Targa Resources Corp. Income Taxes Disclosure
Note 19 — Income Taxes
The following table shows components of the federal and state income tax provisions for the periods presented:
|
Year Ended December 31, |
|
|||||||||
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current expense (benefit) |
|
|
|
|
|
|
|
|
|||
Federal |
$ |
12.2 |
|
|
$ |
(0.1 |
) |
|
$ |
0.2 |
|
State |
|
0.9 |
|
|
|
17.6 |
|
|
|
13.4 |
|
Total current expense (benefit) |
|
13.1 |
|
|
|
17.5 |
|
|
|
13.6 |
|
Deferred expense (benefit) |
|
|
|
|
|
|
|
|
|||
Federal |
|
466.7 |
|
|
|
339.2 |
|
|
|
342.4 |
|
State |
|
49.9 |
|
|
|
27.8 |
|
|
|
7.2 |
|
Total deferred expense (benefit) |
|
516.6 |
|
|
|
367.0 |
|
|
|
349.6 |
|
Total income tax expense (benefit) |
$ |
529.7 |
|
|
$ |
384.5 |
|
|
$ |
363.2 |
|
Our deferred income tax assets and liabilities as of the periods presented consist of recognition differences related to certain types of costs as follows:
|
December 31, 2025 |
|
|
December 31, 2024 |
|
||
Deferred tax assets: |
|
|
|
|
|
||
Net operating loss and tax credit carryforwards |
$ |
1,045.0 |
|
|
$ |
1,094.9 |
|
Disallowed business interest expense carryforward |
|
22.1 |
|
|
|
113.5 |
|
Property, plant and equipment |
|
1.5 |
|
|
|
1.9 |
|
Other |
|
12.6 |
|
|
|
10.1 |
|
Deferred tax assets before valuation allowance |
|
1,081.2 |
|
|
|
1,220.4 |
|
Valuation allowance |
|
(5.9 |
) |
|
|
(5.9 |
) |
Deferred tax assets |
|
1,075.3 |
|
|
|
1,214.5 |
|
Deferred tax liabilities: |
|
|
|
|
|
||
Investments (1) |
|
(2,468.8 |
) |
|
|
(2,086.6 |
) |
Deferred tax liabilities |
|
(2,468.8 |
) |
|
|
(2,086.6 |
) |
Net deferred tax asset (liability) |
$ |
(1,393.5 |
) |
|
$ |
(872.1 |
) |
|
|
|
|
|
|
||
Net deferred tax asset (liability) |
|
|
|
|
|
||
Federal |
$ |
(1,298.0 |
) |
|
$ |
(826.7 |
) |
State |
|
(95.5 |
) |
|
|
(45.4 |
) |
Long-term deferred tax liability, net |
$ |
(1,393.5 |
) |
|
$ |
(872.1 |
) |
We are subject to tax in the U.S. and various state jurisdictions, and we are subject to periodic audits and reviews by taxing authorities. As of December 31, 2025, examinations by the Internal Revenue Service (“IRS”) are currently in process for the 2022 taxable year of certain wholly-owned and consolidated subsidiaries that are treated as partnerships for U.S. federal income tax purposes. We are responding to information requests from the IRS with respect to these audits. We do not expect there to be any audit adjustments that would materially change our taxable income.
Federal statutes of limitations for returns filed in 2022 (for calendar year 2021) have expired. The statute of limitations expired on substantially all 2021 state income tax returns that were filed prior to October 15, 2022. For Texas, the statute of limitations has expired for 2021 returns (for calendar year 2020). However, tax authorities could review and adjust carryover attributes (e.g., net operating losses (“NOLs”)) generated in a closed tax year if utilized in an open tax year.
As of December 31, 2025, we have total U.S. federal NOL carryforwards of $4.4 billion and tax credit carryforwards of $3.8 million. The NOL carryforwards do not expire, but are limited to offsetting 80% of taxable income per year. The tax credit carryforwards expire in 2044. As of December 31, 2025 and 2024, our tax effected valuation allowance was $5.9 million. Of this valuation allowance, $5.2 million is federal and the remaining $0.7 million is state.
The following table shows our income taxes paid net of refunds received for the periods presented:
|
Year Ended December 31, |
|
|||||||||
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Income taxes paid, net of refunds: |
|
|
|
|
|
|
|
|
|||
Federal |
$ |
7.1 |
|
|
$ |
— |
|
|
$ |
(0.1 |
) |
State: |
|
|
|
|
|
|
|
|
|||
Texas |
|
14.3 |
|
|
|
11.6 |
|
|
|
8.9 |
|
New Mexico |
|
1.3 |
|
|
|
1.3 |
|
|
|
— |
|
California |
|
(0.4 |
) |
|
|
1.1 |
|
|
|
— |
|
Arizona |
|
0.2 |
|
|
|
1.0 |
|
|
|
— |
|
Other |
|
1.8 |
|
|
|
1.7 |
|
|
|
(0.3 |
) |
Total State |
|
17.2 |
|
|
|
16.7 |
|
|
|
8.6 |
|
Total income taxes paid, net of refunds |
$ |
24.3 |
|
|
$ |
16.7 |
|
|
$ |
8.5 |
|
The following table shows the reconciliation between our Income tax provision (benefit) computed at the United States statutory rate on income before income taxes and the income tax provision (benefit) in our Consolidated Statements of Operations for the periods presented:
|
Year Ended December 31, |
|
||||||||||||||||||
Income tax reconciliation: |
2025 |
|
|
2024 |
|
|
2023 |
|
||||||||||||
Income (loss) before income taxes |
$ |
2,486.4 |
|
|
|
|
$ |
1,938.0 |
|
|
|
|
$ |
1,942.5 |
|
|
|
|||
U.S. federal statutory tax rate |
|
522.1 |
|
|
21.0 |
% |
|
|
407.0 |
|
|
21.0 |
% |
|
|
407.9 |
|
|
21.0 |
% |
, net of federal income tax effect (1) |
|
40.2 |
|
|
1.6 |
% |
|
|
35.9 |
|
|
1.9 |
% |
|
|
16.3 |
|
|
0.8 |
% |
Changes in valuation allowance |
|
— |
|
|
— |
|
|
|
(1.2 |
) |
|
(0.1 |
%) |
|
|
— |
|
|
— |
|
Nontaxable or nondeductible items |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Income attributable to noncontrolling interest |
|
(7.1 |
) |
|
(0.3 |
%) |
|
|
(50.7 |
) |
|
(2.6 |
%) |
|
|
(49.0 |
) |
|
(2.5 |
%) |
Other |
|
(12.7 |
) |
|
(0.5 |
%) |
|
|
(5.8 |
) |
|
(0.3 |
%) |
|
|
(9.5 |
) |
|
(0.5 |
%) |
Other adjustments |
|
(12.8 |
) |
|
(0.5 |
%) |
|
|
(0.7 |
) |
|
(0.1 |
%) |
|
|
(2.5 |
) |
|
(0.1 |
%) |
Income tax provision (benefit) |
$ |
529.7 |
|
|
21.3 |
% |
|
$ |
384.5 |
|
|
19.8 |
% |
|
$ |
363.2 |
|
|
18.7 |
% |
We have not identified any uncertain tax positions. We believe that our income tax filing positions and deductions will be sustained on audit and do not anticipate any adjustments that will result in a material adverse effect on our financial condition, results of operations or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (the “OBBBA”) into law. Among other things, the OBBBA indefinitely extends the 100% first-year depreciation allowance on qualified property placed in service after January 19, 2025, includes favorable modifications to the business interest expense limitation, and otherwise extends and enhances certain key provisions of the Tax Cuts & Jobs Act. The OBBBA has multiple effective dates with respect to its various provisions, with certain provisions effective in 2025. The impacts of OBBBA are reflected in our results for the year, and there was no material impact to our effective tax rate. We expect certain provisions may change the timing of cash tax payments in future periods.
The U.S. Department of the Treasury and the IRS have issued guidance on the application of the corporate alternative minimum tax (the “CAMT”), which is a 15% minimum tax imposed on certain financial income of “applicable corporations,” including proposed regulations issued in September 2024, which may be relied upon until final regulations are released. Based on our interpretation of the Inflation Reduction Act of 2022 (the “IRA”), the CAMT and related guidance, the impact from the OBBBA, and several operational, economic, accounting and regulatory assumptions, we do not anticipate paying CAMT in the near term.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 18, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 16, 2018 | |
| 2016 | Feb 21, 2017 | |
| 2015 | Feb 29, 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.