ALBANY INTERNATIONAL CORP /DE/AIN

ALBANY INTERNATIONAL CORP /DE/ Income Taxes Disclosure

10-KFiled Feb 27, 20267 min read
Income Taxes
Provision for income taxes consisted of the following:
Years ended December 31,
(in thousands)202520242023
Income before income taxes:
U.S.$(114,505)$26,660 $68,872 
Non-U.S.52,718 90,429 91,584 
$(61,787)$117,089 $160,456 
Income tax expense/(benefit)
Current:
Federal$1,920 $2,682 $17,005 
State2,021 4,724 2,030 
Non-U.S.27,502 34,053 34,110 
$31,443 $41,459 $53,145 
Deferred:
Federal$(25,281)$1,699 $(1,700)
State(1,731)(804)863 
Non-U.S.(9,259)(13,320)(3,462)
$(36,271)$(12,425)$(4,299)
Total income tax expense$(4,828)$29,034 $48,846 
Cash payments for taxes in 2025 consisted of the following:
Years ended December 31,
(in thousands)2025
Income Taxes Paid:
Domestic
Federal$2,291 
State2,319 
Foreign
Brazil12,588 
Canada4,787 
China6,836 
France2,308 
Mexico8,166 
Other3,143 
Total$42,438 
Cash payments for taxes amounted to $47.3 million in 2024, and $54.5 million in 2023.
A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows:
Year Ended December 31, 2025
(in thousands)AmountPercent
U.S. federal statutory income tax rate(12,976)21.0 %
Domestic federal
Effect of changes in tax laws or rate enacted in the current period— — %
Effect of cross-border tax laws
Subpart F income552 (0.9)%
Other73 (0.1)%
Tax credits
Research & Development Tax Credit(1,004)1.6 %
Foreign Tax Credit - Generation, Utilization, and Expiration1,025 (1.7)%
Other(162)0.3 %
Changes in valuation allowances(1,486)2.4 %
Nontaxable or nondeductible items
Officer's compensation612 (1.0)%
Other(674)1.1 %
Changes in unrecognized tax benefits(581)0.9 %
Other(7)— %
State and Local Income Taxes, Net of Federal Tax Effect (a)1,048 (1.7)%
Foreign tax effects
Brazil
State and local (Social Contribution)3,362 (5.4)%
Foreign Rate Differential1,500 (2.4)%
Other(371)0.6 %
Canada
Foreign Rate Differential(341)0.6 %
Withholding tax1,476 (2.4)%
State and local (Quebec & Ontario)545 (0.9)%
Other233 (0.4)%
China
Foreign Rate Differential677 (1.1)%
Withholding tax2,414 (3.9)%
Other(84)0.1 %
Spain
State and local (Trade Tax)(762)1.2 %
Foreign Rate Differential(630)1.0 %
UK
Return to provision(664)1.1 %
Foreign Rate Differential(157)0.3 %
Other foreign jurisdictions
Foreign Rate Differential796 (1.3)%
Withholding tax1,188 (1.9)%
Other(430)0.7 %
Effective income tax rate(4,828)7.8 %
Years ended December 31,
20242023
U.S. federal statutory tax rate21.0 %21.0 %
State taxes, net of federal benefit2.3 1.9 
Non-U.S. local income taxes2.3 1.4 
U.S. permanent adjustments0.6 0.8 
Foreign permanent adjustments1.0 0.7 
Foreign rate differential2.1 2.0 
Net U.S. tax on non-U.S. earnings and foreign withholdings2.8 5.1 
Provision for/(resolution) of tax audits and contingencies, net(1.3)0.3 
U.S. Pension Settlement - Release of Residual Tax Effect— — 
Change in valuation allowances
4.4 (1.2)
Impact of Mexico net operating loss inflation revaluation
(2.2)— 
Establishment of deferred tax asset for Non-U.S. reserves
(4.3)— 
Impact of amended tax returns(0.8)— 
Return to provision(2.2)(1.2)
Other adjustments(0.9)(0.4)
Effective income tax rate24.8 %30.4 %
In 2024, the Company also recorded new valuation allowances totaling $6.7 million and released a valuation allowance of $6.3 million in a non-U.S. jurisdiction due to positive evidence indicating that a full valuation allowance was no longer required. The remaining increase in valuation allowance is due to increases in deferred tax assets in entities that already had established valuation allowances.
On July 4, 2025, the President signed into law the One Big Beautiful Bill Act (OBBBA). The OBBBA retains the 21% corporate tax rate and makes permanent several tax provisions from the Tax Cuts and Jobs Act of 2017, including immediate expensing of domestic R&D, enhanced interest deductibility, and 100 percent bonus depreciation effective in 2025. Revisions to the international tax rules become effective in 2026. In the fourth quarter of 2025, we completed our assessment of the OBBBA, and the impacts were not material.
The Company has operations which constitute a taxable presence in 22 countries outside of the United States. The Company is subject to audit in the U.S. and various foreign jurisdictions. Our open tax years for major jurisdictions generally range from 2019-2024. We believe appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.
During the periods reported, income outside of the U.S. was heavily concentrated within Brazil (34% tax rate), and China (25% tax rate). As a result, the foreign income tax rate differential was primarily attributable to these tax rate differences.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of certain assets and liabilities for financial reporting purposes and income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
For the year ended December 31U.S.Non-U.S.
(in thousands)2025202420252024
Deferred tax assets:
Accounts receivable, net$667 $502 $1,466 $1,138 
Inventories2,542 2,473 1,471 1,636 
Incentive compensation2,289 1,453 1,054 750 
Property, plant, equipment and intangibles, net— — — — 
Pension, post retirement benefits - non-current6,388 6,440 4,832 2,202 
Tax loss carryforwards30 49 49,776 32,963 
Tax credit carryforwards3,935 3,602 238 29 
Leases13,149 12,192 2,500 2,205 
Reserves32,871 2,639 6,999 7,150 
Deferred revenue— — — — 
Other749 373 239 909 
Deferred tax assets before valuation allowance62,769 29,723 68,575 48,982 
Less: valuation allowance(340)(1,826)(17,135)(13,670)
Total deferred tax assets$62,429 $27,897 $51,440 $35,312 
Deferred tax liabilities:
Unrepatriated foreign earnings$5,744 $4,961 $— $— 
Property, plant, equipment and intangibles, net9,822 4,626 17,440 14,483 
Basis difference in partner capital989 1,420 — — 
Basis difference in investment5,732 5,081 — — 
Derivatives— 38 151 125 
Leases12,201 11,433 2,303 2,053 
Deferred revenue279 380 2,688 4,663 
Other(11,743)— (144)— 
Total deferred tax liabilities23,024 27,939 22,438 21,324 
Net deferred tax (liability)/asset$39,405 $(42)$29,002 $13,988 
Deferred income tax assets, net of valuation allowances, are expected to be realized through the reversal of existing taxable temporary differences and future taxable income.
As of December 31, 2025, the Company's net operating loss, capital loss and tax credit carryforwards were as follows:
(in thousands)Expiration PeriodNet Operating and Capital Loss CarryforwardsTax Credit Carryforwards
Jurisdiction
U.S. Federal 2026 - 2045$— $2,558 
U.S. State 2035 - 204230 1,010 
U.S. State
 Indefinite — 367 
Non-U.S. 2026 - 20403,287 — 
Non-U.S. Indefinite 45,806 — 
Balance at end of year$49,123 $3,935 
The Company records the residual U.S. and foreign taxes on certain amounts of foreign earnings that have been targeted for repatriation to the U.S. These amounts are not considered to be indefinitely reinvested, and the Company accrued for the tax cost on these earnings to the extent they cannot be repatriated in a tax-free manner. The Company has targeted for repatriation $122.2 million of current year and prior year earnings of the Company’s foreign operations. If these earnings were distributed, the Company would be subject to foreign withholding taxes of $5.2 million and U.S. income taxes of $1.3 million which have already been recorded.
The accumulated undistributed earnings of the Company’s foreign operations not targeted for repatriation to the U.S. are intended to remain indefinitely invested in foreign operations.
No additional income taxes have been provided on the indefinitely invested foreign earnings at December 31, 2025. If these earnings were distributed, the Company could be subject to income taxes and additional foreign withholding taxes. Determining the amount of unrecognized deferred tax liability related to any additional outside basis difference in these entities is not practical due to the complexities of the hypothetical calculation.
The following table provides a reconciliation of the beginning and ending amount of unrecognized tax benefits. If recognized, the $2.3 million would impact the effective tax rate as of December 31, 2025 as follows:
(in thousands)202520242023
Unrecognized tax benefits balance at January 1,$3,142 $2,741 $792 
Increase in gross amounts of tax positions related to prior years678 1,102 2,373 
Decrease in gross amounts of tax positions related to prior years— (224)— 
Increase in gross amounts of tax positions related to current years— 196 
Decrease due to settlements with tax authorities
(1,714)(460)— 
Increase (decrease) due to lapse in statute of limitations
— 116 (656)
Currency translation206 (133)36 
Unrecognized tax benefits balance at December 31,$2,312 $3,142 $2,741 
The Company recognizes interest and penalties related to unrecognized tax benefits within its global operations as a component of income tax expense. The Company recognized $0.2 million, $0.4 million and $0.5 million interest and penalties related to the unrecognized tax benefits noted above, for the years 2025, 2024 and 2023, respectively.

Historical Timeline

Fiscal YearFiled
2025Feb 27, 2026Showing above
2024Feb 26, 2025
2023Feb 26, 2024
2022Feb 24, 2023
2021Feb 25, 2022
2019Feb 28, 2020
2018Mar 14, 2019
2017Feb 28, 2018

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.

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