v3.26.3
Income Taxes
 12 Months Ended
Aug. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
CHS is a nonexempt agricultural cooperative and files a consolidated federal income tax return within our tax return period. We are subject to tax on income from nonpatronage sources, nonqualified patronage distributions and undistributed patronage-sourced income. Income tax expense (benefit) is primarily the current tax payable for the period and the change during the period in certain deferred tax assets and liabilities. Deferred income taxes reflect the impact of temporary differences between the amounts of assets and liabilities recognized under U.S. GAAP and such amounts recognized for federal and state income tax purposes, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.

The provision for (benefit from) income taxes for the years ended August 31, 2026, 2025 and 2024, is as follows:
202620252024
(Dollars in thousands)
Current:
Federal$78,708 $48,229 $21,608 
State7 7,181 23,750 
Foreign46 (905)30,338 
Total current78,761 54,505 75,696 
Deferred:
Federal(49,525)(48,079)(63,605)
State3,446 9,028 (15,686)
Foreign55 1,323 (1,277)
Total deferred(46,024)(37,728)(80,568)
Total$32,737 $16,777 $(4,872)
The geographic sources of pretax income from continuing operations were as follows:
202620252024
(Dollars in thousands)
United States$1,145,888 $610,626 $1,030,838 
Foreign(17,169)4,146 66,949 
Total$1,128,719 $614,772 $1,097,787 

Deferred tax assets and liabilities as of August 31, 2026 and 2025, are as follows:
20262025
(Dollars in thousands)
Deferred tax assets:
Accrued expenses$75,818 $52,850 
Postretirement health care and deferred compensation63,915 56,082 
Tax credit carryforwards104,688 92,421 
Loss carryforwards111,895 114,433 
Nonqualified equity555,351 560,521 
Lease obligations57,366 56,944 
Capitalized research and development68,456 115,499 
Other71,566 9,497 
Deferred tax assets valuation allowance(217,045)(205,637)
Total deferred tax assets892,010 852,610 
Net deferred tax assets$61,476 $13,950 
Deferred tax liabilities:
Pension costs$2,995 $2,083 
Investments91,468 120,667 
Property, plant and equipment673,149 601,539 
Lease right of use assets56,985 56,250 
Software costs5,937 58,121 
Total deferred tax liabilities830,534 838,660 
Net deferred tax liabilities$— $— 

We had total gross loss carryforwards of $355.7 million, as of August 31, 2026, of which $55.6 million will expire over periods ranging from fiscal 2027 to fiscal 2037. The remainder will carry forward indefinitely. Based on estimates of future taxable profits and losses in certain foreign tax jurisdictions, as well as consideration of other factors, we assessed whether a valuation allowance was necessary to reduce specific foreign loss carryforwards to amounts we believe are more likely than not to be realized as of August 31, 2026. If our estimates prove inaccurate, adjustments to the valuation allowances may be required in the future with gains or losses being charged to income in the period such determination is made. Our McPherson refinery's gross state tax credit carryforwards for income tax were approximately $129.5 million and $116.3 million as of August 31, 2026 and 2025, respectively. The refinery's valuation allowance on Kansas state credits is necessary due to the limited amount of taxable income generated in Kansas by the combined group on an annual basis. Our state tax credits of $131.5 million will begin to expire during fiscal 2027.
The reconciliation of the statutory federal income tax rates to the effective tax rates for the years ended August 31, 2026, 2025 and 2024, is as follows:

2026
(Dollars in thousands)
AmountPercent
U.S. federal statutory tax rate$237,031 21.0 %
State and local income taxes, net of federal income tax effect (a)
3,452 0.3 
Foreign tax effects3,707 0.3 
Tax credits
Clean fuel production tax credit(39,954)(3.5)
Other(8,344)(0.7)
Changes in valuation allowances11,582 1.0 
Nontaxable or nondeductible items
Cooperative §199 A(g) deduction(79,098)(7.0)
Patronage earnings(101,964)(9.0)
Other220 — 
Changes in unrecognized tax benefits5,610 0.5 
Other adjustments495 — 
Effective tax rate$32,737 2.9 %
(a) State taxes in Minnesota, California and Oklahoma made up the majority (greater than 50%) of this category.

20252024
Statutory federal income tax rate21.0 %21.0 %
State and local income taxes, net of federal income tax benefit2.4 0.5 
Patronage earnings(7.8)(12.6)
Domestic production activities deduction(12.9)(6.8)
Export activities at rates other than the U.S. statutory rate(3.3)1.4 
Increase in unrecognized tax benefits2.8 2.7 
Valuation allowance2.8 (0.1)
Tax credits(4.3)(6.2)
Other2.0 (0.3)
Effective tax rate2.7 %(0.4)%

The primary drivers of the fiscal 2026 effective tax rate compared to fiscal 2025 are the decreased benefit of the cooperative §199 A(g) deduction, partially offset by a reduced unfavorable impact of state and local taxes, changes in unrecognized tax benefits and changes in valuation allowances. The primary driver of the fiscal 2026 effective tax rate compared to fiscal 2024 is a decreased benefit related to patronage earnings.

CHS has determined that it qualifies for clean fuel production credits under Section 45Z of the Internal Revenue Code ("45Z"). 45Z provides a production tax credit for domestically produced transportation fuel that is produced after December 31, 2024, and sold before January 1, 2030. The amount of the credit is based on the fuel's carbon intensity score and compliance with applicable prevailing wage and apprenticeship requirements. CHS has elected to account for federal clean fuel production credits earned under 45Z as an income tax credit within the scope of ASC 740. Credits are recognized as a reduction of income tax expense in the period earned and included in the effective tax rate reconciliation.

Subsequent to year-end, U.S. Treasury issued further guidance on 45Z which may affect the amount of tax credit we are able to recognize during fiscal 2027. We are continuing to evaluate the impact of this new guidance.

We file income tax returns in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. Our uncertain tax positions are affected by the tax years that are under audit or remain subject to examination by the relevant taxing authorities. In
addition to the current year, fiscal years 2021 through 2025 remain open and subject to examination by the relevant taxing authorities.

Reserves are recorded against unrecognized tax benefits when we believe certain fully supportable tax return positions are likely to be challenged and we may or may not prevail. If we determine that a tax position is more likely than not to be sustained upon audit, based on the technical merits of the position, we recognize the benefit by measuring the amount that is greater than 50% likely of being realized. We reevaluate the technical merits of our tax positions and recognize an uncertain tax benefit, or derecognize a previously recorded tax benefit, when there is (i) completion of a tax audit, (ii) effective settlement of an issue, (iii) a change in applicable tax law including a tax case or legislative guidance, or (iv) expiration of the applicable statute of limitations. Significant judgment is required in accounting for tax reserves. A reconciliation of the gross beginning and ending amounts of unrecognized tax benefits for the periods is presented as follows:

202620252024
(Dollars in thousands)
Balance at beginning of period$96,549 $65,115 $125,853 
Additions attributable to current year tax positions39,619 3,440 2,027 
Additions attributable to prior year tax positions2,199 27,994 32,569 
Reductions attributable to prior year tax positions— — (85,513)
Reductions attributable to statute expiration— — (9,821)
Balance at end of period$138,367 $96,549 $65,115 

If we were to prevail on all positions taken in relation to uncertain tax positions, $138.4 million of the unrecognized tax benefits would ultimately benefit our effective tax rate.

We recognize interest and penalties related to unrecognized tax benefits in our provision for income taxes. We recognized expense of $5.2 million, $9.5 million and benefits of $2.1 million for interest and penalties related to unrecognized tax benefits in our Consolidated Statements of Operations for the years ended August 31, 2026, 2025 and 2024, respectively, and a related $20.9 million and $15.8 million interest payable on our Consolidated Balance Sheets as of August 31, 2026 and 2025, respectively.

In December 2021, the Organization for Economic Cooperation and Development (OECD) introduced a framework known as Pillar Two, aimed at ensuring large multinational enterprises pay a minimum 15% level of tax on income earned in each jurisdiction in which they operate. The OECD also issued administrative guidance, including transition rules and safe harbor provisions to support the implementation of the global minimum tax. Pillar Two legislation has been enacted or substantively enacted in certain jurisdictions where we operate. We have assessed our potential exposure to Pillar Two income taxes. Based on this assessment, there was no material impact on our consolidated financial statements for fiscal 2026. We will continue to monitor and evaluate any potential future implications for our consolidated financial reporting.
Cash income tax payments, net of refunds, consisted of the following:

202620252024
(Dollars in thousands)
Federal$10,258 
State(5,366)
Iowa(5,385)
Minnesota(3,309)
California2,687 
Louisiana(1,752)
Other states2,393 
International411 
Total$5,303 $77,070 $129,065