Income Taxes
The income tax provision charged to operations for the years ended December 31, 2025, 2024, and 2023 was as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | 2025 | | 2024 | | 2023 |
| Current: | | | | | |
| U.S. federal | $ | 118,700 | | | $ | 116,323 | | | $ | 106,721 | |
| State and local | 3,698 | | | 3,934 | | | 3,796 | |
| Current income tax expense | 122,398 | | | 120,257 | | | 110,517 | |
| Deferred expense: | | | | | |
| U.S. federal | 6,546 | | | 4,530 | | | 964 | |
| State and local | 9 | | | 74 | | | 435 | |
| Deferred income tax expense | 6,555 | | | 4,604 | | | 1,399 | |
| Total income tax expense | $ | 128,953 | | | $ | 124,861 | | | $ | 111,916 | |
Total income tax expense differed from the amounts computed by applying the U.S. federal income tax rate of 21% for the years ended December 31, 2025, 2024, and 2023 to income before federal income taxes as a result of the following (in thousands, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | 2025 | | 2024 | | 2023 |
| Computed tax expense at the statutory rate of 21% | $ | 128,169 | | | 21.0 | % | | $ | 121,552 | | | 21.0 | % | | $ | 108,688 | | | 21.0 | % |
| Reduction in income taxes resulting from: | | | | | | | | | | | |
State and local income taxes, net of federal benefit (1) | 2,930 | | | 0.5 | % | | 3,182 | | | 0.5 | % | | 3,439 | | | 0.7 | % |
| Tax credits | (1,857) | | | (0.3) | % | | (850) | | | (0.1) | % | | — | | | — | % |
| Nondeductible and nontaxable items | (289) | | | (0.1) | % | | 977 | | | 0.2 | % | | (211) | | | (0.1) | % |
| Total income tax expense | $ | 128,953 | | | 21.1 | % | | $ | 124,861 | | | 21.6 | % | | $ | 111,916 | | | 21.6 | % |
(1)Primarily related to income taxes imposed by the State of Texas.
Nondeductible and nontaxable items primarily consist of statutory depletion, prior-year tax adjustments, penalties and interest, and other permanent differences. The Company had no material changes in valuation allowances, unrecognized tax benefits, foreign tax effects, cross-border tax laws, or enacted tax law changes impacting the effective tax rate during the periods presented.
Total income taxes paid (net of refunds received) for the year ended December 31, 2025, 2024, and 2023 were as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| | 2025 | | 2024 | | 2023 |
| U.S. federal | $ | 123,000 | | | $ | 117,000 | | | $ | 100,538 | |
| State and local | 3,955 | | | 3,669 | | | 3,541 | |
| | | | | |
| | | | | |
| Total income taxes paid (net of refunds received) | $ | 126,955 | | | $ | 120,669 | | | $ | 104,079 | |
Income taxes paid (net of refunds received) were principally attributable to U.S. federal income taxes. No individual state jurisdiction accounted for 5% or more of the total income taxes paid in the periods presented.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows (in thousands):
| | | | | | | | | | | |
| | December 31, 2025 | | December 31, 2024 |
| Unearned revenue | $ | 8,821 | | | $ | 5,879 | |
| Stock compensation | 2,976 | | | 2,677 | |
| Right of use lease liabilities | 3,739 | | | 263 | |
| Other | 260 | | | 515 | |
| Total deferred tax assets | 15,796 | | | 9,334 | |
| | | |
| Real estate and royalty interests | 35,405 | | | 33,581 | |
| Property, plant and equipment | 23,482 | | | 20,724 | |
| Capitalized research and development cost | 5,905 | | | — | |
| Pension plan asset | 2,235 | | | 1,901 | |
| Right of use assets | 2,876 | | | 244 | |
| Other, net | — | | | 285 | |
| Total deferred tax liabilities | 69,903 | | | 56,735 | |
| Deferred taxes payable | $ | (54,107) | | | $ | (47,401) | |
One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The provisions of the OBBBA impacting the Company primarily related to accelerated depreciation and immediate expensing of capitalized research and development costs. The OBBBA did not have a material impact on our annual effective tax rate in 2025.
Unrecognized Tax Benefits and Open Tax Years
The Company is subject to taxation in the United States, Texas, and New Mexico. The Company is no longer subject to U.S. federal income tax examinations for tax years prior to 2022.
The Company had no material unrecognized tax benefits as of December 31, 2025 or 2024. Accordingly, changes in unrecognized tax benefits did not have a material impact on the Company’s effective tax rate during the periods presented.