MDU RESOURCES GROUP INCMDU
MDU RESOURCES GROUP INC Income Taxes Disclosure
Income Taxes
The components of income before income taxes from continuing operations for each of the years ended December 31 were as follows:
| 2025 | 2024 | 2023 | |||||||||
| (In thousands) | |||||||||||
| United States | $ | 210,977 | $ | 198,662 | $ | 340,330 | |||||
| Income before income taxes from continuing operations | $ | 210,977 | $ | 198,662 | $ | 340,330 | |||||
Income tax expense (benefit) from continuing operations for the years ended December 31 was as follows:
| 2025 | 2024 | 2023 | |||||||||
| (In thousands) | |||||||||||
| Current: | |||||||||||
| Federal | $ | 25,971 | $ | 30,412 | $ | 8,271 | |||||
| State | 2,522 | 3,255 | 3,251 | ||||||||
| 28,493 | 33,667 | 11,522 | |||||||||
| Deferred: | |||||||||||
| Income taxes: | |||||||||||
| Federal | (13,970) | (17,321) | (3,331) | ||||||||
| State | 1,171 | (1,805) | (125) | ||||||||
| Investment tax credit - net | 3,876 | 3,048 | 2,147 | ||||||||
| (8,923) | (16,078) | (1,309) | |||||||||
| Total income tax expense | $ | 19,570 | $ | 17,589 | $ | 10,213 | |||||
Components of deferred tax assets and deferred tax liabilities at December 31 were as follows:
| 2025 | 2024 | |||||||
| (In thousands) | ||||||||
| Deferred tax assets: | ||||||||
| Environmental compliance | $ | 49,750 | $ | 33,730 | ||||
| Pension and postretirement | 23,443 | 25,508 | ||||||
| Compensation-related | 16,249 | 15,651 | ||||||
| Customer advances | 10,590 | 9,719 | ||||||
| Cost recovery mechanisms | 10,077 | 7,402 | ||||||
| Legal and environmental contingencies | 5,474 | 5,317 | ||||||
| Other | 17,989 | 20,386 | ||||||
| Total deferred tax assets | 133,572 | 117,713 | ||||||
| Deferred tax liabilities: | ||||||||
| Basis differences on property, plant and equipment | 451,595 | 426,493 | ||||||
| Pension and postretirement | 47,931 | 48,355 | ||||||
| Cost recovery mechanisms | 18,109 | 19,245 | ||||||
| Environmental compliance | 17,173 | 17,260 | ||||||
| Legal and environmental contingencies | 6,399 | 6,300 | ||||||
| Purchased gas adjustment | 5,137 | 20,441 | ||||||
| Other | 23,695 | 19,931 | ||||||
| Total deferred tax liabilities | 570,039 | 558,025 | ||||||
| Valuation allowance | 819 | 1,008 | ||||||
| Net deferred income tax liability | $ | 437,286 | $ | 441,320 | ||||
As of December 31, 2025 and 2024, the Company had various state income tax net operating loss carryforwards of $819,000 and $1.0 million, respectively, and state income tax credit carryforwards, excluding alternative minimum tax credit carryforwards, of $28.5 million and $31.6 million, respectively. The state income tax credit carryforwards are due to expire between 2027 and 2039. Changes in tax regulations or assumptions regarding current and future taxable income could require additional valuation allowances in the future.
The following table reconciles the change in the net deferred income tax liability from December 31, 2024, to December 31, 2025, to deferred income tax benefit:
| 2025 | |||||
| (In thousands) | |||||
| Change in net deferred income tax liability from the preceding table | $ | (4,034) | |||
| Effects of rate-regulated accounting | (4,890) | ||||
| Deferred taxes associated with other comprehensive income | 1 | ||||
Deferred income tax benefit for the period | $ | (8,923) | |||
Total income tax expense differs from the amount computed by applying the statutory federal income tax rate to income before taxes. The reasons for this difference were as follows:
| Year ended December 31, | 2025 | |||||||
| Amount | % | |||||||
| U.S. federal statutory tax rate | $ | 44,305 | 21.0 | |||||
| State and local income taxes, net of federal income tax effect * | 2,917 | 1.4 | ||||||
| Tax credits | ||||||||
| Federal renewable energy credit | (19,324) | (9.2) | ||||||
| Other | (1,938) | (0.9) | ||||||
| Nontaxable or nondeductible Items | (265) | (0.1) | ||||||
| Other | ||||||||
| Effects of rate-regulated accounting | (5,169) | (2.5) | ||||||
| Other | (956) | (0.4) | ||||||
| Total income tax expense and effective tax rate | $ | 19,570 | 9.3 | |||||
| * In 2025, state income taxes in Oregon and Montana made up the majority (greater than 50%) of the tax effect in this category. | ||||||||
| Years ended December 31, | 2024 | 2023 | ||||||||||||
| Amount | % | Amount | % | |||||||||||
| Computed tax at federal statutory rate | $ | 41,719 | 21.0 | $ | 71,469 | 21.0 | ||||||||
| Increases (reductions) resulting from: | ||||||||||||||
| State income taxes, net of federal income tax | 4,047 | 2.0 | 3,605 | 1.1 | ||||||||||
| State investment tax credit, net of federal income tax | 2,400 | 1.2 | 1,545 | 0.5 | ||||||||||
| Executive compensation | 2,111 | 1.1 | 564 | 0.2 | ||||||||||
| Federal renewable energy credit | (16,871) | (8.5) | (15,175) | (4.5) | ||||||||||
| Excess deferred income tax amortization | (8,121) | (4.1) | (8,383) | (2.5) | ||||||||||
| State tax rate change | (2,317) | (1.2) | (9) | — | ||||||||||
| Research and development tax credit | (1,465) | (0.7) | (1,985) | (0.6) | ||||||||||
| Nonqualified benefit plans | (1,142) | (0.6) | (1,313) | (0.4) | ||||||||||
| Tax-free debt for equity exchange | — | — | (38,967) | (11.4) | ||||||||||
| Other | (2,772) | (1.4) | (1,138) | (0.3) | ||||||||||
| Total income tax expense | $ | 17,589 | 8.8 | $ | 10,213 | 3.1 | ||||||||
The Company's effective tax rate for 2025 differs from the U.S. federal statutory rate of 21 percent due primarily to the impact of credits and deductions provided by law and the effects of rate-regulated accounting, primarily the amortizations of excess deferred income taxes and deferred investment tax credits.
Income taxes paid (net of refunds) for the year ended December 31, 2025, was $30.8 million, consisting of $27.7 million in federal income taxes and $3.1 million in state income taxes. Income taxes paid (net of refunds) in Montana of $1.8 million exceeded 5 percent of total income taxes paid (net of refunds).
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various state and local jurisdictions. The Company is no longer subject to U.S. federal, non-U.S., state or local income tax examinations by tax authorities for years ending prior to 2021.
Total reserves for uncertain tax positions were not material. The Company recognizes interest and penalties accrued relative to unrecognized tax benefits in income tax expense.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 19, 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.