Income Taxes

9 Months Ended

Sep. 30, 2024

Income Taxes

Income Taxes

13. Income Taxes

Calumet, Inc. is a corporation and is subject to U.S. federal and state income taxes. Income taxes are accounted for under the asset and liability method. Calumet, Inc. recognizes deferred tax assets and liabilities for the future tax consequences attributable to differences between the financial statement carrying amounts and income tax basis of assets and liabilities and the expected benefits of utilizing net operating loss and tax credit carryforwards, using enacted tax rates in effect for the taxing jurisdiction in which Calumet, Inc. operates for the year in which those temporary differences are expected to be recovered or settled. Calumet, Inc. recognizes the financial statement effects of a tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination. Net deferred tax assets are then reduced by a valuation allowance if Calumet, Inc. believes it is more likely than not such net deferred tax assets will not be realized. The Company assessed the realizability of the deferred tax assets (“DTAs”) and concluded that a full valuation allowance for the net DTAs is deemed appropriate as the DTAs were not more likely than not to be realized under relevant accounting standards.

On July 10, 2024, Calumet, Inc. completed the Conversion pursuant to which it became the parent holding company of Calumet Specialty Products Partners, L.P. and its subsidiaries. Following the Conversion, the Company’s sole material asset is the partnership interests in the Partnership, which for U.S. federal, state and local income tax purposes passes its net taxable income and related tax credits, if any, through to its partners for inclusion in the partners’ tax returns. The Partnership is also subject to and reports entity level taxes in certain states. The income tax burden on the earnings taxed

to the noncontrolling interest holders is not reported by the Company in its unaudited condensed consolidated financial statements under U.S. GAAP. As a result, the Company’s effective tax rate differs materially from the statutory rate.

Income Tax Expense

Prior to the Conversion on July 10, 2024, the Company was generally not subject to U.S. federal and state income taxes, whereas following the Conversion, Calumet, Inc. is taxed as a corporation and subject to U.S. federal and state income taxes. The effective tax rate for the period from July 10, 2024 through September 30, 2024, was approximately (0.7)%.  The lower effective tax rate compared to the statutory tax rates is primarily related to the valuation allowance that offsets the deferred tax benefit that would otherwise be recorded.