SunCoke Energy, Inc.SXC
SunCoke Energy, Inc. Income Taxes Disclosure
5. Income Taxes
The components of (loss) income before income tax (benefit) expense are as follows:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Domestic | $ | (73.9) | $ | 118.8 | $ | 88.8 | |||||||||||
| Foreign | 1.1 | 9.7 | 9.0 | ||||||||||||||
| Total | $ | (72.8) | $ | 128.5 | $ | 97.8 | |||||||||||
Income tax (benefit) expense consisted of the following:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Current tax (benefit) expense: | |||||||||||||||||
| U.S. federal | $ | (15.8) | $ | 18.4 | $ | 7.9 | |||||||||||
| U.S. state and local | 0.5 | (0.7) | 4.7 | ||||||||||||||
| Foreign | 4.4 | 2.8 | 3.1 | ||||||||||||||
| Total current tax (benefit) expense | (10.9) | 20.5 | 15.7 | ||||||||||||||
| Deferred tax (benefit) expense: | |||||||||||||||||
| U.S. federal | (20.9) | 5.0 | 19.7 | ||||||||||||||
| U.S. state and local | (2.1) | (0.5) | (1.1) | ||||||||||||||
| Foreign | (0.1) | — | — | ||||||||||||||
| Total deferred tax (benefit) expense | (23.1) | 4.5 | 18.6 | ||||||||||||||
| Total | $ | (34.0) | $ | 25.0 | $ | 34.3 | |||||||||||
| Total income tax (benefit) expense | |||||||||||||||||
| U.S. federal | (36.7) | 23.4 | 27.6 | ||||||||||||||
| U.S. state and local | (1.6) | (1.2) | 3.6 | ||||||||||||||
| Foreign | 4.3 | 2.8 | 3.1 | ||||||||||||||
| Total income tax (benefit) expense | $ | (34.0) | $ | 25.0 | $ | 34.3 | |||||||||||
The reconciliation of income tax (benefit) expense at the U.S. statutory rate to income tax (benefit) expense is as follows:
| Years Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| (Dollars in millions) | |||||||||||||||||||||||||||||||||||
| Income tax (benefit) expense at U.S. statutory rate | $ | (15.3) | 21.0 | % | $ | 27.0 | 21.0 | % | $ | 20.5 | 21.0 | % | |||||||||||||||||||||||
| (Reduction) increase in income taxes resulting from: | |||||||||||||||||||||||||||||||||||
| U.S. federal | |||||||||||||||||||||||||||||||||||
| Nontaxable and nondeductible items | |||||||||||||||||||||||||||||||||||
| Nondeductible equity compensation | 0.4 | (0.6) | % | 1.3 | 1.0 | % | 1.8 | 1.8 | % | ||||||||||||||||||||||||||
Nondeductible transaction costs(1) | 1.8 | (2.5) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
Income attributable to noncontrolling interests in partnerships(2) | (1.1) | 1.6 | % | (1.6) | (1.2) | % | (1.3) | (1.3) | % | ||||||||||||||||||||||||||
| Other | 0.6 | (0.8) | % | 0.4 | 0.4 | % | 0.8 | 0.8 | % | ||||||||||||||||||||||||||
| Effect of cross-border tax laws | |||||||||||||||||||||||||||||||||||
| Foreign branch income | 1.6 | (2.2) | % | 1.3 | 1.0 | % | 1.5 | 1.5 | % | ||||||||||||||||||||||||||
| Foreign tax credit | (3.0) | 4.2 | % | (1.9) | (1.5) | % | — | — | % | ||||||||||||||||||||||||||
| Tax credits | |||||||||||||||||||||||||||||||||||
| Research and development | (3.4) | 4.7 | % | (1.3) | (1.0) | % | (1.1) | (1.2) | % | ||||||||||||||||||||||||||
Investment tax credits(3) | (18.8) | 25.8 | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Other | 0.1 | (0.2) | % | (0.9) | (0.7) | % | — | — | % | ||||||||||||||||||||||||||
Changes in valuation allowances(4) | 0.4 | (0.6) | % | 0.4 | 0.3 | % | 8.4 | 8.6 | % | ||||||||||||||||||||||||||
| Other | — | — | % | — | — | % | (0.8) | (0.7) | % | ||||||||||||||||||||||||||
U.S. state and local income taxes, net of federal effect(5) | (1.2) | 1.7 | % | (1.3) | (1.0) | % | 2.8 | 2.9 | % | ||||||||||||||||||||||||||
| Foreign tax effects | |||||||||||||||||||||||||||||||||||
| Brazil | |||||||||||||||||||||||||||||||||||
| Statutory income tax rate differential | 1.3 | (1.8) | % | 0.8 | 0.6 | % | 0.9 | 0.9 | % | ||||||||||||||||||||||||||
| Withholding tax | 0.8 | (1.1) | % | 0.9 | 0.7 | % | 0.9 | 0.9 | % | ||||||||||||||||||||||||||
Other(6) | — | — | % | (0.2) | (0.2) | % | (0.2) | (0.2) | % | ||||||||||||||||||||||||||
| Romania | |||||||||||||||||||||||||||||||||||
| Changes in valuation allowances | 1.0 | (1.4) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Other | 0.4 | (0.5) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Other foreign jurisdictions | 0.6 | (0.8) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Worldwide changes in unrecognized tax benefits | (0.2) | 0.2 | % | 0.1 | 0.1 | % | 0.1 | 0.1 | % | ||||||||||||||||||||||||||
| Income tax expense at effective tax rate | $ | (34.0) | 46.7 | % | $ | 25.0 | 19.5 | % | $ | 34.3 | 35.1 | % | |||||||||||||||||||||||
(1)Nondeductible transaction costs incurred due to the acquisition of Phoenix Global.
(2)No income tax expense is reflected in the Consolidated Statements of Operations for income attributable to noncontrolling interests in our Indiana Harbor cokemaking facility.
(3)During 2025, as part of tax planning, SunCoke conducted an analysis with respect to the Company’s capital investments under Section 48 of the Internal Revenue Code, which resulted in a net tax benefit of $18.8 million. The Company utilizes the flow-through method to account for investment tax credits ("ITCs"). Under this method, ITCs are recognized as a reduction to income tax expense in the year in which they are generated. $22.8 million ITCs were generated in 2025 of which, $2.5 million of unused credits are available to offset the Company’s income tax liability in future years.
(4)During 2025, the Company established a valuation allowance of $1.4 million on foreign tax credits projected to be unused before expiration. This tax expense is partially offset by a release of valuation allowance due to utilization of existing foreign tax credit carryforwards.
During 2024, the company established a $0.4 million valuation allowance, representing a portion of foreign tax credits projected to be unused before expiration.
During 2023, the Company established an $8.4 million valuation allowance, which was a portion of an $11.3 million valuation allowance that was released during 2022 on deferred tax assets attributable to existing foreign tax credit carryforwards. The release of the valuation allowance during 2022 was a result of new regulations published in 2022 by the U.S. Treasury (2022 Foreign Tax Credit (“FTC”) final regulations) that made foreign taxes paid in future years to certain countries, including Brazil, no longer creditable in the U.S. After tax planning in 2022, the Company expected to be able to utilize its existing foreign tax credits carried forward from prior years. Additionally, Brazil enacted new legislation that aligned the Brazil transfer pricing law with the 2022 OECD Guidelines. As a result, the Company has determined that Brazil taxes paid or accrued in 2024 and forward will become creditable under the 2022 final FTC regulations. Due to the change in the Brazilian tax law, the FTCs that are projected to be created will cause $8.4 million of the foreign tax credit carryforward from prior years to not be utilized, resulting in the establishment of the valuation allowance during 2023. Also, during 2023, the IRS issued Notice 2023-55 and 2023-80 that generally allow taxpayers to defer the application of the of the 2022 FTC final regulations until further guidance is issued. Foreign income taxes paid in 2023 reflected the absence of the generation of foreign tax credits for taxes paid in Brazil due to the Company’s election not to defer the application of the 2022 FTC final regulations allowed under the notices.
(5)In 2025, 2024 and 2023, state and local income taxes in Illinois and Indiana comprise the majority of the domestic state and local income taxes, net of federal effect category.
(6)The Company’s subsidiary in Brazil operates under a tax holiday arrangement that expires on December 31, 2026. The Superintendence for the Development of the Northeast (“SUDENE”) tax benefit is a Northeast regional development incentive offering companies up to a 75 percent reduction in corporate income tax for up to 10 years. The eligible projects must be approved by the Brazilian Federal Revenue Service on technical analysis from SUDENE. For the period ended December 31, 2025, the Company recorded a tax benefit of $0.5 million, representing approximately 0.7 percent effective tax rate impact.
The tax effects of temporary differences that comprise the net deferred income tax liability from operations are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Dollars in millions) | |||||||||||
| Deferred tax assets: | |||||||||||
| Retirement benefit liabilities | $ | 1.9 | $ | 2.0 | |||||||
| Black lung benefit liabilities | 2.9 | 3.1 | |||||||||
| Share-based compensation | — | 0.2 | |||||||||
Federal tax credit carryforward(1) | 4.6 | — | |||||||||
Foreign tax credit carryforward(2) | 9.3 | 8.9 | |||||||||
Foreign net operating loss carryforward(3) | 9.3 | — | |||||||||
Federal net operating loss carryforward(4) | 13.8 | — | |||||||||
Federal 163(j) interest limitation carryforward(4) | 2.6 | — | |||||||||
State net operating loss carryforward, net of federal income tax effects(5) | 10.8 | 10.1 | |||||||||
| Other liabilities not yet deductible | 13.0 | 14.8 | |||||||||
| Total deferred tax assets | 68.2 | 39.1 | |||||||||
Less: valuation allowance(6) | (32.4) | (15.0) | |||||||||
| Deferred tax asset, net | 35.8 | 24.1 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Properties, plants and equipment | (169.1) | (163.7) | |||||||||
| Investment in partnerships | (56.5) | (57.2) | |||||||||
| Share-based compensation | (0.2) | — | |||||||||
Total deferred tax liability(7) | (225.8) | (220.9) | |||||||||
| Net deferred tax liability | $ | (190.0) | $ | (196.8) | |||||||
| The net deferred income tax asset/(liability) is classified in the consolidated balance sheets as follows: | |||||||||||
| Noncurrent asset | $ | 0.3 | $ | — | |||||||
| Noncurrent liability | (190.3) | (196.8) | |||||||||
| Net deferred tax asset/(liability) | $ | (190.0) | $ | (196.8) | |||||||
(1)Federal tax credit carryforward expires in 2044 through 2046.
(2)Foreign tax credit carryforward expires in 2029 through 2036.
(3)Foreign net operating loss carryforward expires in 2026 through indefinite.
(4)Federal net operating loss and 163(j) limitation carryforwards are indefinite.
(5)State net operating loss carryforward, net of federal income tax effects expires in 2035 through indefinite.
(6)If certain deferred tax assets are not likely recoverable in future years a valuation allowance is recorded. As of December 31, 2025, a valuation allowance of $32.4 million reduced deferred tax assets primarily related to foreign tax credit carryforwards, state net operating loss carryforwards, and foreign net operating loss carryforwards. As of December 31, 2024, a valuation allowance of $15.0 million reduced deferred tax assets related to foreign tax credit carryforwards.
(7)As of December 31, 2025, no foreign withholding taxes, federal and state taxes or foreign currency gains or losses have been provided on distributions of approximately $21.1 million of unremitted earnings of our foreign subsidiaries, as such amounts are considered permanently reinvested. It is not practicable to estimate the additional income taxes including applicable foreign withholding taxes, which would be due upon the repatriation of these earnings.
SunCoke is currently open to examination by the IRS for tax years ended December 31, 2022 and forward.
State and foreign income tax returns are generally subject to examination for a period of to five years after the filing of the respective returns. The state impact of any amended federal returns remains subject to examination by various states for a period of up to one year after formal notification of such amendments to the states.
The income taxes paid, net of refunds are as follows:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| U.S. federal | $ | 10.3 | $ | 12.5 | $ | 9.4 | |||||||||||
| U.S. state and local: | |||||||||||||||||
| Illinois | $ | 1.0 | $ | 1.6 | $ | 2.2 | |||||||||||
| Indiana | (2.8) | 0.8 | 2.5 | ||||||||||||||
| Other | 0.4 | 0.3 | 0.5 | ||||||||||||||
| Total U.S. state and local | $ | (1.4) | $ | 2.7 | $ | 5.2 | |||||||||||
| Foreign | |||||||||||||||||
| Brazil | $ | 3.7 | $ | 2.8 | $ | 3.1 | |||||||||||
| Other | 0.2 | — | — | ||||||||||||||
| Total foreign | $ | 3.9 | $ | 2.8 | $ | 3.1 | |||||||||||
Total income taxes paid (net of refunds of $5.2 million, $0.3 million and zero) | $ | 12.8 | $ | 18.0 | $ | 17.7 | |||||||||||
The uncertain tax positions are as follows:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| The total amount of unrecognized tax benefits consisted of the following: | |||||||||||||||||
| Beginning of year | $ | 0.5 | $ | 0.4 | $ | 0.3 | |||||||||||
| Increase related to prior year tax positions | 1.1 | — | — | ||||||||||||||
| Increase related to current year tax positions | 0.1 | 0.1 | 0.1 | ||||||||||||||
| Effect of the expiration of statutes of limitation | (0.3) | — | — | ||||||||||||||
| End of year | $ | 1.4 | $ | 0.5 | $ | 0.4 | |||||||||||
At December 31, 2025, 2024 and 2023, the balances of unrecognized tax benefits were $1.4 million, $0.5 million and $0.4 million, respectively, that, if recognized, will reduce the effective tax rate on income from continuing operations.
We classify interest as interest expense and penalties as operating expense in the Consolidated Statements of Operations and their associated liabilities as other liabilities in the Consolidated Balance Sheets. At December 31, 2025, interest and penalties on unrecognized tax benefits were $0.4 million and December 31, 2024 and 2023 were both zero.
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.