MP Materials Corp. / DEMP
MP Materials Corp. / DE Income Taxes Disclosure
INCOME TAXES
Income tax benefit (expense) consisted of the following:
| For the year ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 1,874 | $ | 148 | $ | (178) | |||||||||||
| State | (367) | — | (135) | ||||||||||||||
| Total current | 1,507 | 148 | (313) | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 30,178 | 21,883 | (11,334) | ||||||||||||||
| State | 215 | 5,892 | 2,879 | ||||||||||||||
| Total deferred | 30,393 | 27,775 | (8,455) | ||||||||||||||
| Total income tax benefit (expense) | $ | 31,900 | $ | 27,923 | $ | (8,768) | |||||||||||
Income (loss) before income taxes, by tax jurisdiction, was as follows:
| For the year ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| United States | $ | (117,774) | $ | (93,347) | $ | 33,075 | |||||||||||
Income taxes differed from the amounts computed by applying the U.S. federal income tax rate of 21% to pretax income as a result of the following:
| For the year ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| (in thousands, except tax rates) | Percent | Amount | Percent | Amount | Percent | Amount | |||||||||||||||||||||||||||||
Computed income tax benefit (expense) at the statutory rate | 21.0 | % | $ | 24,733 | 21.0 | % | $ | 19,603 | 21.0 | % | $ | (6,946) | |||||||||||||||||||||||
Changes resulting from: | |||||||||||||||||||||||||||||||||||
State and local income taxes, net of federal (national) income tax effect: | |||||||||||||||||||||||||||||||||||
State and local income taxes, net of federal benefits(1) | 2.8 | % | 3,302 | 1.8 | % | 1,700 | 2.6 | % | (867) | ||||||||||||||||||||||||||
| California Competes Tax Credit, net of federal detriment | 0.9 | % | 1,019 | 1.9 | % | 1,778 | (11.3) | % | 3,753 | ||||||||||||||||||||||||||
State valuation allowance, net of federal benefits | (3.9) | % | (4,562) | (0.1) | % | (50) | 4.1 | % | (1,360) | ||||||||||||||||||||||||||
State rate change, net of federal benefits | 0.2 | % | 223 | 1.5 | % | 1,354 | (2.7) | % | 872 | ||||||||||||||||||||||||||
Tax credits: | |||||||||||||||||||||||||||||||||||
| Section 48C Qualifying Advanced Energy Project Tax Credit | 1.6 | % | 1,911 | 0.2 | % | 148 | — | % | — | ||||||||||||||||||||||||||
| Nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
Limitation on officers’ compensation | (3.2) | % | (3,735) | (1.9) | % | (1,815) | 11.0 | % | (3,640) | ||||||||||||||||||||||||||
Percentage depletion in excess of basis | 3.2 | % | 3,761 | 3.5 | % | 3,284 | — | % | — | ||||||||||||||||||||||||||
Nondeductible transaction costs | (1.4) | % | (1,639) | — | % | — | — | % | — | ||||||||||||||||||||||||||
Section 45X Advanced Manufacturing Production Credit | 3.6 | % | 4,266 | 3.8 | % | 3,543 | (0.1) | % | 38 | ||||||||||||||||||||||||||
Other nontaxable or nondeductible items | (0.3) | % | (400) | — | % | — | — | % | — | ||||||||||||||||||||||||||
| Other reconciling items: | |||||||||||||||||||||||||||||||||||
Return-to-provision adjustments | 1.7 | % | 1,952 | (0.2) | % | (202) | 0.5 | % | (155) | ||||||||||||||||||||||||||
Excess tax benefits (expense) on stock-based compensation | 0.8 | % | 927 | (1.4) | % | (1,312) | 0.6 | % | (190) | ||||||||||||||||||||||||||
| Other, net | 0.1 | % | 142 | (0.2) | % | (108) | 0.8 | % | (273) | ||||||||||||||||||||||||||
Total effective tax rate and income tax benefit (expense) | 27.1 | % | $ | 31,900 | 29.9 | % | $ | 27,923 | 26.5 | % | $ | (8,768) | |||||||||||||||||||||||
(1)State taxes in California made up the majority (greater than 50%) of the tax effect in this category.
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:
| December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Asset retirement and environmental obligations | $ | 6,585 | $ | 6,442 | |||||||
| Net operating losses | 89,408 | 70,593 | |||||||||
| Inventories | 4,436 | 1,828 | |||||||||
| Stock-based compensation | 7,979 | 5,958 | |||||||||
Lease liabilities | 2,991 | 1,852 | |||||||||
| Credits | 15,491 | 11,119 | |||||||||
| Capped call options | 8,095 | 9,846 | |||||||||
Deferred investment tax credit liability | 6,139 | 5,805 | |||||||||
Deferred revenue | 8,226 | — | |||||||||
| Other | 2,710 | 3,052 | |||||||||
| Gross deferred tax assets | 152,060 | 116,495 | |||||||||
| Less: Valuation allowance | (6,318) | (1,756) | |||||||||
| Net deferred tax assets | 145,742 | 114,739 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property, plant and equipment | (101,101) | (103,133) | |||||||||
ROU assets | (3,366) | (2,335) | |||||||||
| Mineral rights | (89,025) | (92,533) | |||||||||
| Other | (3,808) | (2,047) | |||||||||
| Total deferred tax liabilities | (197,300) | (200,048) | |||||||||
| Non-current deferred tax liabilities, net | $ | (51,558) | $ | (85,309) | |||||||
California Competes Tax Credit
In October 2021, the Company was awarded a $14.8 million California Competes Tax Credit (“CCTC”) available to offset its California state income tax liability with varying amounts allocated to each year within a five-year period, which ended with the 2025 tax year. During each such year, the Company achieved all the specified milestones, which related to employees hired in California, the annual wage of these employees, and capital investments made by the Company within the state. Each year’s credit may be “clawed back” if the milestones are not continually met for a three-year period following the year of achievement. For the years ended December 31, 2025, 2024 and 2023, the Company recorded a credit of $1.3 million, $2.3 million, and $4.8 million, respectively. Of the total CCTC recorded, $5.8 million remains available for the Company to use in future tax years.
Section 48C Qualifying Advanced Energy Project Tax Credit
In March 2024, the Company was awarded a $58.5 million Section 48C Qualifying Advanced Energy Project Tax Credit (the “48C Credit”) to advance the construction of the Independence Facility (the “48C Project”). The 48C Credit is an investment tax credit equal to 30% of qualified investments for certified projects that meet prevailing wage and apprenticeship requirements. The 48C Credit is not eligible for direct pay (i.e., it is nonrefundable); however, it is transferable to an unrelated taxpayer at a negotiated rate. The 48C Project was certified by the Department of Energy on September 2, 2025, and all eligible assets must be placed into service within two years of this date. During the years ended December 31, 2025 and 2024, the Company placed into service eligible assets and recorded 48C Credits of $3.4 million and $27.8 million, respectively.
The Company initially deferred the 48C Credits and will recognize them as a reduction to income tax expense (or an increase to income tax benefit) on a straight-line basis over the remaining estimated useful life of associated long-lived assets. As of December 31, 2025, the Company’s current and non-current deferred investment tax credit liabilities were $2.4 million and $26.9 million, respectively. As of December 31, 2024, the Company’s current and non-current deferred investment tax
credit liabilities were $2.1 million and $25.5 million, respectively. The current and non-current amounts are included in “Other current liabilities,” and “Deferred investment tax credit,” respectively, within the Company’s Consolidated Balance Sheets.
Other Tax Matters
As of December 31, 2025 and 2024, the Company had net operating loss (“NOL”) carryforwards for federal income tax purposes of $390.7 million and $316.1 million, respectively, and $106.6 million and $60.4 million, respectively, for state income tax purposes. The federal NOL may be carried forward indefinitely. Of the total state NOL, $105.6 million will expire in 2044 and 2045, if unused, and $1.0 million may be carried forward indefinitely. As of December 31, 2025, the Company also had tax credit carryforwards of $17.2 million, of which $5.8 million and $9.2 million will begin to expire in 2029 and 2044, respectively, if unused, and $2.2 million may be carried forward indefinitely. As of December 31, 2025, the Company considered positive and negative evidence to determine the need for a valuation allowance to offset its deferred tax assets. During 2025, the Company recorded a full valuation allowance on CCTC and maintained its valuation allowance on California alternative minimum tax credits carried forward from prior years. All other deferred tax assets will be realized through future taxable temporary differences, principally resulting from the deferred tax liabilities on Property, plant and equipment and Mineral rights.
The Company evaluated its tax positions for the years ended December 31, 2025, 2024 and 2023, and determined there were no uncertain tax positions requiring recognition in the Consolidated Financial Statements. The tax years from 2022 onward remain open to examination by the taxing jurisdictions to which the Company is subject.
In August 2022, the U.S. government enacted the Inflation Reduction Act of 2022, which, among other things, provides several tax incentives to promote clean energy adoption for tax years beginning after December 31, 2022. Specifically, the Section 45X Advanced Manufacturing Production Credit (the “45X Credit”) provides a credit equal to 10% of eligible “production costs incurred” with respect to the production and sale of critical minerals, including NdPr oxide. For more information on the 45X Credit, see Note 17, “Government Grants.”
In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. Among other provisions, the OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act. Additionally, the OBBBA established a phase-out for applicable critical minerals starting after December 31, 2030, with credits reduced to 75% in 2031, 50% in 2032, 25% in 2033, and eliminated after December 31, 2033. The enactment of the tax reform provisions did not have a material impact on our Consolidated Financial Statements.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Mar 22, 2021 | |
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.