NOTE 15—INCOME TAXES

Select Inc. is subject to U.S. federal and state income taxes as a corporation. SES Holdings and its subsidiaries, with the exception of certain corporate subsidiaries, are treated as flow-through entities for U.S. federal income tax purposes and as such, are generally not subject to U.S. federal income tax at the entity level. Rather, the tax liability with

respect to their taxable income is passed through to their members or partners. Select Inc. recognizes a tax liability on its allocable share of SES Holdings’ taxable income.

The U.S. and non-U.S. components of income before income tax expense for the year ended December 31, 2025 is as follows:


	For the year ended
	December 31,
	2025
	(in thousands)

U.S.	$	20,222
Non-U.S.		(363)
Total	$	19,859

The components of the federal and state income tax (benefit) expense are summarized as follows:


	For the year ended
	December 31,
	2025		2024		2023

	(in thousands)
Current tax (benefit) expense
Federal income tax expense	$	—	$	55	$	200
State and local income tax (benefit) expense		(392)		1,013		1,563
Total current (benefit) expense		(392)		1,068		1,763
Deferred tax (benefit) expense
Federal income tax (benefit) expense		(2,555)		13,633		(57,807)
State and local income tax expense (benefit)		1,339		(1,133)		(4,152)
Total deferred (benefit) expense		(1,216)		12,500		(61,959)
Total income tax (benefit) expense	$	(1,608)	$	13,568	$	(60,196)
Tax (benefit) expense attributable to controlling interests	$	(1,698)	$	13,422	$	(60,443)
Tax expense attributable to noncontrolling interests		90		146		247
Total income tax (benefit) expense	$	(1,608)	$	13,568	$	(60,196)

The Company’s effective tax rates for the years ended December 31, 2025, 2024 and 2023 were (8.1%), 27.7% and (316.4%) respectively. The effective tax rate for the year ended December 31, 2025 differs from the statutory rate of 21% due to state income taxes, income tax credits, valuation allowances, nondeductible items, and net income allocated to noncontrolling interests. The effective tax rate for the year ended December 31, 2024 differs from the statutory rate of 21% due to net income allocated to noncontrolling interests, state income taxes and nondeductible items. The effective tax rate for the year ended December 31, 2023 differs from the statutory rate of 21% due to net income allocated to noncontrolling interests, state income taxes and valuation allowances.

A reconciliation of the Company’s provision for income taxes as reported and the amount computed by multiplying income before taxes, less noncontrolling interests, by the U.S. federal statutory rate of 21% for 2025 is as follows:


		For the year ended December 31, 2025
		Amount		Percent
		(in thousands)
Provision calculated at federal statutory income tax rate:
Income before equity in losses of unconsolidated entities and taxes		$	24,751
Equity in losses of unconsolidated entities			(4,892)
Income before taxes			19,859
Income tax expense computed at statutory rate			4,170	21.0	%
United States
State and local income taxes, net of federal benefit **			947	4.8
Tax Credits
Research and development credits			(1,024)	(5.2)
Energy investment credits			(1,846)	(9.3)
Change in valuation allowance			(5,277)	(26.5)
Nontaxable or nondeductible items
Compensation Items			1,279	6.4
Meals and Entertainment			438	2.2
Other			306	1.5
Other Adjustments
Impact of noncontrolling interests			(818)	(4.1)
Other			141	0.7
Non-U.S. Tax Effects
Other jurisdictions			76	0.4
Total income tax benefit		$	(1,608)	(8.1)	%

**State taxes in Texas and Colorado comprise greater than 50 percent of the tax effect in this category.


		For the year ended December 31,
		2024			2023

		(in thousands)
Provision calculated at federal statutory income tax rate:
Income before equity in losses of unconsolidated entities and taxes		$	49,370		$	20,823
Equity in losses of unconsolidated entities			(352)			(1,800)
Income before taxes			49,018			19,023
Statutory rate			21	%		21	%
Income tax expense computed at statutory rate			10,294			3,995
Less: noncontrolling interests			(1,021)			(1,011)
Income tax expense attributable to controlling interests			9,273			2,984
State and local income taxes, net of federal benefit			1,220			1,302
State rate change			253			644
Deferred tax adjustments and carryforward expirations			7,439			1,665
Change in valuation allowance			(6,586)			(71,164)
Nondeductible items			1,823			4,126
Income tax expense (benefit) attributable to controlling interests			13,422			(60,443)
Income tax expense attributable to noncontrolling interests			146			247
Total income tax expense (benefit)		$	13,568		$	(60,196)

The following table presents income taxes paid (net of refunds received) for the year ended December 31, 2025 (in thousands):


		For the year ended December 31,
		2025
		(in thousands)

U.S. Federal		$	145
U.S. State and Local
Texas			527
Oklahoma			(110)
Pennsylvania			76
Other			4
Total income tax paid (net of refunds received)		$	642

Deferred taxes result from the temporary differences between financial reporting carrying amounts and the tax basis of existing assets and liabilities. Deferred tax liabilities are recorded in other long-term liabilities on the consolidated balance sheets. The principal components of the deferred tax assets (liabilities) are summarized as follows:


	As of year ended
	December 31,
	2025		2024

	(in thousands)
Deferred tax assets
Outside basis difference in SES Holdings	$	—	$	33,695
Net operating losses		136,816		89,883
Credits and other carryforwards		21,548		20,300
Other		9,707		7,827
Total deferred tax assets before valuation allowance		168,071		151,705
Valuation allowance		(100,237)		(105,366)
Total deferred tax assets		67,834		46,339
Deferred tax liabilities
Outside basis difference in SES Holdings		(18,396)		—
Property and equipment		(1,863)		(365)
Total deferred tax liabilities		(20,259)		(365)
Net deferred tax assets	$	47,575	$	45,974

The change in the valuation allowance is as follows:


	For the year ended
	December 31,
	2025			2024

	(in thousands)
Balance at the beginning of the year	$	105,366		$	112,282
Deductions⁽¹⁾		(5,129)			(6,916)
Balance at the end of the year	$	100,237		$	105,366

(1)

For the year ended December 31, 2025 and December 31, 2024, the net decreases are primarily a result of adjustments to partially reserved deferred tax assets.

The Company regularly reviews its deferred tax assets for realization and establishes a valuation allowance if it is more likely than not that some portion or all of a deferred tax asset will not be realized. The Company considers all available positive and negative evidence in determining whether realization of the tax benefit is more likely than not. This evidence includes historical income / loss, projected future income, the expected timing of the reversal of existing temporary differences and the implementation of tax planning strategies. In the Company's evaluation of the need for and amount of a valuation allowance on its deferred tax assets, the Company places the most weight on objectively verifiable direct evidence, including its recent and historical operating results and continuing its operating profitability. The specific positive factors and evidence considered in the realizability of its deferred tax assets include the cumulative pre-tax income that the Company generated over the past three-year period and the expectation of income in future periods. As of December 31, 2025 and 2024, the Company has evaluated the realizability of its deferred tax assets and made adjustments based upon the available positive and negative evidence.

As of December 31, 2025, the Company and certain of its corporate subsidiaries had approximately $210.6 million of tax-affected U.S. federal NOLs, $87.7 million of which the Company expects will expire unused beginning in 2031 due to applicable IRC Section 382 limitations and such NOLs have not been included in the deferred taxes table above. The Company and certain of its corporate subsidiaries also has tax-affected state NOLs of approximately $19.2 million, $6.6 million of which the Company expects will expire unused due to state law limitations similar to IRC Section 382 and the remaining $12.6 million of which will begin to expire in 2026, and tax-affected non-U.S. NOLs of

approximately $1.3 million, which will begin to expire in 2035. As of December 31, 2025, the Company had approximately $14.6 million of tax-affected capital loss carryforwards which begin to expire in 2029, $5.9 million federal and state tax credit carryforwards, including $1.8 million of federal energy investment credits for which the flow-through method of accounting is utilized, which begin to expire in 2030, $0.9 million tax-affected disallowed interest expense carryforwards which do not expire and disallowed charitable contribution carryforward of $0.2 million.

Accounting for uncertainty in income taxes prescribes a recognition threshold and measurement methodology for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. As of December 31, 2025 and 2024 there was no liability or expense for the periods then ended recorded for payments of interest and penalties associated with uncertain tax positions or material unrecognized tax positions.

Separate U.S. federal and state income tax returns are filed for Select Inc., SES Holdings and certain consolidated affiliates. The tax years 2022 through 2024 remain open to examination by the major taxing jurisdictions in which the Company is subject to income tax.

Historical Timeline

Fiscal Year	Filed
2025	Feb 18, 2026	Showing above
2024	Feb 19, 2025

2023	Feb 21, 2024

2022	Feb 22, 2023

2021	Feb 23, 2022

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.

Select Water Solutions, Inc. Income Taxes Disclosure

Historical Timeline

About Income Taxes Disclosures

Other Available Disclosures