Arcosa, Inc.ACA
Arcosa, Inc. Income Taxes Disclosure
Income Taxes
The components of the provision for income taxes are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 1.4 | $ | 3.7 | $ | 3.0 | |||||||||||
| State | 4.7 | 4.6 | 1.9 | ||||||||||||||
| Foreign | 0.8 | 2.8 | — | ||||||||||||||
| Total current | 6.9 | 11.1 | 4.9 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 30.7 | 15.1 | 25.0 | ||||||||||||||
| State | (0.7) | 6.4 | 4.1 | ||||||||||||||
| Foreign | (4.0) | 3.7 | 2.7 | ||||||||||||||
| Total deferred | 26.0 | 25.2 | 31.8 | ||||||||||||||
| Provision | $ | 32.9 | $ | 36.3 | $ | 36.7 | |||||||||||
The provision for income taxes results in effective tax rates that differ from the statutory rates. The following is a reconciliation between the statutory U.S. federal income tax rate and the Company’s effective income tax rate on income before income taxes:
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| (in millions) | |||||||||||
| Federal statutory tax rate | $ | 50.7 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect(1) | 3.0 | 1.2 | |||||||||
| Foreign tax effects | |||||||||||
| Mexico | |||||||||||
| Currency adjustments | (7.3) | (3.0) | |||||||||
| Nondeductible expenses | 3.3 | 1.4 | |||||||||
| Other | (0.6) | (0.2) | |||||||||
| Other foreign jurisdictions | 0.2 | 0.1 | |||||||||
| Tax credits | |||||||||||
| AMP tax credits | (14.2) | (5.9) | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Statutory depletion | (4.9) | (2.0) | |||||||||
| Other | 2.7 | 1.0 | |||||||||
| Effective rate | $ | 32.9 | 13.6 | % | |||||||
(1) State taxes in Tennessee, New Jersey, Kansas, California, Montana, Oklahoma, Arizona, Kentucky, Minnesota, Florida, New Mexico, Missouri, and Alabama made up a majority (greater than 50%) of the tax effect in this category.
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Statutory rate | 21.0 | % | 21.0 | % | |||||||
| State taxes, including prior year true-ups | 7.5 | 2.3 | |||||||||
| AMP tax credits | (8.2) | (3.5) | |||||||||
| Statutory depletion | (3.2) | (2.1) | |||||||||
| Changes in valuation allowances and reserves | (1.1) | 1.8 | |||||||||
| Prior year true-ups | 0.4 | (0.5) | |||||||||
| Foreign adjustments | 1.5 | 1.8 | |||||||||
| Currency adjustments | 4.8 | (2.6) | |||||||||
| Compensation related items | 0.5 | — | |||||||||
| Divestiture-related non-deductible goodwill | 3.3 | — | |||||||||
| Other, net | 1.4 | 0.5 | |||||||||
| Effective rate | 27.9 | % | 18.7 | % | |||||||
The Company’s 2024 state income taxes include an increase in expense associated with the remeasurement of the Company’s deferred tax liabilities primarily in connection with acquisitions and divestitures that occurred during the year.
The income taxes paid, net of refunds, by the Company, including jurisdictions where income taxes paid, net of refunds, exceed 5 percent of the total income taxes paid, net of refunds, are as follows:
| Year Ended December 31, | |||||
| 2025 | |||||
| (in millions) | |||||
| Federal | $ | 15.0 | |||
| State and local | |||||
| New Jersey | 6.0 | ||||
| Iowa | (2.1) | ||||
| California | 1.6 | ||||
| Tennessee | 1.5 | ||||
| Other | 4.0 | ||||
| State and local | 11.0 | ||||
| Foreign | |||||
| Other | 0.4 | ||||
| Foreign | 0.4 | ||||
| Total income taxes paid, net of refunds | $ | 26.4 | |||
On August 16, 2022, the Inflation Reduction Act of 2022 (“IRA”) was enacted. Among other things, the IRA provides for certain manufacturing, production, and investment tax credit incentives, including new Advanced Manufacturing Production ("AMP") tax credits for companies that domestically manufacture and sell clean energy equipment, including wind towers. For the years ended December 31, 2025, 2024 and 2023, the Company has recognized $72.8 million, $53.6 million and $32.4 million, respectively, in gross AMP tax credits for wind towers produced and sold which are included as a reduction to cost of revenues on the Consolidated Statement of Operations due to the refundable nature of the credits. During the year ended December 31, 2025, the Company sold $67.1 million and $8.3 million of the 2025 and 2024 AMP tax credits, respectively. In the year ended December 31, 2024, the Company sold $45.0 million of the 2024 AMP tax credits. All sales were completed pursuant to Section 6418 of the Internal Revenue Code resulting in losses of $5.1 million and $2.7 million, in 2025 and 2024, respectively, which are reflected in cost of revenues on the Consolidated Statements of Operations. The Company did not sell AMP tax credits in 2023. The Company has utilized $3.8 million of the credits to offset the US federal income tax liability in 2025 and a remaining $11.1 million of AMP tax credits are included in deferred tax assets on the Consolidated Balance Sheet as of December 31, 2025.
The Organization for Economic Co-operation and Development issued Pillar Two model rules for a global minimum tax of 15% effective January 1, 2024 ("Pillar Two"). While it is uncertain whether the U.S. will enact legislation to adopt Pillar Two, certain countries in which we operate have adopted legislation, and other countries are in the process of introducing legislation to implement Pillar Two. Pillar Two had no impact on our 2025 or 2024 tax rates, and we do not currently expect Pillar Two to significantly impact our tax rate going forward.
Income (loss) before income taxes for the years ended December 31, 2025, 2024, and 2023 was $236.0 million, $130.9 million, and $182.6 million, respectively, for U.S. operations, and $5.3 million, $(0.9) million, and $13.3 million, respectively, for foreign operations, principally Mexico and Canada. The Company provides deferred income taxes on the unrepatriated earnings of its foreign operations that are not considered permanently reinvested where it results in a deferred tax liability.
Deferred income taxes represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax liabilities and assets are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation, depletion, and amortization | $ | 269.0 | $ | 248.7 | |||||||
| Total deferred tax liabilities | 269.0 | 248.7 | |||||||||
| Deferred tax assets: | |||||||||||
| Workers compensation and other benefits | 11.2 | 12.3 | |||||||||
| Tax carryforwards and credits | 33.3 | 36.9 | |||||||||
| Inventory | 3.4 | 6.1 | |||||||||
| Accrued liabilities and other | 4.7 | 2.6 | |||||||||
| Total deferred tax assets | 52.6 | 57.9 | |||||||||
| Net deferred tax assets (liabilities) before valuation allowances | (216.4) | (190.8) | |||||||||
| Valuation allowances | 7.2 | 7.0 | |||||||||
| Net deferred tax assets (liabilities) | $ | (223.6) | $ | (197.8) | |||||||
At December 31, 2025, the Company had $10.3 million of federal net operating loss carryforwards, primarily from businesses acquired, that will begin to expire in the year 2036, and had $5.0 million of tax-effected state loss carryforwards that will begin to expire in 2033. In addition, at December 31, 2025, the Company had $10.5 million of tax-effected foreign net operating loss carryforwards that will begin to expire in the year 2026.
We have established a valuation allowance for state and foreign tax operating losses and credits that we have estimated may not be realizable.
Income tax has not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested outside the U.S. This amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary. Determination of the amount of any unrecognized deferred income tax liability on this temporary difference is not practicable because of the hypothetical calculation.
Taxing authority examinations
We have multiple federal tax return filings that are subject to examination by the Internal Revenue Service. The 2022-2024 tax years are open for the Arcosa, Inc. federal return. We have various subsidiaries that file separate state tax returns and are subject to examination by taxing authorities at different times, generally open for their 2021 tax years and forward. We have various subsidiaries in Mexico that file separate tax returns and are subject to examination by taxing authorities at different times. The entities are generally open for their 2019 tax years and forward.
Unrecognized tax benefits
Unrecognized tax benefits represent the differences between tax positions taken or expected to be taken on a tax return and the benefits recognized for financial statement purposes. There were no unrecognized tax benefits as of December 31, 2025, 2024, and 2023.
The Company accounts for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and penalties associated with an uncertain tax position are included in the income tax provision. There were no accrued interest and penalties as of December 31, 2025, 2024, and 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 28, 2019 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.