WERNER ENTERPRISES INCWERN
WERNER ENTERPRISES INC Income Taxes Disclosure
INCOME TAXES
Income tax expense consisted of the following (in thousands):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 1,993 | $ | 53,521 | $ | 17,624 | |||||||||||
| State | 1,120 | 3,496 | 7,661 | ||||||||||||||
| Foreign | 1,801 | 2,095 | 2,053 | ||||||||||||||
| 4,914 | 59,112 | 27,338 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (3,382) | (50,489) | 4,807 | ||||||||||||||
| State | (2,260) | (3,106) | (1,866) | ||||||||||||||
| Foreign | 2,937 | 3,395 | 5,212 | ||||||||||||||
| (2,705) | (50,200) | 8,153 | |||||||||||||||
| Total income tax expense | $ | 2,209 | $ | 8,912 | $ | 35,491 | |||||||||||
The following table presents the updated requirements of ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, for the year ended December 31, 2025, which requires additional information about cash paid for income taxes disaggregated by jurisdiction (in thousands):
| Year Ended December 31, 2025 | ||||||||
| Federal | $ | 35,004 | ||||||
| State | 3,547 | |||||||
| Foreign | 35 | |||||||
| Total cash paid for income taxes | $ | 38,586 | ||||||
Cash paid for income taxes in prior periods is presented as a supplemental disclosure in the consolidated statements of cash flows.
The following table presents the updated requirements of ASU 2023-09 for the year ended December 31, 2025, reconciling the federal statutory income tax rate with our effective income tax rate (in thousands):
| Year Ended December 31, 2025 | |||||||||||
| Tax at statutory rate | $ | (4,366) | 21.00 | % | |||||||
State income taxes, net of federal (national) income tax effect (1) | (1,006) | 4.84 | % | ||||||||
| Foreign tax effects | |||||||||||
| Mexico | |||||||||||
| Statutory tax rate difference between Mexico and United States | 756 | (3.63) | % | ||||||||
| Other | 988 | (4.75) | % | ||||||||
| Other countries | 37 | (0.18) | % | ||||||||
| Effect of cross-border tax laws | 45 | (0.21) | % | ||||||||
| Tax credits | |||||||||||
| Foreign tax credit | (1,779) | 8.56 | % | ||||||||
| Work opportunity tax credit | (1,600) | 7.69 | % | ||||||||
| Research and development tax credit | (360) | 1.73 | % | ||||||||
| Other credits | (54) | 0.26 | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Equity earnings | 1,790 | (8.61) | % | ||||||||
| Stock compensation | 476 | (2.29) | % | ||||||||
| Nondeductible compensation | 804 | (3.87) | % | ||||||||
| Meals and entertainment | 931 | (4.48) | % | ||||||||
| Other non taxable or nondeductible items | 206 | (0.99) | % | ||||||||
| Changes in unrecognized benefits | 432 | (2.08) | % | ||||||||
| Other adjustments | |||||||||||
| Change in deferred tax assets/liabilities | 4,909 | (23.62) | % | ||||||||
| Effective tax rate | $ | 2,209 | (10.63) | % | |||||||
(1) During the year ended December 31, 2025, state taxes in Texas, Louisiana, Oklahoma, Alabama, and Missouri made up the majority (greater than 50%) of the tax effect in this category.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the following table reconciles the federal statutory income tax with our effective income tax (in thousands):
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Tax at statutory rate | $ | 8,921 | $ | 31,034 | |||||||
| State income taxes, net of federal tax benefits | 308 | 4,578 | |||||||||
| Other, net | (317) | (121) | |||||||||
| Total income tax expense | $ | 8,912 | $ | 35,491 | |||||||
The following table presents our deferred income tax assets and liabilities (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Insurance and claims accruals | $ | 51,503 | $ | 57,666 | |||||||
| Compensation-related accruals | 10,702 | 10,146 | |||||||||
| Allowance for uncollectible accounts | 2,158 | 1,918 | |||||||||
| Foreign tax credit carryforward | 5,015 | 2,770 | |||||||||
| Operating lease liabilities | 10,555 | 12,484 | |||||||||
| State net operating losses | 4,910 | 446 | |||||||||
| Valuation allowance (State net operating losses) | (1,440) | — | |||||||||
| Other | 1,707 | 373 | |||||||||
| Gross deferred income tax assets | 85,110 | 85,803 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Property and equipment | 304,766 | 305,089 | |||||||||
| Investments in equity securities | 14,833 | 14,109 | |||||||||
| Prepaid expenses | 7,449 | 6,391 | |||||||||
| Operating lease right-of-use assets | 10,066 | 12,028 | |||||||||
| Investment in partnership | 8,092 | 14,805 | |||||||||
| Other | 6,113 | 2,897 | |||||||||
| Gross deferred income tax liabilities | 351,319 | 355,319 | |||||||||
| Net deferred income tax liability | $ | 266,209 | $ | 269,516 | |||||||
Deferred income tax assets are more likely than not to be realized as a result of the reversal of deferred income tax liabilities. As of December 31, 2025, we had $5.0 million of foreign tax credit carryforwards subject to expiration of $0.7 million in 2033, $2.0 million in 2034, and $2.3 million in 2035. We also had $4.9 million of state net operating loss carryforwards subject to expiration from 2035 to 2045.
We recognized a $2.7 million increase, a $14 thousand decrease, and a $0.2 million decrease in the net liability for unrecognized tax benefits for the years ended December 31, 2025, 2024, and 2023, respectively. We recognized net interest expense of $0.6 million, $0.1 million, and $0.1 million during 2025, 2024, and 2023, respectively. If recognized, $3.7 million, $1.5 million, and $1.7 million of unrecognized tax benefits as of December 31, 2025, 2024 and 2023, respectively, would impact our effective tax rate. Interest of $1.3 million, $0.7 million, and $0.5 million has been reflected as a component of the total liability as of December 31, 2025 and 2024 and 2023, respectively. The reconciliations of beginning and ending gross balances of unrecognized tax benefits are shown below (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Unrecognized tax benefits, beginning balance | $ | 2,235 | $ | 2,245 | $ | 2,495 | |||||||||||
| Gross increases – tax positions in prior period | 2,973 | 179 | 161 | ||||||||||||||
| Gross increases – current period tax positions | — | 80 | 120 | ||||||||||||||
| Reductions due to lapsed statute of limitations | (283) | (269) | (531) | ||||||||||||||
| Unrecognized tax benefits, ending balance | $ | 4,925 | $ | 2,235 | $ | 2,245 | |||||||||||
We file U.S. federal income tax returns, as well as income tax returns in various states and several foreign jurisdictions. The years 2022 and forward are open for examination by the U.S. Internal Revenue Service (“IRS”), and various years are open for examination by state and foreign tax authorities. State and foreign jurisdictional statutes of limitations generally range from three to four years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 26, 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.