Magnolia Oil & Gas CorpMGY
Magnolia Oil & Gas Corp Income Taxes Disclosure
Income Taxes
The Company’s income tax provision consists of the following components:
| Years Ended | ||||||||||||||||||||
| (In thousands) | December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | (15,537) | $ | 23,738 | $ | 30,166 | ||||||||||||||
| State | (1,161) | 1,803 | 1,686 | |||||||||||||||||
| Total current | (16,698) | 25,541 | 31,852 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | 94,278 | 67,531 | 73,672 | |||||||||||||||||
| State | 2,552 | 2,741 | 1,684 | |||||||||||||||||
| Total deferred | 96,830 | 70,272 | 75,356 | |||||||||||||||||
| Income tax expense | $ | 80,132 | $ | 95,813 | $ | 107,208 | ||||||||||||||
The income taxes paid (net of refunds) by the Company are as follows:
| Years Ended | ||||||||||||||||||||
| (In thousands) | December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||||
| Federal | $ | 6,300 | $ | 19,908 | $ | 34,190 | ||||||||||||||
| Texas | 1,482 | 3,163 | 4,536 | |||||||||||||||||
| Other state | — | 31 | 108 | |||||||||||||||||
| State total | 1,482 | 3,194 | 4,644 | |||||||||||||||||
| Total cash paid for taxes (net of refunds) | $ | 7,782 | $ | 23,102 | $ | 38,834 | ||||||||||||||
A reconciliation of the statutory federal income tax expense to the income tax expense from continuing operations is as follows:
| Years Ended | ||||||||||||||||||||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||
| (In thousands) | $ | % | $ | % | $ | % | ||||||||||||||||||||||||||||||||
| Income tax expense at the federal statutory rate | $ | 87,656 | 21.0 | % | $ | 103,557 | 21.0 | % | $ | 115,464 | 21.0 | % | ||||||||||||||||||||||||||
| State income tax expense, net of federal income tax benefits | 258 | — | % | 4,547 | 0.9 | % | 3,369 | 0.6 | % | |||||||||||||||||||||||||||||
| Noncontrolling interest in partnerships | (2,630) | (0.6) | % | (7,002) | (1.4) | % | (11,450) | (2.1) | % | |||||||||||||||||||||||||||||
| Change in valuation allowances | — | — | % | — | — | % | 5,627 | 1.0 | % | |||||||||||||||||||||||||||||
| Research and development tax credits | (6,166) | (1.5) | % | (4,559) | (0.9) | % | (3,550) | (0.6) | % | |||||||||||||||||||||||||||||
| Marginal well tax credits | (2,554) | (0.6) | % | (2,427) | (0.5) | % | — | — | % | |||||||||||||||||||||||||||||
| Other, net | 3,568 | 0.9 | % | 1,697 | 0.3 | % | (2,252) | (0.4) | % | |||||||||||||||||||||||||||||
| Income tax expense | $ | 80,132 | 19.2 | % | $ | 95,813 | 19.4 | % | $ | 107,208 | 19.5 | % | ||||||||||||||||||||||||||
The Company is subject to U.S. federal income tax, Texas state margin tax, and Louisiana corporate income tax. The primary differences between the annual effective tax rates and the statutory rate of 21.0% are income attributable to noncontrolling interest, state taxes, tax credits generated, and changes in valuation allowances.
As of December 31, 2025, the Company has no material uncertain tax positions and does not expect any significant uncertain tax positions to arise in the next 12 months. For the year ended December 31, 2025, no significant amounts were incurred for interest and penalties. Currently, the Company is not aware of any issues under review that could result in significant payments, accruals, or a material deviation from its position. As of December 31, 2025, the earliest tax years subject to possible examination by the tax authorities are 2022 for U.S. federal and 2021 for Texas state.
The tax effects of temporary differences that give rise to significant positions of the deferred income tax assets and liabilities are presented below:
| (In thousands) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Investment in partnership | $ | — | $ | 71,587 | ||||||||||
| Net operating loss carryforward | 4,062 | — | ||||||||||||
| Tax credit carryforward | 6,562 | — | ||||||||||||
| Capital loss carryforward | 5,822 | 5,822 | ||||||||||||
| Oil and natural gas properties | 2,662 | 6,077 | ||||||||||||
| Capitalized transaction costs | 1,737 | 1,969 | ||||||||||||
| Total deferred tax assets | 20,845 | 85,455 | ||||||||||||
| Valuation allowances | (5,822) | (7,818) | ||||||||||||
| Total deferred tax assets, net of valuation allowances | $ | 15,023 | $ | 77,637 | ||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Investment in partnership | (33,034) | — | ||||||||||||
| Total deferred tax liabilities | (33,034) | — | ||||||||||||
| Net deferred tax assets (liabilities) | $ | (18,011) | $ | 77,637 | ||||||||||
Net deferred tax assets and liabilities are included in the consolidated balance sheets as of December 31, 2025 and 2024 as follows:
| (In thousands) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Assets: | ||||||||||||||
| Deferred tax assets | $ | 2,662 | $ | 77,637 | ||||||||||
| Liabilities: | ||||||||||||||
| Other long-term liabilities | ||||||||||||||
| Deferred tax liabilities | (20,673) | — | ||||||||||||
| Net deferred tax assets (liabilities) | $ | (18,011) | $ | 77,637 | ||||||||||
As of December 31, 2025, the Company had a $19.3 million gross U.S. federal net operating loss, which has an indefinite carryforward, and $27.7 million gross capital loss carryforwards primarily attributable to the sale of the Company’s interest in Highlander which will expire between 2027 and 2028, unless offset by future capital gains. The Company also has tax credit carryforwards of $6.6 million which will expire between 2044 and 2045.
The Company periodically assesses whether it is more likely than not that it will generate sufficient taxable income to realize its deferred income tax assets. Valuation allowances for deferred tax assets are recognized when it is more likely than not that some or all of the benefit from the deferred tax assets will not be realized. Management assessed whether it is more likely than not that the Company will generate sufficient taxable income to realize its deferred income tax assets. In making this determination, the Company considered all available positive and negative evidence and made certain assumptions. The Company considered, among other things, the overall business environment, its historical earnings and losses, current industry trends, and its outlook for future years. As of December 31, 2025, the Company recorded a valuation allowance of $5.8 million to offset the capital loss carryforward.
On July 4, 2025, the U.S. enacted legislation referred to as the One Big Beautiful Bill Act of 2025, which contains certain significant changes to U.S. corporate income tax laws and is generally effective for tax years beginning after December 31, 2024. These changes include, among others, the immediate deduction of domestic research and development (“R&D”) expenses, the option to retroactively deduct previously capitalized R&D expenses, and 100% bonus depreciation for property acquired after January 19, 2025. The impacts are reflected in the Company’s income tax provision for the year ended December 31, 2025, which resulted in a decrease in current tax expense offset by an increase in deferred tax expense.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 14, 2018 | |
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.