Income Taxes

12 Months Ended

Dec. 31, 2024

(9)

Income Taxes

Deferred income taxes are provided to reflect the future tax consequences or benefits of differences between the tax basis of assets and liabilities and their reported amounts in the financial statements using enacted tax rates.

The following is an analysis of the consolidated income tax provision (benefit):


	Year Ended December 31,
	2024			2023			2022
	(In thousands)
Current - Federal	$	(24,200	)	$	(4,570	)	$	40,445
Current - State		44			(4,636	)		(7,701	)
Deferred - Federal		(88,001	)		52,520			209,705
Deferred - State		(36,918	)		(8,219	)		18,612
	$	(149,075	)	$	35,095		$	261,061

In recording deferred income tax assets, the Company considers whether it is more likely than not that its deferred income tax assets will be realized in the future. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the periods in which those deferred income tax assets would be deductible. The Company believes that after considering all the available objective evidence, historical and prospective, with greater weight given to historical evidence, management is not able to determine that it is more likely than not that all of its deferred tax assets will be realized. As a result, the Company established valuation allowances for its deferred tax assets and U.S. federal and state net operating loss carryforwards that are not expected to be utilized due to the uncertainty of generating taxable income prior to the expiration of the carryforward periods. The Company will continue to assess the valuation allowances against deferred tax assets considering all available information obtained in future periods.

The tax effects of significant temporary differences representing the net deferred tax liabilities were as follows:


	As of December 31,
	2024			2023
	(In thousands)
Deferred tax assets:
Interest expense limitation	$	207,053		$	168,604
Net operating loss carryforwards		79,628			106,961
Unrealized hedging losses		16,701			—
Asset retirement obligation		6,991			6,610
Other		22,142			3,784
		332,515			285,959
Valuation allowance on deferred tax assets		(53,687	)		(70,184	)
Deferred tax assets		278,828			215,775
Deferred tax liabilities:
Property and equipment		(621,561	)		(653,369	)
Unrealized hedging gains		—			(26,623	)
Other		(2,383	)		(5,818	)
Deferred tax liabilities		(623,944	)		(685,810	)
Net deferred tax liability	$	(345,116	)	$	(470,035	)

The difference between the customary rate of 21.0% and the effective tax rate on income (losses) is due to the following:


	Year Ended December 31,
	2024			2023			2022
	(In thousands)
Tax at statutory rate	$	(77,244	)	$	51,868		$	294,408
Tax effect of:
Research and development and other income tax credits		(41,796	)		—			—
Valuation allowance on deferred tax assets		(16,499	)		(2,307	)		(47,077	)
State income taxes, net of federal benefit		(20,215	)		(10,542	)		14,680
Effect of changes in state tax laws or rates		6,847			—			—
Other		(168	)		(3,924	)		(950	)
Total	$	(149,075	)	$	35,095		$	261,061


	Year Ended December 31,
	2024			2023			2022
Tax at statutory rate		21.0	%		21.0	%		21.0	%
Tax effect of:
Research and development and other income tax credits	11.4				—			—
Valuation allowance on deferred tax assets		4.5			(0.9	)		(3.4	)
State income taxes, net of federal benefit		5.5			(4.3	)		1.1
Effect of changes in state tax laws or rates		(1.9	)		—			—
Other		—			(1.6	)		(0.1	)
Effective tax rate		40.5	%		14.2	%		18.6	%

At December 31, 2024, Comstock had the following carryforwards available to reduce future income taxes:


Types of Carryforward	Years of Expiration Carryforward	Amount
		(In thousands)
Net operating loss – U.S. federal	2025-2037	$	740,631
Net operating loss – U.S. federal	Unlimited	$	2,408
Net operating loss – state taxes	Unlimited	$	1,805,167
Interest expense – U.S. federal	Unlimited	$	822,544
Interest expense – state taxes	Unlimited	$	789,849

The Company's ability to use net operating losses ("NOLs") generated before its ownership change in 2018 to reduce taxable income is limited under IRC Section 382. NOLs that exceed the Section 382 limitation in any year continue to be allowed as carry forwards until they expire and can be used to offset taxable income for years within the carryover period subject to the limitation in each year. U.S. federal NOLs incurred prior to 2018 generally have a 20-year life until they expire. NOLs generated in 2018 and after would be carried forward indefinitely. NOLs arising after the date of an ownership change are not affected by the 382 limitation. If the Company does not generate a sufficient level of taxable income prior to the expiration of the pre-2018 NOL carry-forward periods, then it will lose the ability to apply those NOLs as offsets to future taxable income. The Company estimates that all of the U.S. federal NOL carryforwards expiring in 2037 and $1.2 billion of the estimated state NOL carryforwards will expire unused.

The Company's federal income tax returns for the years subsequent to December 31, 2020 remain subject to examination. The Company's income tax returns in major state income tax jurisdictions remain subject to examination for various periods subsequent to December 31, 2021. The Company is currently under examination with the state of Louisiana and believes that its significant filing positions are highly certain and that all of its other significant income tax filing positions and deductions would be sustained upon audit or the final resolution would not have a material effect on the consolidated financial statements. Therefore, the Company has not established any significant reserves for uncertain tax positions.

- Definition

The entire disclosure for income tax.

+ References

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+ Details

COMSTOCK RESOURCES INC 10-K