v3.26.1
Income Taxes
 6 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes

7. Income Taxes

(Benefit) Provision for income taxes is as follows:

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2026

 

 

2025

 

 

2026

 

 

2025

 

 

 

(In Thousands)

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

State

 

 

(124

)

 

 

37

 

 

 

201

 

 

 

90

 

Total Current

 

$

(124

)

 

$

37

 

 

$

201

 

 

$

90

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

(1,583

)

 

$

983

 

 

$

2,415

 

 

$

775

 

State

 

 

(210

)

 

 

64

 

 

 

(6,663

)

 

 

(64

)

Total Deferred

 

$

(1,793

)

 

$

1,047

 

 

$

(4,248

)

 

$

711

 

 (Benefit) provision for income taxes

 

$

(1,917

)

 

$

1,084

 

 

$

(4,047

)

 

$

801

 

The income tax benefit for the six months ended June 30, 2026, was $4.0 million (42.8% benefit on pre-tax income). The tax provision for the six months ended June 30, 2025, was $0.8 million (37.0% provision on pre-tax income). For 2026, the effective tax rate was lower than the statutory tax rate primarily due to the release of state valuation allowances described below, partially offset by nondeductible compensation expense. For 2025, the effective tax rate was higher than the statutory tax rate primarily due to nondeductible compensation expense and state taxes.

We considered both positive and negative evidence in our determination of the need for valuation allowances for deferred tax assets. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as an evaluation of currently available information about future years. Valuation allowances are reflective of our quarterly analysis of the four sources of taxable income, including the calculation of the reversal of existing tax assets and liabilities, the impact of financing activities and our quarterly results. Based on our analysis, we have determined that it is more-likely-than-not that all of our federal deferred tax assets and a portion of our state deferred tax assets will be utilized.

During the first quarter of 2026, our results of operations and expected results for the remainder of 2026 and future years significantly improved compared to our prior year-end forecast, primarily due to a favorable shift in pricing conditions across our product portfolio resulting from global supply constraints. This improvement supported the inclusion of future taxable income in our quarterly analysis of the four sources of taxable income and represented a change in the weight of positive evidence relative to the negative evidence that had existed at year-end. As a result of this change, we recognized a discrete income tax benefit of $6.2 million during the first quarter of 2026, representing the release of a portion of our beginning-of-year state valuation allowances. As of June 30, 2026, our remaining state valuation allowance of $8.0 million relates to net operating loss carryforwards and interest expense limitation carryforwards in certain states.

We will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a valuation allowance with respect to our deferred tax assets. Changes in positive and negative evidence, including differences between estimated and actual results, could result in changes in the valuation of our deferred tax assets that could have a material impact on our

condensed consolidated financial statements. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.

LSB Industries, Inc. and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the 2022-2025 years remain open for all purposes of examination by the U.S. Internal Revenue Service and other major tax jurisdictions. Additionally, the 2015-2020 years remain subject to examination for determining the amount of net operating loss and other carryforwards.