Lineage Inc

(9)Income taxes

Components of earnings before income taxes

The following table summarizes the components of earnings before income taxes for the years ended December 31:

Summary of current and deferred income taxes

Income tax expense (benefit) is summarized as follows for the years ended December 31:

Income tax expense (benefit) attributable to net income (loss) before income taxes differs from the amounts computed by applying the U.S. statutory federal income tax rate of 21% to Net income (loss) before income taxes. The reconciliation between these amounts is as follows for the years ended December 31:

Deferred income taxes

The net deferred tax liability above is presented in the consolidated balance sheets as follows:

As of December 31, 2024, there were operating loss carryforwards of $383 million related to U.S., state, and foreign net operating losses, of which $245 million do not expire and the remaining expire, if not utilized, from 2025 to 2044. There were also total tax credits of $7 million which expire, if not utilized, from 2025 to 2044.

In assessing the realizability of deferred tax assets, management considers whether it is more-likely-than-not that some portion of or all the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more-likely-than-not that the Company will realize the benefits of these deductible differences, net of the existing valuation allowances on December 31, 2024 and 2023. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. There is a reasonable possibility that within the next twelve months, sufficient positive or negative evidence may become available to allow the Company to reach a conclusion that would warrant a change in the Company’s valuation allowance positions, and any related changes will be recorded in the period such a determination is made.

The valuation allowance for deferred tax assets as of December 31, 2024 and 2023 was $42 million and$57 million, respectively. The change in valuation allowance was primarily related to certain U.S. and Australia deferred tax assets that changed as a result of internal restructurings. During the year ended December 31, 2024, the Company released a valuation allowance established on deferred tax assets attributable to existing net operating losses carryforwards and tax credits in the U.S., resulting in an income tax benefit of $24 million, recorded in Deferred income tax liability on the consolidated balance sheets. The release of the valuation allowance was due to the Company’s internal restructurings.

Uncertain tax positions

The beginning and ending balances of the Company’s uncertain tax positions are reconciled below for the years ended December 31:

The Company’s policy regarding interest and penalties related to uncertain tax positions is to record interest and penalties as an element of income tax expense. As of December 31, 2024 and 2023, the Company had liabilities of $3 million and $2 million, respectively, of potential interest and penalties associated with uncertain tax positions. During the years ended December 31, 2024, 2023, and 2022, the Company recognized interest and penalties associated with uncertain tax positions through Income tax expense (benefit) of $1 million, $2 million, and less than $1 million, respectively.

The uncertain tax positions of $9 million as of December 31, 2024, if subsequently recognized, will affect the Company’s effective tax rate favorably at the time when such a benefit is recognized.

The Company believes the amount of gross uncertain tax positions that will be settled during the next twelve months cannot be reasonably estimated but will not be significant.

Other income tax updates

The 2015 through 2024 tax years generally remain open to examination by U.S. federal, state, and foreign tax authorities.

The Company has analyzed its global cash requirements as of December 31, 2024 and has recorded a $1 million deferred tax liability related to foreign income and withholding tax that will be incurred with respect to the undistributed foreign earnings which are not permanently reinvested.

The Organization for Economic Co-operation and Development (“OECD”) has issued Pillar Two Model Rules introducing a new global minimum tax of 15% effective for tax years beginning on or after January 1, 2024. While the U.S. has not yet adopted the Pillar Two rules, various other governments around the world are enacting legislation. The Company has consolidated revenue of more than €750 million per annum and therefore is in scope of the Pillar Two rules which entail tax compliance obligations and can potentially lead to additional taxes where the effective tax rate in a jurisdiction is below 15%. The Company is continuing to evaluate the impact of proposed and enacted legislative changes as new guidance becomes available.