PRIMEENERGY RESOURCES CORP Income Taxes Disclosure

8. Income Taxes

 

The components of the provision for income taxes for the years ended December 31, 2025 and 2024 are as follows:

 

		Years Ended December 31,
(Thousands of dollars)		2025				2024
Current:
Federal		$	1,860			$	8,545
State			255				1,055
Total current			2,115				9,600
Deferred:
Federal			1,939				6,080
State			124				89
Total deferred			2,063				6,169
Total income tax provision		$	4,178			$	15,769

 

The components of net deferred tax assets and liabilities are as follows:

 

		At December 31,
(Thousands of dollars)		2025				2024
*Deferred Tax Assets:
Accrued liabilities		$	880			$	279
Allowance for credit losses			126				93
Partnership basis difference			0				114
State Net operating loss carry-forwards			304				212
Total deferred tax assets			1,310				698
Deferred Tax Liabilities:
Depletion and depreciation			56,778				54,103
Total deferred tax liabilities			56,778				54,103
Net deferred tax liabilities		$	55,468			$	53,405

 

The total provision for income taxes for the years ended December 31, 2025 and 2024 varies from the federal statutory tax rate as a result of the following: 

 

		December 31,								December 31,
(Thousands of dollars)		2025								2024
Expected tax expense		$	6,403				21.0	%		$	14,946				21.0	%
Permanent differences			763				2.5	%			880				1.2	%
State income tax, net of federal benefit			247				0.8	%			834				1.2	%
Provision to return adjustment			(2,624	)			(8.6	)			(679				(1.0	)%
Tax credits			(461	)			(1.5	)%			(599				(0.8	)%
Other, Net			(150	)			(0.5	)%			387				0.5	%
Total income tax provision		$	4,178				13.7	%		$	15,769				22.2	%

 

Deferred income taxes reflect the impact of temporary differences between the amount of assets and liabilities recognized for financial reporting purposes and such amounts recognized for tax purposes.

 

The Company is entitled to percentage depletion on certain of its wells, which is calculated without reference to the basis of the property. To the extent that such depletion exceeds a property’s basis, it creates a permanent difference, which lowers the Company’s effective rate. The availability of the percentage depletion deduction is phased out as an entity’s production exceeds certain levels, and based on the Company’s increasing production the percentage depletion deduction is becoming less significant.

 

The Company is allowed a credit against the Texas Franchise Tax based on net operating losses incurred in prior periods. The credits allowed are $89 thousand in the years 2025 through 2026. Any credits not utilized in a given year due to the allowable credit exceeding the tax liability may be carried forward. No credit may be carried forward past 2026. The value of the credit is calculated net of the federal income tax effect.

 

 

The Company has not recorded any provision for uncertain tax positions. The Company files income tax returns in the U.S. federal jurisdiction and various state and local jurisdictions. The 2004, 2005, 2006, 2009 and 2017 federal income tax returns have been audited by the Internal Revenue Service. Returns for unexamined earlier years may be examined and adjustments made to the amount of percentage depletion and AMT credit carryforwards flowing from those years into an open tax year, although in general no assessment of income tax may be made for those years on which the statute has closed. Federal and State returns for the years 2022 through 2024 remain open for examination by the relevant taxing authorities.