STRATUS PROPERTIES INCSTRS
STRATUS PROPERTIES INC Income Taxes Disclosure
INCOME TAXES
Stratus’ provision for income taxes consists of the following (in thousands):
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Current | |||||||||||
Federal | $ | 4,870 | $ | 165 | |||||||
State - Texas | 464 | 257 | |||||||||
| Deferred | |||||||||||
Federal | — | — | |||||||||
| State - Texas | (53) | 20 | |||||||||
| Provision for income taxes | $ | 5,281 | $ | 442 | |||||||
The components of deferred income taxes follow (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets and liabilities: | |||||||||||
| Real estate, leasing operations assets and facilities | $ | 9,501 | $ | 8,427 | |||||||
| Employee benefit accruals | 628 | 821 | |||||||||
| Other assets | 3,611 | 4,132 | |||||||||
| Charitable contributions | — | 2 | |||||||||
| Net operating loss credit carryforwards | 1 | 2 | |||||||||
| Other liabilities | (3,699) | (3,924) | |||||||||
| Valuation allowance | (9,836) | (9,307) | |||||||||
| Deferred tax assets, net | $ | 206 | $ | 153 | |||||||
Stratus continues to maintain a valuation allowance on substantially all of its remaining net deferred tax assets. In evaluating the recoverability of the remaining deferred tax assets, management considered available positive and negative evidence, giving greater weight to the uncertainty regarding projected future financial results.
Upon a change in facts and circumstances, management may conclude that sufficient positive evidence exists to support a reversal of, or decrease in, the valuation allowance in the future, which would favorably impact Stratus’ results of operations. Stratus’ future results of operations may be negatively impacted by an inability to realize a tax benefit for future tax losses or for items that will generate additional deferred tax assets that are not more likely than not to be realized.
Stratus adopted ASU 2023-09 prospectively for the year ended December 31, 2025. Comparative information for 2024 remains under the previous Accounting Standards Codification (ASC) 740 disclosure requirements.
Reconciliations of the United States (U.S.) federal statutory tax rate to Stratus’ effective income tax rate follow (dollars in thousands):
Year Ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| Income tax expense computed at the federal statutory income tax rate | $ | 1,698 | 21 | % | |||||||
| Adjustments attributable to: | |||||||||||
| State income taxes, net of federal effect | 308 | 4 | % | ||||||||
| Change in valuation allowance | 539 | 7 | % | ||||||||
| Noncontrolling interests | 1,928 | 24 | % | ||||||||
| Nondeductible items | |||||||||||
| Development and asset management fees | 453 | 5 | % | ||||||||
Executive compensation limitation | 240 | 3 | % | ||||||||
Meals and entertainment | 81 | 1 | % | ||||||||
| Net, other | 34 | — | % | ||||||||
| Provision for income taxes | $ | 5,281 | 65 | % | |||||||
Year Ended December 31, 2024 | |||||||||||
| Amount | Percent | ||||||||||
| Income tax benefit computed at the federal statutory income tax rate | $ | (308) | 21 | % | |||||||
| Adjustments attributable to: | |||||||||||
| Change in valuation allowance | (813) | 56 | % | ||||||||
| Noncontrolling interests | 810 | (55) | % | ||||||||
| Executive compensation limitation | 362 | (25) | % | ||||||||
| State taxes | 228 | (16) | % | ||||||||
| Net, other | 163 | (11) | % | ||||||||
| Provision for income taxes | $ | 442 | (30) | % | |||||||
The following table disaggregates the income taxes paid (net of refunds):
| Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Income taxes paid, net of refunds: | |||||||||||
| State - Texas | 260 | 137 | |||||||||
Income taxes paid, net of refunds | $ | 260 | $ | 137 | |||||||
Stratus paid state margin taxes totaling $260 thousand in 2025 and $205 thousand in 2024. Stratus also received a $68 thousand state margin tax refund in 2024. During 2025, Stratus accrued U.S. federal current income taxes primarily due to taxable income generated from the retail sale of Lantana Place – Retail, and cash received in the Holden Hills Phase 2 transaction (refer to Notes 2 and 4).
On July 4, 2025, the One Big Beautiful Bill Act (OBBB) was enacted into law. Key corporate tax provisions of OBBB include the restoration of 100% bonus depreciation, immediate expensing for domestic research and experimental expenditures, changes to Section 163(j) interest limitations, amendments to energy credits, and expanded Section 162(m) aggregation requirements. In accordance with ASC 740, Income Taxes, Stratus has recognized the effects of the new tax law in the period of enactment. The impact of OBBB for the quarter ended December 31, 2025 did not result in a material impact on Stratus’ consolidated financial statements. Stratus continues to evaluate the impact of OBBB on its consolidated financial statements but does not expect a material impact to its financial statements.
Uncertain Tax Positions. As of December 31, 2025 and December 31, 2024, Stratus had no unrecognized tax benefits.
Stratus records liabilities offsetting the tax provision benefits of uncertain tax positions to the extent it estimates that a tax position is more likely than not to not be sustained upon examination by the taxing authorities. Stratus has elected to classify any interest and penalties related to income taxes within income tax expense in its consolidated statements of comprehensive income. As of December 31, 2025, no such interest costs have been accrued.
Stratus files both U.S. federal income tax and state margin tax returns. With limited exceptions, Stratus is no longer subject to U.S. federal income tax examinations by tax authorities for the years prior to 2022 and state margin tax examinations for the years prior to 2021.
On August 16, 2022, the Inflation Reduction Act of 2022 (the IR Act) was enacted in the United States. Among other provisions, the IR Act imposes a new one percent excise tax on the fair market value of net corporate stock repurchases made by covered corporations, effective for tax years beginning after December 31, 2022. The excise tax did not have a material effect on Stratus’ consolidated financial statements. Refer to Note 8 for discussion of Stratus’ share repurchase programs.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 27, 2026 | Showing above |
| 2024 | Mar 28, 2025 | |
| 2023 | Mar 28, 2024 | |
| 2022 | Mar 31, 2023 | |
| 2021 | Mar 31, 2022 | |
| 2020 | Mar 15, 2021 | |
| 2019 | Mar 16, 2020 | |
| 2018 | Mar 18, 2019 | |
| 2017 | Mar 16, 2018 | |
| 2016 | Mar 16, 2017 | |
| 2015 | Mar 15, 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.