Income Taxes |
6 Months Ended |
|---|---|
Jun. 30, 2025 | |
| Income Taxes | |
| Income Taxes |
9.Income Taxes Our predecessor, Aris LLC, is a Delaware limited liability company treated as a partnership for federal income tax purposes and, therefore, has not been subject to U.S. federal income tax at an entity level. As a result, the consolidated net income (loss) in our historical financial statements does not reflect the tax expense (benefit) we would have incurred if we were subject to U.S. federal income tax at an entity level during periods prior to the IPO. Aris LLC continues to be treated as a partnership for U.S. federal income tax purposes and, as such, is not subject to U.S. federal income tax. Instead, taxable income is allocated to members, including Aris Inc., and except for Texas franchise tax, any taxable income of Aris LLC is reported in the respective tax returns of its members. Income Tax Expense We recorded income tax expense of $2.7 million and $2.8 million for the three and six months ended June 30, 2025, respectively, of which $0.5 million was a current expense for the three months ended June 30, 2025, and $1.6 million was a current tax benefit for the six months ended June 30, 2025. Deferred income tax expense for the three and six months ended June 30, 2025 was $2.2 million and $4.4 million, respectively. We recorded income tax expense of $2.0 million and $4.6 million for the three and six months ended June 30, 2024, respectively, of which $0.3 million and $0.8 million was current, respectively, and the remainder was deferred. Effective Tax Rate We record our income tax expense using an estimated annual effective tax rate (“ETR”) and recognize specific events discretely as they occur. The ETR for the six months ended June 30, 2025 and 2024 was 8.4% and 13.3%, respectively. The difference between the federal statutory rate and our ETR for the six months ended June 30, 2025 is primarily due to the impact of the noncontrolling interest and windfall tax benefit from stock-based compensation vesting. The difference between the federal statutory rate and our ETR for six months ended June 30, 2024 is primarily due to the impact of the noncontrolling interest. Deferred Tax Assets We regularly evaluate the realizable tax benefits of deferred tax assets and record a valuation allowance, if required, based on an estimate of the amount of deferred tax assets that we believe does not meet the more-likely-than-not criteria of being realized. The balance of our “Deferred Income Tax Assets, Net” on the condensed consolidated balance sheet increased $5.5 million during the six months ended June 30, 2025, as a result of deferred tax benefits from the redemption of Class B shares for Class A shares and stock-based compensation vesting that occurred during the period, offset partially by a deferred tax expense for income during the period. Tax Examinations Aris LLC files income tax returns in the U.S. federal jurisdiction and various states. There are currently no federal or state income tax examinations underway for these jurisdictions. Its federal and state returns remain open to examination for tax years 2020 through 2024. Update on Tax Legislation On July 4, 2025, the United States Congress enacted H.R. 1, referred to as the One Big Beautiful Bill (“OBBB”). The OBBB contains several changes to corporate taxation including allowing for immediate expensing of research and development expenses and the expensing of unamortized, previously capitalized, qualified research and development expenses, a less restrictive limitation on the business interest deduction and the extension of 100% bonus depreciation for qualified properties. We are still in the process of evaluating the OBBB and an estimate of the financial impact cannot be made at this time. |