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Income Taxes
 9 Months Ended
Sep. 30, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 6 - INCOME TAXES

The Company is a corporation and thus is subject to United States (“U.S.”) federal, state and local income taxes. Intuitive Machines, LLC is a partnership for U.S. federal income tax purposes and therefore does not pay U.S. federal income tax on its taxable income. Instead, the Intuitive Machines, LLC unitholders, including the Company, are liable for U.S. federal income tax on their respective shares of Intuitive Machines, LLC’s taxable income. Intuitive Machines, LLC is liable for income taxes in those states which tax entities classified as partnerships for U.S. federal income tax purposes.

For the three and nine months ended September 30, 2024, we recognized a combined U.S. federal and state expense for income taxes of $50 thousand. For the three and nine months ended September 30, 2023, we recognized a combined U.S. federal and state expense for income taxes of $605 thousand and $292 thousand, respectively. The effective combined U.S. federal and state income tax rates were (0.06%) and (0.03%) for the three and nine months ended September 30, 2024, respectively, and 4.1% and 3.9% for the three and nine months ended September 30, 2023, respectively. For the three and nine months ended September 30, 2024, our effective tax rate differed from the statutory rate primarily due to deferred taxes for which no benefit is being recorded and losses attributable to noncontrolling interest unitholders that are taxable on their respective share of taxable income. For the three and nine months ended September 30, 2023, our effective tax rate differed from the statutory rate primarily due to Intuitive Machines, LLC's status as a partnership for U.S. federal income tax purposes.

In conjunction with the consummation of the Transactions, Intuitive Machines, Inc. entered into a tax receivable agreement (the “TRA”). Pursuant to the TRA, the Company will generally be required to pay the TRA Holders (certain Intuitive Machines, LLC members and related parties to the Company) 85% of the amount of the cash tax savings, if any, in U.S. federal, state, and local taxes that are based on, or measured with respect to, net income or profits, and any interest related thereto that the Company (and applicable consolidated, unitary, or combined subsidiaries thereof, if any and collectively the “Tax Group”) realizes, or is deemed to realize, as a result of certain tax attributes (the “Tax Attributes”), including:

•existing tax basis in certain assets of Intuitive Machines, LLC and certain of its direct or indirect subsidiaries, including assets that will eventually be subject to depreciation or amortization, once placed in service;
•tax basis adjustments resulting from taxable exchanges of Intuitive Machines, LLC Common Units (including any such adjustments resulting from certain payments made by the Company under the TRA) acquired by the Company from a TRA Holder pursuant to the terms of the Second A&R Operating Agreement;
•certain tax benefits realized by the Company as a result of certain U.S. federal income tax allocations of taxable income or gain away from the Company and to other members of Intuitive Machines, LLC and deductions or losses to the Company and away from other members of Intuitive Machines, LLC, in each case as a result of the Business Combination; and
•tax deductions in respect of portions of certain payments made under the TRA.
The TRA remains in effect until all such tax benefits have been utilized or expired unless the Company exercises its rights to terminate the TRA or in the case of a change in control of the Company or a material breach of the Company's obligations under the TRA, at which time all obligations under the TRA will be accelerated and become payable for an amount representing the present value of anticipated future tax benefits. The resulting TRA amount from an early termination would be material to the financial statements, but due to the contingent nature of such early termination the amount cannot be estimated at this time. No notice of early termination has been given and the Company is not aware of any events in the foreseeable future that would give rise to an early termination of the TRA.

Based on the TRA, until a TRA Holder exchanges at least 5% of its Intuitive Machines, LLC Common Units, the Company will hold TRA payments applicable to existing basis until the TRA Holder satisfies such threshold exchange. Upon the completion of the Business Combination, TRA Holders have not exchanged at least 5% of their Intuitive Machines, LLC Common Units. As of September 30, 2024, the 5% exchange threshold has been met, and based on a current benefit being recorded in the period, a TRA liability is being recorded. As of September 30, 2024 and December 31, 2023, the TRA liability totaled $473 thousand and $0, respectively.