020 | |
| 2018 | Feb 8, 2019 | |
| 2017 | Feb 9, 2018 | |
| 2016 | Feb 10, 2017 | |
| 2015 | Feb 16, 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.