Solaris Energy Infrastructure, Inc.SEI
Solaris Energy Infrastructure, Inc. Income Taxes Disclosure
Income Taxes
Income Tax Expense
The components of the income tax expense are:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State | (1.4) | 1.5 | 0.5 | ||||||||||||||
| Total current income tax expense | $ | (1.4) | $ | 1.5 | $ | 0.5 | |||||||||||
| Deferred: | |||||||||||||||||
| Federal | $ | 11.9 | $ | 6.1 | $ | 6.5 | |||||||||||
| State | 4.2 | 0.4 | 0.8 | ||||||||||||||
| Total deferred income tax expense | $ | 16.1 | $ | 6.5 | $ | 7.3 | |||||||||||
| Income tax expense | $ | 14.7 | $ | 8.0 | $ | 7.8 | |||||||||||
Income tax expense differs from the amount computed by applying the statutory federal income tax rate of 21% to income before taxes as follows:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| U.S. federal statutory income tax rate | 15.3 | 21.0 | % | 7.8 | 21.0 | % | 9.8 | 21.0 | % | ||||||||||||||||||||||||||
| State and local income taxes, net of federal income tax effect (1) | 3.1 | 4.3 | % | 2.3 | 6.3 | % | 1.0 | 2.1 | % | ||||||||||||||||||||||||||
| Non-controlling interest | (5.9) | (8.1) | % | (2.8) | (7.5) | % | (3.0) | (6.5) | % | ||||||||||||||||||||||||||
| Executive compensation limitation | 2.6 | 3.5 | % | 0.1 | 0.2 | % | 0.1 | 0.1 | % | ||||||||||||||||||||||||||
| Other nontaxable or nondeductible items | 0.3 | 0.4 | % | 0.6 | 1.7 | % | 0.3 | 0.5 | % | ||||||||||||||||||||||||||
| Other adjustments | (0.7) | (1.0) | % | — | — | % | (0.4) | (0.4) | % | ||||||||||||||||||||||||||
| Income tax expense | $ | 14.7 | 20.1 | % | $ | 8.0 | 21.7 | % | $ | 7.8 | 16.8 | % | |||||||||||||||||||||||
(1)State taxes in Mississippi make up the majority (greater than 50 percent) of the tax effect in this category in 2025. State taxes in Tennessee make up the majority (greater than 50 percent) of the tax effect in this category in 2024. State taxes in Texas and New Mexico make up the majority (greater than 50 percent) of the tax effect in this category in 2023.
Deferred Tax Assets and Liabilities
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. Significant components of the deferred tax assets and liabilities are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred Tax Assets: | |||||||||||
| Imputed interest | $ | 4.0 | $ | 3.7 | |||||||
| Net operating loss carryforward | 136.8 | 55.9 | |||||||||
| Interest limitation carryforward | — | 1.3 | |||||||||
| Other | 0.5 | — | |||||||||
| Total deferred tax assets | $ | 141.3 | $ | 60.9 | |||||||
| Deferred Tax Liabilities: | |||||||||||
| Investments in subsidiaries | $ | (9.9) | $ | (9.7) | |||||||
| Depreciation | (13.6) | (3.1) | |||||||||
| Intangibles and other | (2.6) | (4.5) | |||||||||
| Total deferred tax liabilities | $ | (26.1) | $ | (17.3) | |||||||
| Net deferred tax asset | $ | 115.2 | $ | 43.6 | |||||||
The components of deferred tax assets and liabilities in the table above are presented before offsetting within tax jurisdictions. On the consolidated balance sheets, deferred tax assets and liabilities are netted by jurisdiction, resulting in a deferred tax asset of $122.6 million and a deferred tax liability of $7.4 million as of December 31, 2025.
As of December 31, 2025, the Company had approximately $595.8 million of federal net operating loss carryovers and $270.4 million of state net operating loss carryovers. $543.0 million of such federal net operating loss carryovers have no expiration date, and the remaining $52.8 million of federal net operating loss carryovers expire in 2037. $170.6 million of such state net operating loss carryovers will expire in varying amounts between the period of 2037 to 2045, while the remaining $99.8 million of state net operating loss carryovers have no expiration date. The statute of limitations with respect to the U.S. federal income tax returns of the Company for years ending on or before December 31, 2021, are closed, except to the extent of any federal net operating loss carryovers. States often follow the federal statute of limitation,
but some state jurisdictions may vary. There are currently no federal or state income tax examinations underway for these jurisdictions.
The Company regularly reviews its deferred tax assets, including net operating loss carryovers, for recoverability, and a valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset may not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which the temporary differences are deductible. In assessing the need for a valuation allowance, the Company makes estimates and assumptions regarding projected future taxable income, its ability to carry back operating losses to prior periods, the reversal of deferred tax liabilities and the implementation of tax planning strategies. Based on our cumulative earnings history and forecasted future sources of taxable income, we believe that we will be able to realize our deferred tax assets in the future. As the Company reassesses this position in the future, changes in cumulative earnings history, excluding non-recurring charges, or changes in forecasted taxable income may alter this expectation and may result in an increase to the valuation allowance and an increase in the effective tax rate.
Section 382 of the Internal Revenue Code of 1986, contains rules that limit the ability of a company that undergoes an “ownership change” to utilize its net operating loss and tax credit carryovers and certain built-in losses recognized in years after the “ownership change.” An “ownership change” is generally defined as any change in ownership of more than 50% of a corporation’s stock over a rolling three-year period by stockholders that own (directly or indirectly) 5% or more of the stock of a corporation, or arising from a new issuance of stock by a corporation. If an ownership change occurs, Section 382 generally imposes an annual limitation on the use of pre-ownership change net operating loss carryovers to offset taxable income earned after the ownership change. We do not believe the Section 382 annual limitation related to historical ownership changes impacts our ability to utilize our net operating losses; however, if we were to experience a future ownership change our ability to use net operating losses may be impacted.
Income Taxes Paid
Cash paid for income taxes, net of refunds, were paid in the following jurisdictions:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Federal | $ | — | $ | — | $ | — | |||||||||||
| State (1) | |||||||||||||||||
| Texas | 0.5 | 0.5 | 0.5 | ||||||||||||||
| Tennessee | 0.3 | — | — | ||||||||||||||
| Income taxes paid, net of refunds | $ | 0.8 | $ | 0.5 | $ | 0.5 | |||||||||||
(1) Other states were paid immaterial amounts.
Uncertain Tax Benefits
The Company evaluates its tax positions and recognizes only tax benefits that, more likely than not, will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax position is measured at the largest amount of benefit that has a greater than 50.0% likelihood of being realized upon settlement. As of December 31, 2025 and 2024, the Company’s uncertain tax benefits totaled $0.8 million and $0.8 million, respectively, and are reported as a component of the net deferred tax asset in the consolidated balance sheets. The full balance of unrecognized tax benefits as of December 31, 2025, if recognized, would affect the effective tax rate. However, we do not believe that any of the unrecognized tax benefits will be realized within the coming year. The Company has elected to recognize interest and penalties related to unrecognized tax benefits in income tax expense notwithstanding the fact that, as of December 31, 2025, the Company has not accrued any penalties or interest. Changes in the Company’s gross unrecognized tax benefits are as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Balance, January 1, | $ | 0.8 | $ | 0.8 | |||||||
| — | — | ||||||||||
| Balance, December 31, | $ | 0.8 | $ | 0.8 | |||||||
Payables Related to the Tax Receivable Agreement
As of December 31, 2025, our liability under the Tax Receivable Agreement was $76.3 million, representing 85% of the net cash savings in United States federal, state and local income tax or franchise tax that Solaris Inc. anticipates realizing in future years from certain increases in tax basis and certain tax benefits attributable to imputed interest as a result of Solaris Inc.’s acquisition (or deemed acquisition for United States federal income tax purposes) of Solaris LLC Units in connection with the IPO or pursuant to an exercise of the Redemption Right or the Call Right (each as defined in the Solaris LLC Agreement) and additional tax basis arising from any payments Solaris Inc. makes under the Tax Receivable Agreement.
The projection of future taxable income involves significant judgment. Actual taxable income may differ from our estimates, which could significantly impact our liability under the Tax Receivable Agreement. Therefore, in accordance with ASC 450, Contingencies, we have recorded a liability under the Tax Receivable Agreement related to the tax savings we may realize from certain increases in tax basis and certain tax benefits attributable to imputed interest as a result of Solaris Inc.’s acquisition (or deemed acquisition for United States federal income tax purposes) of Solaris LLC Units in connection with the IPO or pursuant to an exercise of the Redemption Right or the Call Right (each as defined in the Solaris LLC Agreement) and additional tax basis arising from any payments Solaris Inc. makes under the Tax Receivable Agreement. Solaris LLC may make tax distributions to Solaris Inc. in order for Solaris Inc. to satisfy its obligations under the Tax Receivable Agreement and will be required to distribute cash pro rata to each of the other members of Solaris LLC, in accordance with the number of Solaris LLC Units owned by each member at that time.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 5, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Mar 9, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 23, 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.