Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income tax (benefit) provision attributable to the Company for the year ended December 31, 2024, 2023 and 2022, respectively, are as follows (in thousands):
Year Ended December 31,
2024 2023 2022
U.S. current income tax expense $ 474  $ 715  $ 61 
U.S. deferred income tax expense (benefit) 2,500  —  (207)
Foreign current income tax (benefit) expense (15,913) 13,269  5,846 
Foreign deferred income tax expense (benefit) 1,735  (1,687) 7,907 
Total $ (11,204) $ 12,297  $ 13,607 
A reconciliation of the statutory federal income tax amount to the recorded expense is as follows (in thousands):
Year Ended December 31,
2024 2023 2022
(Loss) income before income taxes $ (218,530) $ 9,134  $ 12,988 
Statutory income tax rate 21  % 21  % 21  %
Expected income tax (benefit) expense (45,891) 1,918  2,727 
Interest and penalties 3,493  2,269  1,677 
Foreign income tax rate differential (28,291) 3,416  4,311 
Foreign (loss) earnings not in reported income (35,996) 5,188  1,565 
Foreign tax credits (166) (11,193) (3,646)
Withholding taxes (19,899) 1,340  1,677 
Other permanent differences 1,007  1,011  322 
State tax benefit (5,983) 227  (1,129)
Return to provision (27) (11) (116)
Change in valuation allowance 120,549  8,132  6,219 
Total $ (11,204) $ 12,297  $ 13,607 

The Company’s effective tax rate was 5.1% for the year ended December 31, 2024 compared to 134.6% for the year ended December 31, 2023 and 104.8% for the year ended December 31, 2022.

The effective tax rate for the years ended December 31, 2024, 2023 and 2022 differed from the statutory rate of 21% primarily due to the mix of earnings between the United States and Puerto Rico, changes in the valuation allowance and interest and penalties. Additionally, as a result of the Settlement Agreement with PREPA, during the year ended December 31, 2024, the Company reversed $19.9 million in withholding tax accruals related to undistributed earnings from Puerto Rico.

The Company recorded interest and penalties expense of $3.2 million, $1.8 million and $1.7 million during the years ended December 31, 2024, 2023 and 2022, respectively, related to the 2020, 2021, 2022 and 2023 tax year returns in Puerto Rico. Additionally, the Company recorded interest expense of $0.3 million and $0.5 million during the years ended December 31, 2024 and 2023, respectively related to the 2019 tax year return in the United States.
Deferred tax liabilities attributable to the Company consisted of the following (in thousands):
Year Ended December 31,
2024 2023
Deferred tax assets:
Section 163(j) interest limitation $ 5,090  $ — 
Lease asset 3,660  3,249 
Intangible assets 1,050  997 
Accrued liabilities 3,605  3,712 
Net operating loss carryover 114,506  4,334 
Foreign tax credits 76,570  96,303 
Other 1,442  1,315 
Valuation allowance (187,087) (86,432)
Deferred tax assets 18,836  23,478 
Deferred tax liabilities:
Property and equipment $ (14,140) $ (14,708)
Lease liability (3,583) (3,160)
Prepaid expenses (2,306) (2,586)
Other (1,828) (1,808)
Deferred tax liabilities (21,857) (22,262)
Net deferred tax (liability) asset $ (3,021) $ 1,216 
Reflected in accompanying balance sheet as:
Deferred income tax asset $ —  $ 1,844 
Deferred income tax liability (3,021) (628)
Total $ (3,021) $ 1,216 

During the years ended December 31, 2024 and 2023, the Company recorded changes in its valuation allowance of $120.5 million and $8.1 million, respectively, related to deferred tax assets that are not expected to be utilized. The Company has foreign tax credit carryforwards of $76.6 million as of December 31, 2024. These credits have a 10-year carryforward period and begin to expire in 2028. As of December 31, 2024, the Company has federal net operating loss and 163(j) interest limitation carryforwards of $197.8 million and $24.2 million, respectively, that have an indefinite life carryforward. The Company has net operating loss carryforwards in Puerto Rico of $170.4 million that have a 10-year carryforward period and expire in 2034.

The Company maintains a full valuation allowance related to U.S. foreign tax credit carryforwards, as it cannot objectively assert that these deferred tax assets are more likely than not to be realized. The Company has a full valuation allowance on U.S. tax attribute carryforwards to the extent not supported by existing deferred tax liabilities. As result of the annual limitations for net operating loss carryforwards to offset only 80 percent of taxable income, the Company reflects the net deferred tax liability as of December 31, 2024. The Company recorded the full valuation allowance with respect to the Puerto Rico net operating loss carryforwards as they are not more likely than not to be realized. All available positive and negative evidence was weighed to determine whether a valuation allowance was necessary. The most significant evidential matter relates to recent cumulative loss position in the U.S. and no projected benefit related to losses generated in Puerto Rico as of December 31, 2024.

At December 31, 2024, Mammoth has a foreign subsidiary in Canada with undistributed earnings. These earnings are considered permanently reinvested, as it is the Company’s intention to reinvest these earnings in foreign operations. Although we would not be subject to income tax in the U.S. on these earnings, these amounts could be subject to withholding tax if distributed. The Company has made no provision for tax related to these undistributed earnings.

The Company has recorded interest and penalties payable of $8.5 million and $5.0 million at December 31, 2024 and
2023, respectively, related to the 2020, 2021, 2022 and 2023 tax year returns in Puerto Rico and the 2019 tax year return in the United States. It is the Company’s policy to recognize interest and applicable penalties in income tax expense.

The Company did not have any uncertain tax positions for the years ended December 31, 2024 and 2023.
The Company’s U.S. federal tax returns for tax years 2019 through 2024 remain subject to examination by the tax authorities. The Company’s state and local income tax returns for tax years 2018 through 2024 remain subject to examination, with few exceptions, by the respective tax authorities. Puerto Rico tax returns for tax years 2019 through 2024 and Canada tax returns for the tax years 2017 through 2024 remain open to examination by the respective tax authorities.