RAYONIER ADVANCED MATERIALS INC.RYAM
RAYONIER ADVANCED MATERIALS INC. Income Taxes Disclosure
21. Income Taxes
On July 4, 2025, the United States enacted The One Big Beautiful Bill Act, resulting in modifications to existing tax law. The most material impacts to the Company are changes to Internal Revenue Code §163(j) interest deductibility, permanent immediate expensing of capital spend in the U.S., immediate deductions of domestic R&D expenditures and foreign tax regime changes. The Company incorporated the 2025 effects of this new legislation beginning in its third quarter 2025 consolidated financial statements.
Loss from continuing operations before income tax included domestic and foreign components as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | (33,469) | $ | (8,590) | $ | (65,413) | |||||||||||
| Foreign | (61,576) | (40,610) | (67,061) | ||||||||||||||
Total | $ | (95,045) | $ | (49,200) | $ | (132,474) | |||||||||||
Income Tax (Expense) Benefit on Continuing Operations
Income tax (expense) benefit on continuing operations consisted of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current tax (expense) benefit | |||||||||||||||||
| U.S. federal | $ | (286) | $ | 981 | $ | 1,623 | |||||||||||
| U.S. state and local | (178) | (191) | (144) | ||||||||||||||
| Foreign | (876) | (1,468) | 3,119 | ||||||||||||||
| Total current tax (expense) benefit | (1,340) | (678) | 4,598 | ||||||||||||||
| Deferred tax (expense) benefit | |||||||||||||||||
| U.S. federal | 8,076 | 6,011 | 15,542 | ||||||||||||||
| U.S. state and local | 596 | 509 | 143 | ||||||||||||||
| Foreign | (330,597) | 3,086 | 12,028 | ||||||||||||||
| Total deferred tax (expense) benefit | (321,925) | 9,606 | 27,713 | ||||||||||||||
| Total income tax (expense) benefit | |||||||||||||||||
| U.S. federal | 7,790 | 6,992 | 17,165 | ||||||||||||||
| U.S. state and local | 418 | 318 | (1) | ||||||||||||||
| Foreign | (331,473) | 1,618 | 15,147 | ||||||||||||||
| Total income tax (expense) benefit | $ | (323,265) | $ | 8,928 | $ | 32,311 | |||||||||||
The following tables reconcile the effective income tax rate on continuing operations to the U.S. federal statutory rate:
| Year Ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| U.S. Domestic | |||||||||||
| U.S. federal statutory income tax rate | $ | (19,962) | 21.0 | % | |||||||
State and local taxes(a) | (378) | 0.4 | |||||||||
| Valuation allowance changes | 477 | (0.5) | |||||||||
| Tax credits | (1,243) | 1.3 | |||||||||
| Other | (264) | 0.3 | |||||||||
| Foreign | |||||||||||
| Canada | |||||||||||
| Statutory rate difference | (3,046) | 3.2 | |||||||||
| Valuation allowance changes | 347,897 | (366.0) | |||||||||
| Other | 81 | (0.1) | |||||||||
| France | |||||||||||
| Other | (711) | 0.7 | |||||||||
| Other aggregated jurisdictions | 11 | — | |||||||||
| Worldwide changes in uncertain tax benefits | 403 | (0.4) | |||||||||
| Effective income tax rate on continuing operations | $ | 323,265 | (340.1) | % | |||||||
(a)The Florida and Tennessee jurisdictions make up more than 50 percent of the total state and local taxes.
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal statutory income tax rate | 21.0 | % | 21.0 | % | |||||||
| Change in valuation allowance | (11.5) | (7.7) | |||||||||
| Adjustment to previously filed tax returns | (0.4) | 2.0 | |||||||||
| Tax credits (excluding foreign tax credit) | 4.1 | 5.4 | |||||||||
| Nondeductible compensation for executives and share-based awards | (3.4) | 0.5 | |||||||||
| Net changes in uncertain tax positions | 6.3 | (0.1) | |||||||||
| Difference in foreign statutory rates | 1.2 | 2.1 | |||||||||
| U.S. tax on foreign earnings (GILTI and Subpart F, net of FTC) | (0.4) | (0.1) | |||||||||
| Interest on tax payments/receipts | 1.1 | 0.6 | |||||||||
| Other | 0.1 | 0.7 | |||||||||
| Effective income tax rate on continuing operations | 18.1 | % | 24.4 | % | |||||||
Cash Income Taxes
Income taxes (paid) refunded, net for the year ended December 31, 2025 were as follows:
| U.S. federal | $ | 164 | |||
| U.S. state and local | (161) | ||||
| Foreign | |||||
| Canada | 2,315 | ||||
| France | (2,745) | ||||
| Other | (83) | ||||
| Income taxes (paid) refunded, net | $ | (510) | |||
Deferred Taxes
Deferred income taxes result from recording revenue and expense in different periods for financial reporting versus tax reporting. The nature of these temporary differences and the resulting net deferred tax balances follow:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets | |||||||||||
Net operating losses(a) | $ | 209,631 | $ | 157,942 | |||||||
Canadian pool of SR&ED | 96,452 | 96,458 | |||||||||
| Property, plant and equipment basis differences | 79,362 | 74,408 | |||||||||
Tax credit carryforwards(a) | 50,645 | 71,013 | |||||||||
| Environmental liabilities | 42,375 | 39,316 | |||||||||
| Deferred U.S. interest deductions | 38,315 | 36,286 | |||||||||
| Pension, postretirement and other employee benefits | 19,222 | 19,534 | |||||||||
| Capitalized costs | 14,111 | 18,275 | |||||||||
| Other compensation | 5,711 | 7,050 | |||||||||
State net operating losses(a) | 4,572 | 3,454 | |||||||||
| Deferred foreign interest deductions | 3,304 | 7,601 | |||||||||
| Other deferred tax assets | 21,965 | 23,636 | |||||||||
| Total gross deferred tax assets | 585,665 | 554,973 | |||||||||
| Valuation allowance | (441,887) | (86,082) | |||||||||
| Total deferred tax assets, net of valuation allowance | 143,778 | 468,891 | |||||||||
| Deferred tax liabilities | |||||||||||
| Property, plant and equipment basis differences | (112,959) | (110,577) | |||||||||
| Prepaid expenses | (5,462) | (4,487) | |||||||||
| Intangible assets | (430) | (2,326) | |||||||||
| Other deferred tax liabilities | (13,623) | (15,686) | |||||||||
| Total deferred tax liabilities | (132,474) | (133,076) | |||||||||
| Net deferred tax asset | $ | 11,304 | $ | 335,815 | |||||||
| Net deferred tax asset as reflected in consolidated balance sheets: | |||||||||||
| Deferred tax assets | $ | 24,026 | $ | 349,500 | |||||||
| Deferred tax liabilities | (12,722) | (13,685) | |||||||||
| Net deferred tax asset | $ | 11,304 | $ | 335,815 | |||||||
(a)Further detail of these items as of December 31, 2025 follows:
| Gross Amount | Tax Effected | Valuation Allowance | Expiration | ||||||||||||||||||||
| Net operating losses | $ | 963,365 | $ | 214,203 | $ | (185,328) | 2027 - 2045 | ||||||||||||||||
| Tax credit carryforwards | $ | 51,127 | $ | 50,645 | $ | (28,741) | 2026 - 2045 | ||||||||||||||||
The vast majority of the Company’s DTAs are in Canada, where the Company incurred a cumulative adjusted pre-tax loss over the three most recent fiscal years ending in 2025. The Company expected to incur this cumulative loss in Canada based on projections in the second quarter of 2025 and, as a result of the significant weight of this negative evidence, the Company believed it was more likely than not that its Canadian DTAs would not be fully realizable and recorded a full valuation allowance against these assets and a corresponding $337 million tax expense to write off the previously recognized net DTA. Barring positive evidence that changes this conclusion, future Canadian earnings will not result in tax expense or benefit on the Company’s financial statements. The valuation allowance does not impact the Company’s legal right to use the deferred tax assets against cash taxes and future recognition will continue to be evaluated as market conditions evolve.
At December 31, 2025 and 2024, the Company’s net DTA included $16 million and $15 million, respectively, of disallowed U.S. interest deductions that the Company does not believe will be realized. The increase in this asset was a result of a $1 million net tax benefit recognized in 2025. In strict compliance with the AICPA’s Technical Questions and Answers 3300.01-02, which asserts that certain material evidence regarding the realizability of disallowed U.S. interest deductions should be ignored when assessing the need for a valuation allowance, the Company has not recognized a valuation allowance on this portion of the DTA generated from disallowed interest.
The Company has not provided additional income taxes for outside basis differences inherent in its foreign entities, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to all outside basis differences in these entities is not practicable at this time.
Unrecognized Tax Benefits
The Company recognizes the impact of a tax position if it is more likely than not to prevail, based on technical merit, in the case of an audit. As of December 31, 2025, several positions resulted in unrecognized tax benefits that, if recognized, would affect income tax expense. A reconciliation of beginning and ending unrecognized tax benefits balances for the periods presented follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at beginning of period | $ | 10,444 | $ | 13,580 | $ | 11,015 | |||||||||||
| Decreases related to prior year tax positions | (37) | (3,035) | (1,612) | ||||||||||||||
| Increases related to prior year tax positions | 149 | 905 | 2,804 | ||||||||||||||
| Decreases related to current year tax positions | — | — | — | ||||||||||||||
| Increases related to current year tax positions | 436 | 957 | 1,373 | ||||||||||||||
| Decreases due to statutory expirations | — | (1,963) | — | ||||||||||||||
| Balance at end of period | $ | 10,992 | $ | 10,444 | $ | 13,580 | |||||||||||
For the year ended December 31, 2025, $6 million of the Company’s unrecognized tax benefits would impact the effective tax rate if recognized. Total interest and penalties recorded in unrecognized tax benefits were $1 million for each of the years presented.
Tax Statutes
In the normal course of business, the Company is regularly audited by tax authorities and is currently under audit in Canada and France. The following table provides the tax years that remain open to examination by significant taxing jurisdictions:
| Open Tax Years | |||||
| U.S. | 2022-2025 | ||||
| France | 2020-2025 | ||||
| Canada | 2022-2025 | ||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 5, 2026 | Showing above |
| 2024 | Mar 6, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 1, 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.