NATURAL GAS SERVICES GROUP INCNGS
NATURAL GAS SERVICES GROUP INC Income Taxes Disclosure
Income Taxes
The following table summarizes our provision for income taxes for the presented:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current income tax benefit (expense): | |||||||||||||||||
| Federal | $ | 156 | $ | (88) | $ | — | |||||||||||
| State | (102) | (114) | (35) | ||||||||||||||
| Total current income tax benefit (expense) | 54 | (202) | (35) | ||||||||||||||
| Deferred income tax (expense) benefit: | |||||||||||||||||
| Federal | (5,703) | (4,456) | (1,940) | ||||||||||||||
| State | (954) | 219 | 102 | ||||||||||||||
| Total deferred income tax expense | (6,657) | (4,237) | (1,838) | ||||||||||||||
| Provision for income taxes | $ | (6,603) | $ | (4,439) | $ | (1,873) | |||||||||||
The following table summarizes the effective tax rates for the periods presented:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Statutory rate | $ | (5,571) | 21.0 | % | $ | (4,550) | 21.0 | % | $ | (1,390) | 21.0 | % | |||||||||||||||||||||||
| State and local taxes | (1,035) | 3.9 | % | 130 | (0.6) | % | 86 | (1.3) | % | ||||||||||||||||||||||||||
| Stock-based compensation | — | — | % | 195 | (0.9) | % | (46) | 0.7 | % | ||||||||||||||||||||||||||
| Nondeductible compensation | (251) | 0.9 | % | (65) | 0.3 | % | (543) | 8.2 | % | ||||||||||||||||||||||||||
| Other | 254 | (1.0) | % | (149) | 0.7 | % | 20 | (0.3) | % | ||||||||||||||||||||||||||
| Effective rate | $ | (6,603) | 24.8 | % | $ | (4,439) | 20.5 | % | $ | (1,873) | 28.3 | % | |||||||||||||||||||||||
The following table summarizes the income tax effects of temporary differences that give rise to significant portions of deferred income tax assets and (liabilities) as of the dates presented:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Net operating loss carryforward | $ | 28,356 | $ | 20,600 | |||||||
| Research and development credits | 1,026 | 1,011 | |||||||||
| Stock-based compensation | 132 | 269 | |||||||||
| Interest expense | 285 | 2,756 | |||||||||
| Inventory reserves | 794 | 1,293 | |||||||||
| Deferred compensation | 693 | 827 | |||||||||
| Other | 513 | 569 | |||||||||
| Total deferred income tax assets | 31,799 | 27,325 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Property and equipment | (84,329) | (73,198) | |||||||||
| Total deferred income tax liabilities | (84,329) | (73,198) | |||||||||
| Net deferred income tax liabilities | $ | (52,530) | $ | (45,873) | |||||||
We file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, we are no longer subject to U.S. federal or state income tax examination by tax authorities for years before 2020.
Income Taxes Receivable
On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the economic impact caused by the COVID-19 pandemic. The CARES Act, among other things, permits federal income tax net operating loss (“NOL”) carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs incurred in 2018, 2019, and 2020 to be carried back to each of the five preceding taxable years to generate a refund of previously paid federal income taxes. We generated significant NOLs during 2018 and 2019 and filed carryback claims for these losses to the preceding five years.
In connection with the filing of these claims, we initially recorded a federal income tax receivable of approximately $15.0 million and certain related adjustments to our deferred tax liability. We subsequently received federal income tax refunds corresponding to the 2018 NOL carryback during 2020 leaving approximately $11.5 million remaining to be refunded in connection with the 2019 NOL carryback. In conjunction with the remaining income tax refund claim, we received a notice from the Internal Revenue Service (“IRS”) on March 8, 2023, stating that our income tax returns for 2015, 2016, 2017 and 2019 were selected for examination. Furthermore, and as is customary for income tax refunds of this magnitude, the IRS was required to review the refund claim and provide a report to the Joint Committee on Taxation of the U.S. Congress (“JCT”). As a result of the submission of the refund claim to the JCT, the IRS completed their review of the income tax returns for 2015, 2016 and 2017. Our request for refund was reviewed and concluded favorably with the JCT concurring with the IRS’s conclusions. Subsequent to a delay due to the federal government shutdown in October 2025, we received a total of $12.3 million in the first quarter of 2026. This amount includes tax refunds of $10.2 million and related interest of $2.1 million for the years 2015, 2016 and 2017. After receipt of these refunds, a total of $1.8 million attributable solely to 2019 remains open including an income tax refund of $1.5 million plus interest of $0.3 million.
Other Income Tax Attributes
As of December 31, 2025, we had NOL carryforwards for federal income tax purposes of $124.2 million, which may be carried forward indefinitely and can offset up to 80% of future taxable income in any given year. Future changes in ownership, as defined by Section 382 of the Internal Revenue Code of 1986, as amended (“IRC”), could limit the amount of NOL carryforwards used in any one year. In general, under Section 382 and 383 of the IRC, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change NOLs and certain tax credits, to offset future taxable income and tax. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders changes by more than 50 percentage points over such stockholders’ lowest percentage of ownership during the testing period (generally three years). We also had state NOL carryforwards of $58.5 million with carryforward periods similar to those of our federal NOLs.
We paid a total of $0.3 million during 2025for income taxes, net of refunds received, including $0.1 million to the IRS and $0.1 million to the State of Texas. We have no reserves for uncertain tax positions as of December 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 17, 2025 | |
| 2023 | Apr 1, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 18, 2022 | |
| 2020 | Mar 31, 2021 | |
| 2019 | Mar 31, 2020 | |
| 2018 | Mar 18, 2019 | |
| 2017 | Mar 9, 2018 | |
| 2016 | Mar 10, 2017 | |
| 2015 | Mar 11, 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.