RING ENERGY, INC.REI
RING ENERGY, INC. Income Taxes Disclosure
NOTE 14 — INCOME TAXES
For the years ended December 31, 2025, 2024, and 2023, components of our provision (benefit) for income taxes are as follows.
| Provision for (Benefit from) Income Taxes: | 2025 | 2024 | 2023 | |||||||||||||||||
| Federal deferred tax | $ | (7,654,389) | $ | 19,096,010 | $ | (901,522) | ||||||||||||||
State current tax | 374,982 | 401,197 | 72,213 | |||||||||||||||||
| State deferred tax | (173,339) | 943,747 | 954,551 | |||||||||||||||||
| Provision for (Benefit from) Income Taxes | $ | (7,452,746) | $ | 20,440,954 | $ | 125,242 | ||||||||||||||
The Company’s overall effective tax rates are calculated as Benefit from (Provision for) Income Taxes divided by Income (Loss) Before Benefit from (Provision for) Income Taxes. The effective tax rates for the years ended December 31, 2025, 2024, and 2023 were as follows.
| For the years ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Effective tax rate (1) | 17.7 | % | 23.3 | % | 0.1 | % | |||||||||||
(1) The effective tax rates for the years ended December 31, 2025 and 2024 differ from the U.S. federal statutory rate of 21% primarily due to share-based and executive compensation and state income taxes. The effective tax rate for the year ended December 31, 2023 was impacted by the release of valuation allowance on the Company's federal net deferred tax asset. A tax benefit of $24.2 million was recorded in the year ended December 31, 2023.
The following is a reconciliation of the difference between the effective income tax rate and the U.S. federal statutory rate, for the year ended December 31, 2025.
| Rate Reconciliation: | 2025 | |||||||||||||
Amount | Percent | |||||||||||||
| Pre-tax book income (loss) | $ | (42,183,945) | ||||||||||||
| Tax provision (benefit) computed at the U.S. federal statutory rate | (8,858,628) | 21.0 | % | |||||||||||
State and local income tax, net of federal income tax effect (1) | 174,193 | (0.4) | ||||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||
| Share-based compensation and executive compensation disallowance | 1,209,928 | (2.9) | ||||||||||||
| Meals and entertainment | 20,147 | 0.0 | ||||||||||||
| Other | 1,614 | 0.0 | ||||||||||||
| Provision for (Benefit from) Income Taxes | $ | (7,452,746) | 17.7 | % | ||||||||||
(1) State taxes in Texas made up the majority (greater than 50%) of the tax effect in this category.
As previously disclosed for the years ended December 31, 2024, and 2023, prior to the adoption of ASU 2023-09, the following is a reconciliation of the difference between the effective income tax rate and the U.S. federal statutory rate.
Rate Reconciliation: | 2024 | 2023 | ||||||||||||
Pre-tax book income (loss) (2) | $ | 87,911,268 | $ | 104,917,670 | ||||||||||
| Tax at federal statutory rate | 18,461,366 | 22,032,711 | ||||||||||||
| Excess tax benefit from stock option exercises and restricted stock vesting | 104,344 | 478,304 | ||||||||||||
| Adjust prior estimates to tax return | 69,654 | (474,617) | ||||||||||||
| States taxes, net of federal benefit | 1,008,096 | 1,122,782 | ||||||||||||
| Valuation allowance | — | (24,182,975) | ||||||||||||
| Non-deductible expenses and other | 797,494 | 1,149,037 | ||||||||||||
| Provision for (Benefit from) Income Taxes | $ | 20,440,954 | $ | 125,242 | ||||||||||
(2) Amount in the year ended December 31, 2023 represented pre-tax book income, net of income taxes paid.
The Company's deferred tax position reflects the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting. The net deferred taxes consisted of the following as of December 31, 2025 and 2024.
| 2025 | 2024 | ||||||||||
| Deferred Tax Assets | |||||||||||
| Net operating loss (NOL) carryforward | $ | 72,880,353 | $ | 68,516,720 | |||||||
| Share-based compensation | 910,213 | 1,097,273 | |||||||||
| Asset retirement obligation | 6,627,813 | 5,755,174 | |||||||||
| §163(j) business interest expense carryforward | 19,675,692 | 18,838,600 | |||||||||
| Other | 1,488,392 | 1,672,268 | |||||||||
| Gross Deferred Tax Assets | $ | 101,582,463 | $ | 95,880,035 | |||||||
| Less: valuation allowance | — | — | |||||||||
| Net Deferred Tax Assets | $ | 101,582,463 | $ | 95,880,035 | |||||||
| Deferred Tax Liabilities | |||||||||||
| Property and equipment | $ | (115,663,637) | $ | (123,318,803) | |||||||
| Fair value of derivative instruments | (6,107,910) | (392,761) | |||||||||
| Other | (575,035) | (760,273) | |||||||||
| Net Deferred Tax Liabilities | $ | (122,346,582) | $ | (124,471,837) | |||||||
| Net Deferred Tax Liability | $ | (20,764,119) | $ | (28,591,802) | |||||||
The following table summarizes income taxes paid (net of refunds received) for the year ended December 31, 2025. All jurisdictions in which income taxes paid (net of refunds received) were equal to or greater than five percent of total income taxes paid (net of refunds received) are included below (if the noted jurisdiction did not meet the five percent threshold for a particular year, the amount for that year is not included below).
| Income taxes paid (net of refunds received) | 2025 | |||||||
| Federal income taxes | $ | — | ||||||
| State and local income taxes: | ||||||||
| Texas | $ | 337,787 | ||||||
| Other | 9,700 | |||||||
| Total state and local income taxes, net of refunds | $ | 347,487 | ||||||
| Total income taxes paid, net of refunds received | $ | 347,487 | ||||||
As of December 31, 2025, the Company had net operating loss carryforwards for federal income tax reporting purposes of approximately $96.9 million which, if unused, will begin to expire in 2033 and fully expire in 2037 and an additional $248.2 million that can be carried forward indefinitely.
Section 382 of the Internal Revenue Code of 1986, as amended, limits the availability of certain tax attributes, including net operating losses and disallowed interest carryforwards, to offset future taxable income of the Company. In evaluating its need for a valuation allowance against its deferred tax assets, the Company has estimated the amount of tax attributes related to the pre-ownership change period to be available under Section 382 in periods in which it expects deferred tax liabilities to be realized based on currently available information. Based on its current analysis, the Company does not anticipate any material tax attributes to expire unused as result of the Section 382 ownership change; however, the ultimate timing in the amount of tax attributes available in future periods may be different than the Company's current estimate and will be determined in each year as new information becomes available. Changes in expectation in the timing of the availability of the Company's tax attributes could result in adjustments to the valuation allowance in future years as it updates its analysis based on new information.
As of December 31, 2025, we carried a valuation allowance against our federal and state deferred tax assets of $0. We have considered both the positive and negative evidence in determining whether it was more likely than not that some portion or all of our deferred tax assets will be realized. The amount of deferred tax assets considered realizable could, however, be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence is no longer present and additional weight is given to subjective positive evidence, including projections for growth. As of June 30, 2023, the Company was no longer in a cumulative loss position. As a result, future forecasted pre-tax book income was considered as positive evidence in assessing the valuation allowance. Based on the change in judgment on the realizability of the related federal deferred tax assets in future years, the Company released $24.2 million of valuation allowance as a benefit during the year ended December 31, 2023. This, coupled with the income tax provision for the year ended December 31, 2025 resulted in an ending federal net deferred tax liability of $16,977,823. Additionally, the Company reported a net state deferred tax liability at December 31, 2025 of $3,786,296 attributable to certain state deferred tax liabilities mainly associated with property and equipment.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 4, 2026 | Showing above |
| 2024 | Mar 5, 2025 | |
| 2023 | Mar 7, 2024 | |
| 2022 | Mar 9, 2023 | |
| 2021 | Mar 16, 2022 | |
| 2020 | Mar 16, 2021 | |
| 2018 | Feb 28, 2019 | |
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.