Viper Energy, Inc.VNOM
Viper Energy, Inc. Income Taxes Disclosure
INCOME TAXES
The Company’s total income tax benefit for the year ended December 31, 2025, differed from amounts computed by applying the United States federal statutory tax rate to pre-tax loss for the period primarily due to net loss attributable to the non-controlling interest. For the year ended December 31, 2024, the Company’s total income tax benefit differed from amounts computed by applying the United States federal statutory tax rate to pre-tax income for the period primarily due to the release of the remaining valuation allowance during the fourth quarter and net income attributable to non-controlling interests. For the year ended December 31, 2023, total income tax expense differed from amounts computed by applying the United States federal statutory rate to pre-tax income for the period primarily due to net income attributable to the non-controlling interest and the impact of reductions to the valuation allowance.
The components of the provision for income taxes for the years ended December 31, 2025, 2024 and 2023 are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In millions) | |||||||||||||||||
| Current income tax provision (benefit): | |||||||||||||||||
| Federal | $ | 60 | $ | 47 | $ | 50 | |||||||||||
| State | 4 | 2 | 3 | ||||||||||||||
| Total current income tax provision (benefit) | 64 | 49 | 53 | ||||||||||||||
| Deferred income tax provision (benefit): | |||||||||||||||||
| Federal | (78) | (148) | (7) | ||||||||||||||
| State | (5) | (1) | — | ||||||||||||||
| Total deferred income tax provision (benefit) | (83) | (149) | (7) | ||||||||||||||
| Total provision (benefit) from income taxes | $ | (19) | $ | (100) | $ | 46 | |||||||||||
A reconciliation of the statutory federal income tax amount to the recorded expense is as follows:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| Amount (In millions) | Percentage of Income (Loss) Before Income Taxes | Amount (In millions) | Percentage of Income (Loss) Before Income Taxes | Amount (In millions) | Percentage of Income (Loss) Before Income Taxes | ||||||||||||||||||||||||||||||
| $ | (47) | 21 | % | $ | 106 | 21 | % | $ | 115 | 21 | % | ||||||||||||||||||||||||
State income tax, net of federal income tax effect(1) | (1) | — | % | 2 | — | % | 2 | — | % | ||||||||||||||||||||||||||
| Changes in valuation allowances | — | — | % | (156) | (31) | % | (8) | (1) | % | ||||||||||||||||||||||||||
Nontaxable or nondeductible items: | |||||||||||||||||||||||||||||||||||
| Impact of nontaxable noncontrolling interest | 29 | (13) | % | (52) | (10) | % | (63) | (12) | % | ||||||||||||||||||||||||||
| Provision for (benefit from) income taxes | $ | (19) | 8 | % | $ | (100) | (20) | % | $ | 46 | 8 | % | |||||||||||||||||||||||
(1)State taxes in Texas make up the majority (greater than 50%) of the tax effect in this category.
The components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024 are as follows:
| Year Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In millions) | |||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss and capital loss carryforwards | $ | 5 | $ | — | |||||||
| Investment in the Operating Company | 28 | 185 | |||||||||
| Total deferred tax assets | 33 | 185 | |||||||||
| Valuation allowance | — | — | |||||||||
| Net deferred tax assets | 33 | 185 | |||||||||
| Net deferred tax assets (liabilities) | $ | 33 | $ | 185 | |||||||
At December 31, 2025, the Company had net deferred tax assets of approximately $33 million, including $5 million in federal capital loss carryforwards expiring in 2027 and immaterial state operating loss carryforwards. Deferred taxes are provided on the difference between the Company’s basis for financial accounting purposes and basis for federal income tax purposes in its investment in the Operating Company.
In connection with the closing of the Sitio Acquisition, the Company acquired prepaid income tax balances of approximately $14 million and deferred tax assets of $5 million related to loss carryforwards. The Company also recognized a deferred tax liability of approximately $122 million. The Company’s federal loss carryforwards acquired from Sitio are subject to an annual limitation under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), which subjects tax attributes to limitation upon an “ownership change” (as defined in the Code). In general, an ownership change occurs if there is a cumulative increase in the ownership of a corporation’s stock totaling more than 50 percentage points by one or more “5% shareholders” (as defined in the Code) at any time during a rolling three-year look back period. Based on Sitio’s fair market value, the Company has determined that the applicable annual limitation exceeds the loss carryforwards acquired from Sitio. As such, the Company believes that the application of Section 382 of the Code will not have an adverse effect on future usage of its federal tax attributes.
During the fourth quarter of 2024, the Company released its remaining valuation allowance of $156 million as a result of management’s assessment of the realizability of future taxable income, which primarily contributed to the discrete income tax benefit of $149 million for the year ended December 31, 2024. During the year ended December 31, 2023, the Company recognized a discrete income tax benefit of $7 million related to a partial release of its beginning-of-the-year valuation allowance, based on a change in judgment about the realizability of its deferred tax assets in future years.
In March 2024, as part of the Diamondback Offering, the Company recognized a $28 million increase in its deferred tax asset and an $11 million increase in its valuation allowance through additional paid-in capital.
At December 31, 2025, the Company did not have any significant uncertain tax positions requiring recognition in the financial statements. The Company’s 2022 through 2025 tax years remain open to examination by tax authorities.
On July 4, 2025, H.R. 1, commonly known as the One Big Beautiful Bill Act (the “OBBB”), was enacted. The OBBB included multiple provisions applicable to U.S. income taxes for businesses, including immediate expensing of research or experimental expenses, bonus depreciation for qualified tangible property, deductible intangible drilling costs for purposes of the corporate “book” minimum tax and enhancements to limits on business interest expense deductions. The Company accounted for the OBBB in the period of enactment and concluded there was not a material impact to the Company’s current or deferred income tax balances.
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.