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Note 6 - Income Taxes
 9 Months Ended
Sep. 30, 2025
Notes to Financial Statements  
Income Tax Disclosure [Text Block]

(6)

INCOME TAXES

 

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. 

 

On July 4, 2025, President Trump signed into law the legislation formally titled “An Act to Provide for Reconciliation Pursuant to Title II of H. Con. Res. 14” (Act) and commonly referred to as the One Big Beautiful Bill Act (OBBBA). The impact of the OBBBA on our consolidated financial statements is the modification to the Adjusted Taxable Income (ATI) for purposes of calculating the new limitation on interest expense. We do not expect this to have a material effect on our consolidated financial statements.

 

The Organization for Economic Co-operation and Development (OECD) has agreed to a two-pillar approach to global taxation focusing on global profit allocation, referred to as Pillar One, and a 15.0% global minimum corporate tax rate (Pillar Two). Many countries, including jurisdictions in which we do business, are enacting changes to their tax laws to adopt certain portions of the OECD’s proposals. Pillar Two tax law changes are effective for Tidewater as of January 1, 2025.

 

For the nine months ended September 30, 2025, income tax expense reflects tax liabilities in various jurisdictions based on either revenue (deemed profit regimes) or pre-tax profits and the impact of Pillar Two. The total expense accrual related to Pillar 2 is approximately $11.0 million as of September 30, 2025.

 

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, 2024, our balance sheet reflected approximately $533.5 million of net deferred tax assets prior to a valuation allowance of $533.0 million. As of September 30, 2025, we had net deferred tax assets of approximately $524.0 million prior to a valuation allowance of $511.9 million. The net deferred tax assets as of September 30, 2025 includes $51.2 million of deferred tax assets from the 2022 Swire Pacific Offshore acquisition offset by a valuation allowance of $51.2 million. Our ability to utilize U.S. net operating losses (NOLs) in the current period was primarily driven by activity in international jurisdictions that generated income subject to U.S. tax. Our ability to utilize U.S. NOLs in future periods is likely to be impacted by the extent to which we will generate such income in future periods which will be influenced by a variety of factors including the jurisdictions in which our vessels operate and the extent to which we are impacted by various global minimum tax initiatives that are adopted in those jurisdictions. 

 

During the nine months ended September 30, 2025, we generated a deferred tax benefit of $16.2 million, primarily related to a $27.0 million reduction of our valuation allowance due to changes in the balance of relevant positive and negative evidence when assessing the realization of our U.S. NOLs. Considering all available evidence, including the three-year cumulative financial taxable income position, our future taxable income evidence and the domestic tax impact given our current operating structure, we determined that sufficient positive evidence existed to conclude that this portion of the valuation allowance on the U.S. NOL deferred tax asset was no longer needed. We intend to maintain a valuation allowance on a substantial portion of our deferred tax assets until sufficient evidence supports a reversal. This tax benefit is included within Other assets on our Condensed Consolidated Balance Sheet as of September 30, 2025 and as a component of tax expense in our Condensed Consolidated Statement of Operations for the nine months ended September 30, 2025.

 

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 2020. 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.