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Income Taxes
 9 Months Ended
Sep. 30, 2025
Income Tax Disclosure [Abstract]  
Income Taxes

7. Income Taxes

Provision (benefit) for income taxes is as follows:

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2025

 

 

2024

 

 

2025

 

 

2024

 

 

 

(In Thousands)

 

Current:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

—

 

 

$

—

 

 

$

—

 

 

$

—

 

State

 

 

134

 

 

 

718

 

 

 

224

 

 

 

251

 

Total Current

 

$

134

 

 

$

718

 

 

$

224

 

 

$

251

 

 

 

 

 

 

 

 

 

 

 

 

 

Deferred:

 

 

 

 

 

 

 

 

 

 

 

 

Federal

 

$

2,244

 

 

$

(5,267

)

 

$

3,019

 

 

$

(2,354

)

State

 

 

158

 

 

 

67

 

 

 

94

 

 

 

(526

)

Total Deferred

 

$

2,402

 

 

$

(5,200

)

 

$

3,113

 

 

$

(2,880

)

 Provision (benefit) for income taxes

 

$

2,536

 

 

$

(4,482

)

 

$

3,337

 

 

$

(2,629

)

The tax provision for the nine months ended September 30, 2025, was $3.3 million (28.2% provision on pre-tax income). The tax benefit for the nine months ended September 30, 2024 was $2.6 million (20.5% benefit on pre-tax loss). For 2025, the effective tax rate was higher than the statutory tax rate primarily due to nondeductible compensation expense and state taxes. For 2024, the effective tax rate was lower than the statutory tax rate primarily due to change in valuation allowance and nondeductible compensation, partially offset by state tax law changes.

We considered both positive and negative evidence in our determination of the need for valuation allowances for deferred tax assets. Information evaluated includes our financial position and results of operations for the current and preceding years, the availability of deferred tax liabilities and tax carrybacks, as well as an evaluation of currently available information about future years. Valuation allowances are reflective of our quarterly analysis of the four sources of taxable income, including the calculation of the reversal of existing tax assets and liabilities, the impact of financing activities and our quarterly results. Based on our analysis, we have determined that it is more-likely-than-not that all of our federal deferred tax assets and a portion of our state deferred tax assets will be utilized. We estimate an approximately $0.6 million increase in the related valuation allowance associated with these state deferred tax assets will be recorded during the year as part of the estimated annual effective tax rate applied to ordinary income.

We will continue to evaluate both the positive and negative evidence on a quarterly basis in determining the need for a valuation allowance with respect to our deferred tax assets. Changes in positive and negative evidence, including differences between estimated

and actual results, could result in changes in the valuation of our deferred tax assets that could have a material impact on our consolidated financial statements. Changes in existing tax laws could also affect actual tax results and the realization of deferred tax assets over time.

LSB Industries, Inc. and certain of its subsidiaries file income tax returns in the U.S. federal jurisdiction and various state jurisdictions. With few exceptions, the 2021-2024 years remain open for all purposes of examination by the U.S. Internal Revenue Service (“IRS”) and other major tax jurisdictions. Additionally, the 2013-2020 years remain subject to examination for determining the amount of net operating loss and other carryforwards.

On July 4, 2025, “An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14” and commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was enacted into law in the United States. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and favorable changes to bonus depreciation, domestic research cost expensing, and the business interest limitation. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. There was not a significant impact to our income tax expense or effective tax rate for the nine months ended September 30, 2025 associated with the OBBBA.