WESTLAKE CORPWLK

WESTLAKE CORP Income Taxes Disclosure

10-KFiled Feb 26, 20267 min read
Income Taxes
The components of income before income taxes are as follows:
Year Ended December 31,
202520242023
Domestic$(1,455)$855 $923 
Foreign(142)83 (223)
$(1,597)$938 $700 
The Company's provision for (benefit from) income taxes consisted of the following:
Year Ended December 31,
202520242023
Current
Federal$(16)$215 $229 
State3 24 26 
Foreign64 87 98 
Total current
51 326 353 
Deferred
Federal(150)(58)(82)
State(6)35 (31)
Foreign(21)(12)(62)
Total deferred
(177)(35)(175)
Total provision for (benefit from) income taxes$(126)$291 $178 
The Company adopted ASU 2023-09 in the 2025 annual period and applied this standard prospectively. The adoption of this ASU resulted in additional income tax disclosures. A reconciliation of taxes computed at the statutory rate to the Company's income tax expense (benefit) is as follows:
Year Ended December 31, 2025
Amount
Percentage
U.S. federal statutory income tax rate$(335)21.0 %
State and local income tax, net of federal income tax effect(2)0.1 %
Foreign tax effects
Canada
Provincial taxes 23 (1.4)%
Other Canada(9)0.6 %
Netherlands
Changes in valuation allowance79 (4.9)%
Other Netherlands(15)0.9 %
Other foreign jurisdictions(1)0.1 %
Tax credits(14)0.9 %
Nontaxable and nondeductible items
 Goodwill impairment151 (9.5)%
 Other1 (0.1)%
Worldwide changes in unrecognized tax benefits 1 (0.1)%
Other adjustments
Noncontrolling interest(6)0.4 %
Other1 (0.1)%
Effective Tax Rate$(126)7.9 %
In the 2025 annual period, state and local income taxes in Louisiana and Mississippi comprise the majority of the state and local income taxes, net of federal income tax effect category.
The comparative periods are presented based on the prior guidance. A reconciliation of taxes computed at the statutory rate to the Company's income tax expense is as follows:
Year Ended December 31,
20242023
Provision for federal income tax, at statutory rate$197 $148 
State income tax provision, net of federal income tax effect6 7 
Foreign income tax rate differential7 (15)
Noncontrolling interests(9)(7)
Change in valuation allowance62 76 
U.S. federal research and development credits(16)(54)
Uncertain Income Tax Positions
9 14 
Goodwill impairment
— 26 
Change in state apportionment and tax rates
45 (6)
Other, net(10)(11)
Total income tax expense$291 $178 

The Company's income taxes paid is presented in accordance with ASU 2023-09 and the standard is applied prospectively. The income taxes paid, net of refunds received, is as follows:
Year Ended December 31, 2025
US federal$19 
US state and local8 
Foreign
Canada53 
Taiwan
6 
Korea
6 
Other12 
77 
Income Taxes Paid, net of Refunds Received$104 
The tax effects of the principal temporary differences between financial reporting and income tax reporting at December 31 are as follows:
20252024
Net operating loss carryforward$524 $230 
Credit carryforward30 28 
Operating lease liabilities202 202 
Accruals106 110 
Pension20 42 
Inventories39 36 
Research and experimental expenditures112 154 
Other87 36 
Deferred taxes assets—total1,120 838 
Property, plant and equipment(1,242)(1,259)
Intangibles(247)(226)
Operating lease right-of-use asset(195)(191)
Turnaround costs(52)(53)
Consolidated partnerships(165)(202)
Equity method investments(224)(236)
Other(33)(29)
Deferred tax liabilities—total(2,158)(2,196)
Valuation allowance(298)(170)
Total net deferred tax liabilities$(1,336)$(1,528)
Balance sheet classifications
Noncurrent deferred tax asset$7 $25 
Noncurrent deferred tax liability(1,343)(1,553)
Total net deferred tax liabilities$(1,336)$(1,528)
At December 31, 2025, the Company had federal, foreign and state net operating loss carryforwards ("NOLs") of approximately $611, $1,228 and $1,683, respectively. The $611 of federal NOLs do not expire. Of the $1,228 of foreign NOLs, $1,186 do not expire and $42 expire in varying amounts between 2026 and 2030. Of the $1,683 of state NOLs, $970 do not expire and $713 expire in varying amounts between 2026 and 2045. The utilization of federal NOLs and certain foreign and state NOLs are subject to annual limitations. On December 31, 2025, the Company had various federal and state credit carryforwards of $2 and $28, respectively, of which $16 do not expire and $14 expire in varying amounts between 2026 and 2040. Management believes the Company will realize the benefit of a portion of the net operating loss and credit carryforwards before they expire, but to the extent that the full benefit may not be realized, a valuation allowance has been recorded. The valuation allowance increased by $128 primarily due to various states' net operating loss and credit carryforwards and net operating loss carryforwards generated from continuing operations of Westlake's base epoxy resin business in the Netherlands are not expected to be realized.
The following table summarizes the changes in the valuation allowance:
Year Ended December 31
202520242023
Valuation allowance, beginning of year
$170 $118 $47 
Additional allowances
128 55 94 
Reversals & other changes
— (3)(23)
Valuation allowance, end of year
$298 $170 $118 
The following table presents a reconciliation of the beginning and ending amounts of gross unrecognized tax benefits:
Year Ended December 31
202520242023
Gross unrecognized tax benefits, beginning of year $42 $35 $24 
Additions for tax positions of current year3 7 6 
Additions for tax positions of prior years1 1 15 
Reductions for tax positions of prior years(1)— (10)
Lapse of statute of limitations (3)(1)— 
Gross unrecognized tax benefits, end of year $42 $42 $35 
The Company's total gross unrecognized tax benefits were $42, $42 and $35 as of December 31, 2025, 2024 and 2023, respectively. If recognized, the majority of the gross unrecognized tax benefit would favorably affect the effective tax rate.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. Interest and penalties related to unrecognized tax benefits accrued at the end of each respective period were $6, $4, and $3. The potential changes, ultimate resolution and timing of payment for remaining matters continue to be uncertain.
The Company files income tax returns in the U.S. federal jurisdiction, various states and foreign jurisdictions. The Company is no longer subject to examinations by tax authorities before the year 2017.
On October 8, 2021, the Organization for Economic Co-operation and Development (the "OECD")/G20 Inclusive Framework on Base Erosion and Profit Shifting released a statement indicating that its members had agreed to a Two Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy. Pillar One aims to reallocate a taxpayer's residual profits to the market jurisdictions with which the taxpayer has a nexus. Pillar One targets multinational companies with global annual revenue exceeding €20 billion and profit-to-revenue ratio of more than 10%. Based on the current threshold requirements, the Company does not expect to be subject to Pillar One. Pillar Two aims to establish a minimum global tax rate of 15%, assessed through a top-up tax imposed on a country-by-country basis. The impacts of Pillar Two have been recorded since 2024, the first year in which the rules take effect and are immaterial to the Company. The Company continues to closely monitor and evaluate Pillar Two developments, including the January 5th OECD guidance introducing a Side-by-Side Safe Harbor applicable to U.S. parented groups. The guidance also introduced several other new Safe Harbors and extended the Country-by-Country Safe Harbor.
On December 4, 2024, the Governor of Louisiana signed into law a package of tax reform bills, effective January 1, 2025 and January 1, 2026. Among other things, the laws reduce the corporate state income tax rate, repeal the corporate state franchise tax and eliminate preferential apportionment treatment for companies with sales and inventory in foreign trade zones. In the fourth quarter of 2024, the Company recognized a one-time charge of approximately $45 for the revaluation of state deferred tax assets and deferred tax liabilities associated with the change in corporate state income tax and apportionment rates resulting from this change. The Company will continue to evaluate the impact of these tax law changes.
On July 4, 2025, President Trump signed into law the legislation commonly referred to as the One Big Beautiful Bill Act ("OBBBA"), which includes a broad range of tax reform provisions affecting corporations. The OBBBA, among other changes, permanently reinstates the "bonus" depreciation provisions that allow for the immediate expensing of 100% of the cost of certain qualified property, permanently reinstates the elective immediate expensing of domestic research and experimental expenditures paid or incurred and permanently relaxes the limitation on the deductibility of business interest. The OBBBA also modifies certain international tax provisions. The Company evaluated the impact of these tax law changes and recognized the associated income tax effects in the consolidated financial statements beginning in the third quarter of 2025, the period of enactment. At this time, the Company expects these tax law changes to reduce its cash tax without materially impacting its effective income tax rate.
Free Sentinel

Want the next WESTLAKE CORP income taxes disclosure the moment it drops?

Set a Sentinel and we'll alert you the moment WESTLAKE CORP's next filing hits EDGAR. No credit card, your email never gets sold.

Track for free

Historical Timeline

Fiscal YearFiled
2025Feb 26, 2026Showing above
2024Feb 25, 2025
2023Feb 22, 2024
2022Feb 22, 2023
2021Feb 23, 2022
2020Feb 24, 2021
2019Feb 19, 2020
2018Feb 20, 2019
2017Feb 21, 2018
2016Feb 22, 2017
2015Feb 24, 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.

Other Available Disclosures

Earnings Per ShareFair ValuePP&EGoodwill & IntangiblesLeasesSegmentsDebtCommitmentsStock CompensationNew StandardsPay vs Performance