Liberty Energy Inc.LBRT
Liberty Energy Inc. Income Taxes Disclosure
Income Taxes
The Company is a corporation and is subject to taxation in the United States, Canada, Australia and various state, local and provincial jurisdictions. Historically, Liberty LLC was treated as a partnership, and its income was passed through to its owners for income tax purposes. Liberty LLC’s members, including the Company, were liable for federal, state and local income taxes based on their share of Liberty LLC’s pass-through taxable income.
Effective January 31, 2023, the Company adopted a plan of merger, pursuant to which Liberty LLC merged into the Company, ceasing the existence of Liberty LLC with the Company remaining as the surviving entity. Liberty LLC filed a final tax return during the 2023 calendar year. The Company is still party to the TRAs; the associated liabilities are discussed below.
As of December 31, 2025, tax reporting by the Company for the years ended December 31, 2022, 2023, 2024, and the short period ended January 31, 2023 are subject to examination by the tax authorities. With few exceptions, as of December 31, 2025, the Company is no longer subject to U.S. federal, state or local examinations by tax authorities for tax years ended on or before December 31, 2021. The Company is currently under IRS examination for the tax year ended December 31, 2023, at this time there have been no material audit adjustments proposed as part of the examination process.
The components of the Company’s income from continuing operations before income taxes on which the provision for income taxes was computed consisted of the following:
| Year Ended December 31, | ||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| United States | $ | 202,280 | $ | 356,340 | $ | 668,338 | ||||||||||||||
| Foreign | (7,089) | 46,931 | 66,552 | |||||||||||||||||
| Total | $ | 195,191 | $ | 403,271 | $ | 734,890 | ||||||||||||||
The components of the provision for incomes taxes from continuing operations are summarized as follows:
| Year Ended December 31, | ||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | (10,268) | $ | 33,474 | $ | 36,319 | ||||||||||||||
| State | 1,354 | 6,637 | 4,662 | |||||||||||||||||
| Foreign | 1,449 | 13,306 | 17,189 | |||||||||||||||||
| Total Current | $ | (7,465) | $ | 53,417 | $ | 58,170 | ||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | $ | 53,430 | $ | 32,087 | $ | 109,399 | ||||||||||||||
| State | 4,443 | 3,289 | 11,913 | |||||||||||||||||
| Foreign | (3,089) | (1,532) | (1,000) | |||||||||||||||||
| Total Deferred | $ | 54,784 | $ | 33,844 | $ | 120,312 | ||||||||||||||
| Income tax expense (benefit) | $ | 47,319 | $ | 87,261 | $ | 178,482 | ||||||||||||||
Income tax expense (benefit) attributable to net income (loss) before income taxes differed from the amounts computed by applying the statutory U.S. federal income tax rate of 21.0% to pre-tax income as a result of the following:
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||||
| US Federal Statutory Tax Rate | $ | 40,991 | 21.0 | % | $ | 84,687 | 21.0 | % | $ | 154,327 | 21.0 | % | ||||||||||||||||||||||||||
| State and Local Income Taxes Net of Federal Income Tax Effect | 5,676 | 2.9 | % | 8,315 | 2.1 | % | 15,995 | 2.2 | % | |||||||||||||||||||||||||||||
| Foreign Tax Effects | (152) | (0.1) | % | 1,928 | 0.5 | % | 1,269 | 0.1 | % | |||||||||||||||||||||||||||||
| Effect of Changes in Tax Laws or Rates Enacted in the Current Period | — | — | % | — | — | — | — | |||||||||||||||||||||||||||||||
| Effect of Cross-Border Tax Laws | — | — | % | — | — | — | — | |||||||||||||||||||||||||||||||
| Tax Credits: | ||||||||||||||||||||||||||||||||||||||
| IRA Tax Credits | — | — | % | (2,343) | (0.6) | % | — | — | % | |||||||||||||||||||||||||||||
| R&D Credit | (3,578) | (1.8) | % | (4,400) | (1.1) | % | (200) | — | % | |||||||||||||||||||||||||||||
| RTP Credits | (2,343) | (1.2) | % | (3,271) | (0.8) | % | (158) | — | % | |||||||||||||||||||||||||||||
| Changes in Valuation Allowance | — | — | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
| Nontaxable or Nondeductible Items: | ||||||||||||||||||||||||||||||||||||||
| Stock Comp | 29 | — | % | (1,935) | (0.5) | % | (354) | — | % | |||||||||||||||||||||||||||||
| Executive compensation limited | 5,255 | 2.7 | % | 2,920 | 0.7 | % | 6,514 | 0.9 | % | |||||||||||||||||||||||||||||
| Non-controlling interest | — | — | % | — | — | % | (19) | — | % | |||||||||||||||||||||||||||||
| Other, net | 955 | 0.5 | % | 1,180 | 0.3 | % | 1,357 | 0.1 | % | |||||||||||||||||||||||||||||
| Changes in Unrecognized Tax Benefits | — | — | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
| Other Adjustments: | ||||||||||||||||||||||||||||||||||||||
| Other TRA adjustment | 486 | 0.2 | % | 180 | — | % | (249) | — | % | |||||||||||||||||||||||||||||
| Total income tax expense/(benefit) | $ | 47,319 | 24.2 | % | $ | 87,261 | 21.6 | % | $ | 178,482 | 24.3 | % | ||||||||||||||||||||||||||
The effective tax rate for the years ended December 31, 2025, 2024, and 2023 was 24.2%, 21.6%, and 24.3%, respectively.
The Company’s effective tax rate is greater than the statutory federal income tax rate of 21.0% due to the Company’s Canadian operations, state income taxes in the states the Company operates, as well as nondeductible executive compensation, partially offset by U.S. federal income tax credits.
Income taxes paid (net of refunds) were paid in the following jurisdictions:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | 6,615 | $ | 2,821 | $ | 53,038 | ||||||||||||||
| State | 3,415 | 4,350 | 7,841 | |||||||||||||||||
| Foreign | 1,020 | 28,685 | 5,806 | |||||||||||||||||
| Total Current | $ | 11,050 | $ | 35,857 | $ | 66,685 | ||||||||||||||
Other than cash payments for U.S. federal income tax shown in the table above, Canada ($1.0 million, $28.7 million, and $5.8 million in 2025, 2024, and 2023, respectively) and Texas ($1.7 million, $2.9 million, and $1.8 million in 2025, 2024, and 2023, respectively) are the only jurisdictions in which the Company paid more than 5% of total cash taxes in any of the years presented.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:
| ($ in thousands) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Federal tax credit | $ | 3,578 | $ | 9,615 | ||||||||||
| Foreign net operating losses | 2,006 | 920 | ||||||||||||
| Federal net operating losses | 54,376 | — | ||||||||||||
| State net operating losses | 6,090 | 859 | ||||||||||||
| Lease liabilities | 60,366 | 67,603 | ||||||||||||
| Realized tax benefit - TRAs | 70,631 | 79,175 | ||||||||||||
| Stock-based compensation | 4,635 | 4,494 | ||||||||||||
| Intangibles | 22,389 | 22,440 | ||||||||||||
| Inventory | 2,474 | 2,604 | ||||||||||||
| Other | 1,968 | 10,674 | ||||||||||||
| Total deferred tax assets | 228,513 | 198,384 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Property and equipment | (291,445) | (233,649) | ||||||||||||
| Lease assets | (93,654) | (83,137) | ||||||||||||
| Other | (34,334) | (17,782) | ||||||||||||
| Total deferred tax liabilities | (419,433) | (334,568) | ||||||||||||
| Net deferred tax (liability) | $ | (190,920) | $ | (136,184) | ||||||||||
As of December 31, 2025, the Company has U.S. federal net operating loss carryforwards of $54.4 million, has $6.1 million in state net operating loss carryforwards, and $2.0 million of foreign net operating loss carryforwards that will not expire in the foreseeable future. The Company also has $3.6 million U.S. federal income tax credits that will not expire for twenty years.
On October 8, 2021, the Organization for Economic Co-operation and Development (“OECD”) released a statement on the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting, which agreed to a two-pillar solution to address tax challenges of the digital economy. On December 20, 2021, the OECD released Pillar Two model rules defining a 15% global minimum tax rate for large multinational corporations (the “Pillar Two Framework”). On June 20, 2024 and December 23, 2024, Canada and Australia, respectively, enacted the Pillar Two global minimum tax regime, which is not expected to have a material impact on the Company’s financial statements for the fiscal year ended December 31, 2025. The OECD continues to release additional guidance and countries are implementing legislation, with widespread adoption of the Pillar Two Framework
expected by 2025. The Company is continuing to evaluate the Pillar Two Framework and its potential impact on future periods, including any legislation enacted in the jurisdictions in which the Company operates.
The Company may distribute cash from foreign subsidiaries to its U.S. parent as business needs arise. The Company has not provided for deferred income taxes on the undistributed earnings from certain foreign subsidiaries earnings as such earnings are considered to be indefinitely reinvested. If such earnings were to be distributed, any income and/or withholding tax would not be significant.
During the year ended December 31, 2024, the Company entered into a Tax Credit Transfer Agreement (“TCTA”) with a third-party seller, pursuant to which the Company agreed to purchase up to $33.5 million of transferable tax credits under the Inflation Reduction Act. The benefit for the federal income tax credits purchased was recognized as a reduction to the Company’s income tax expense in 2024. The Company has not entered into any material third-party tax credit purchase agreements for the year ended December 31, 2025.
Uncertain Tax Positions
The Company records uncertain tax positions on the basis of a two-step process in which (1) the Company determines whether it is more likely than not the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions meeting the more likely than not recognition threshold, the Company recognizes the largest amount of tax benefit that is more than 50% likely to be realized upon ultimate settlement with the related tax authority.
The Company determined that no liability for unrecognized tax benefits for uncertain tax positions was required at December 31, 2025. In addition, the Company does not believe that it has any tax positions for which it is reasonably possible that it will be required to record a significant liability for unrecognized tax benefits within the next twelve months. If the Company were to record an unrecognized tax benefit, the Company will recognize applicable interest and penalties related to income tax matters in income tax expense.
Tax Receivable Agreements
The term of each TRA commenced on January 17, 2018, and will continue until all such tax benefits that are subject to such TRA have been utilized or expired, unless the Company experiences a change of control (as defined in the TRAs, which includes certain mergers, asset sales and other forms of business combinations) or the TRAs are terminated early (at the Company’s election or as a result of its breach), and the Company makes the termination payments specified in such TRA.
The amounts payable, as well as the timing of any payments, under the TRAs are dependent upon significant future events and assumptions, including the timing of the redemptions of Liberty LLC Units, the price of our Class A Common Stock at the time of each redemption, the extent to which such redemptions are taxable transactions, the amount of the redeeming unit holder’s tax basis in its Liberty LLC Units at the time of the relevant redemption, the characterization of the tax basis step-up, the depreciation and amortization periods that apply to the increase in tax basis, the amount of net operating losses available to the Company as a result of the Corporate Reorganization, the amount and timing of taxable income the Company generates in the future, the U.S. federal income tax rate then applicable, and the portion of the Company’s payments under the TRAs that constitute imputed interest or give rise to depreciable or amortizable tax basis.
At December 31, 2025, the Company’s liability under the TRAs was $74.8 million of which $7.9 million is recorded as a current liability and $66.9 million is recorded as a component of long-term liabilities. The Company recorded a gain on remeasurement of the liabilities subject to the TRA of $0.1 million recorded as part of continuing operations in the current year.
At December 31, 2024, the Company’s liability under the TRAs was $115.7 million, of which $40.8 million was presented as a current liability, and $74.9 million was presented as a long-term liability. The Company recorded a loss on remeasurement of the liabilities subject to the TRA of $3.2 million recorded as part of continuing operations in the prior year.
The Company made $40.8 million of TRA payments during the year ended December 31, 2025.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 2, 2026 | Showing above |
| 2024 | Feb 6, 2025 | |
| 2023 | Feb 9, 2024 | |
| 2022 | Feb 10, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 28, 2019 | |
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.