7. Income Taxes

Income from continuing operations before income taxes, classified by source of income, was as follows (in thousands):

​

​

The components of the provision for income taxes were as follows (in thousands):

​

​

Pursuant to ASU 2023-09, for the year ended June 30, 2026, the effective tax rate differs from the statutory tax rates as follows (in thousands):

​

Consistent with our presentation prior to the adoption of ASU 2023-09, for the years ended June 30, 2025 and 2024, the effective tax rate differs from the statutory tax rates as follows (in thousands):

​

​

Our effective tax rate from continuing operations was 22.5%, 22.1%, and 16.0% for the years ended June 30, 2026, 2025, and 2024, respectively. The effective tax rate for the year ended June 30, 2026 increased compared to the year ended June 30, 2025 primarily due to taxes on foreign earnings net of U.S. foreign tax credits, partially offset by an increase in the percentage of earnings from operations in lower taxed jurisdictions. The income tax provisions reflect the U.S. federal tax rate of 21% adjusted for taxes related to global intangible low-taxed income (“GILTI”), limitation of tax benefits on certain executive compensation, the rate of tax applied by state and local jurisdictions, the rate of tax applied to earnings

outside the U.S., tax incentives, tax credits related to research and development expenditures, changes in valuation allowance, changes in unrecognized tax benefits, and tax benefits on stock-based compensation.

Income taxes paid, net of refunds, by jurisdiction were as follows (in thousands):

​

Deferred income tax assets and liabilities result primarily from temporary differences in the recognition of various expenses for tax and financial statement purposes, and from the recognition of the tax benefits of net operating loss carryforwards. The components of the deferred income tax assets and liabilities were as follows (in thousands):

​

​

Tax net operating loss (tax effected), interest (tax effected), and credit carryforwards, were as follows (in thousands):

​

​

As of June 30, 2026, Covista had $112.3 million of gross, post apportioned state net operating loss carryforwards, and $5.3 million of gross foreign net operating loss carryforwards in St. Maarten. As of June 30, 2025, Covista had $123.9 million of gross, post apportioned state net operating loss carryforwards, and $6.1 million of gross foreign net operating loss carryforwards in St. Maarten.

RUSM and RUSVM each have agreements with their respective domestic governments that exempt them from local income taxation. RUSM has an exemption in Barbados until 2039 and RUSVM has an exemption in St. Kitts until 2038.

Covista does not assert that the accumulated undistributed earnings of its foreign subsidiaries are indefinitely reinvested in foreign jurisdictions. Accrued state income and foreign withholding taxes on such undistributed earnings were not material.

The changes in valuation allowances were as follows (in thousands):

​

​

Covista reviews the realizability of its deferred tax assets and related valuation allowances on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset are considered, along with any other positive or negative evidence. A valuation allowance is established when, based on the weight of available evidence, it is more likely than not that all or a portion of a deferred tax asset will not be realized. The valuation allowance on our deferred tax assets was $0.3 million as of June 30, 2026 and relates to U.S. foreign tax credit carryforwards. We will continue to evaluate the need for valuation allowances and, as circumstances change, the valuation allowance may change.

The changes in unrecognized tax benefits were as follows (in thousands):

​

​

As of June 30, 2026 and 2025, the total amount of gross unrecognized tax benefits for uncertain tax positions was $2.7 million and $6.9 million, respectively, which if recognized, would impact the effective tax rate. Covista classifies interest and penalties on tax uncertainties as a component of the provision for income taxes. The total amount of interest and penalties accrued as of June 30, 2026 and 2025 was $0.3 million and $1.2 million, respectively. Interest and penalties recognized during the years ended June 30, 2026, 2025, and 2024 was a benefit of $1.0 million, nil, and expense of $0.4 million, respectively.

Covista files tax returns in the U.S. federal jurisdiction and in various state and foreign jurisdictions based on existing tax laws and incentives. Covista remains generally subject to examination in the U.S. for years beginning on or after July 1, 2022; in various states for years beginning on or after July 1, 2021; and in our significant foreign jurisdictions for years beginning on or after July 1, 2019.

In July 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law, which introduced substantial changes to U.S. tax provisions. The most relevant provisions to Covista for fiscal year 2026 include allowing accelerated tax deductions for qualified property and research and development expenditures. The impacts of OBBBA were not material to the income tax provision for the year ended June 30, 2026.