Note 6 - Income Taxes |
6 Months Ended | ||
|---|---|---|---|
Jun. 30, 2026 | |||
| Notes to Financial Statements | |||
| Income Tax Disclosure [Text Block] |
Income tax rates and taxation systems in the jurisdictions where we and our subsidiaries conduct business vary and our subsidiaries are frequently subjected to minimum taxation regimes. In some jurisdictions, tax liabilities are based on gross revenues, statutory deemed profits or other factors, rather than on net income. We use a discrete effective tax rate method to calculate taxes for interim periods instead of applying the annual effective tax rate to an estimate of the full fiscal year due to the level of volatility and unpredictability of earnings in our industry, both overall and by jurisdiction.
For the six months ended June 30, 2026, income tax expense differs from the tax effect of the U.S. rate due to tax liabilities in various jurisdictions based on either revenue (deemed profit regimes) or pre-tax profits, international activity that generated income subject to U.S. tax, and the impact of Pillar Two.
During the six months ended June 30, 2026, a gain on sale of a vessel was recognized in connection with an internal restructuring to reposition the vessel for strategic opportunities. This transaction resulted in $2.9 million of Pillar Two top-up tax and was included as Subpart F income and subject to U.S. taxation. Due to the internal nature of this transaction, this gain is not reflected in the consolidated financial statements leading to a higher effective tax rate. The total expense accrual related to Pillar Two is approximately $9.4 million. We also generated U.S. tax expense of $18.1 million, primarily related to Net CFC Tested Income (NCTI) and Subpart F income.
During the six months ended June 30, 2025, after assessing relevant positive and negative evidence, we released our valuation allowance against our entire U.S. net operating loss (NOL) balance totaling approximately $27.0 million.
The tax liabilities for uncertain tax positions are primarily attributable to permanent establishment considerations related to foreign jurisdictions, subpart F income inclusions and withholding taxes on foreign services. Penalties and interest related to income tax liabilities are included in income tax expense. Income tax payable is included in other current liabilities.
As of December 31, 2025, our balance sheet reflected approximately $528.4 million of net deferred tax assets prior to a valuation allowance of $332.0 million. As of June 30, 2026, we had net deferred tax assets of approximately $515.7 million prior to a valuation allowance of $338.1 million.
Management assesses all available positive and negative evidence to permit use of existing deferred tax assets.
With limited exceptions, we are no longer subject to tax audits by U.S. federal, state, local or foreign taxing authorities for years prior to December 2021. We are subject to ongoing examinations by various foreign tax authorities and do not believe the results of these examinations will have a material adverse effect on our consolidated financial position, results of operations or cash flows.
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