Allegion plcALLE
Allegion plc Income Taxes Disclosure
INCOME TAXES
As discussed in Note 2, the Company applied the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025, including using Ireland, and its national tax rate of 12.5%, as the starting point for several disclosures as it is the Company’s country of domicile. Disclosures for the years ended December 31, 2024 and 2023 are presented consistent with the prior years and with the income tax disclosure requirements of ASC 740 prior to the adoption of ASU 2023-09.
Earnings before income taxes for the years ended December 31 were taxed within the following jurisdictions:
| In millions | 2025 | |||||||
| Ireland | $ | (120.5) | ||||||
| Non-Ireland | 888.9 | |||||||
| Total | $ | 768.4 | ||||||
| In millions | 2024 | 2023 | ||||||||||||
| U.S. | $ | 298.6 | $ | 220.8 | ||||||||||
| Non-U.S. | 400.2 | 396.4 | ||||||||||||
| Total | $ | 698.8 | $ | 617.2 | ||||||||||
The components of the Provision for income taxes for the years ended December 31 were as follows:
| In millions | 2025 | |||||||
| Current tax expense: | ||||||||
| Ireland | $ | 6.2 | ||||||
| Non-Ireland | 128.6 | |||||||
| Total: | 134.8 | |||||||
| Deferred tax benefit: | ||||||||
| Ireland | (0.2) | |||||||
| Non-Ireland | (10.0) | |||||||
| Total: | (10.2) | |||||||
| Total tax expense: | ||||||||
| Ireland | 6.0 | |||||||
| Non-Ireland | 118.6 | |||||||
| Total | $ | 124.6 | ||||||
| In millions | 2024 | 2023 | ||||||||||||
| Current tax expense: | ||||||||||||||
| U.S. | $ | 111.4 | $ | 114.7 | ||||||||||
| Non-U.S. | 34.1 | 29.5 | ||||||||||||
| Total: | 145.5 | 144.2 | ||||||||||||
| Deferred tax benefit: | ||||||||||||||
| U.S. | (39.7) | (59.1) | ||||||||||||
| Non-U.S. | (4.5) | (8.5) | ||||||||||||
| Total: | (44.2) | (67.6) | ||||||||||||
| Total tax expense: | ||||||||||||||
| U.S. | 71.7 | 55.6 | ||||||||||||
| Non-U.S. | 29.6 | 21.0 | ||||||||||||
| Total | $ | 101.3 | $ | 76.6 | ||||||||||
The Provision for income taxes differs from the amount of income taxes determined by applying the applicable Irish statutory income tax rate to pretax income, as a result of the following differences:
| 2025 | ||||||||||||||
| Amount | Percent | |||||||||||||
| Ireland Federal Statutory Tax Rate | $ | 96.1 | 12.5 | % | ||||||||||
| State and Local Income Tax, Net of Federal Income Tax Effect | — | — | ||||||||||||
| Foreign Tax Effects: | ||||||||||||||
| United States: | ||||||||||||||
| Statutory tax rate difference between Ireland and United States | 30.7 | 4.0 | ||||||||||||
| State and local income taxes, net of Federal income tax effect | 21.7 | 2.8 | ||||||||||||
| Research and development tax credits | (5.8) | (0.7) | ||||||||||||
| Other | 9.4 | 1.2 | ||||||||||||
| United Arab Emirates ("UAE"): | ||||||||||||||
| Statutory tax rate difference between Ireland and UAE | (13.7) | (1.8) | ||||||||||||
| Exempt income | (35.4) | (4.6) | ||||||||||||
| Other | 1.3 | 0.2 | ||||||||||||
| Germany: | ||||||||||||||
| Local income tax | 6.4 | 0.8 | ||||||||||||
| Effect of changes in tax rate enacted in the current period | (7.3) | (0.9) | ||||||||||||
| Other | 3.0 | 0.4 | ||||||||||||
| Luxembourg: | ||||||||||||||
| Statutory revaluation of investment in subsidiary | (13.6) | (1.8) | ||||||||||||
| Other | 10.7 | 1.4 | ||||||||||||
| Other foreign jurisdictions | (2.8) | (0.4) | ||||||||||||
| Effect of Cross-Border Tax Laws: | ||||||||||||||
Pillar II | 6.2 | 0.8 | ||||||||||||
| Nontaxable or Nondeductible Items: | ||||||||||||||
| Nondeductible interest expense | 12.4 | 1.6 | ||||||||||||
| Other | 2.3 | 0.3 | ||||||||||||
| Changes in Unrecognized Tax Benefits | 3.1 | 0.4 | ||||||||||||
| Other | (0.1) | — | ||||||||||||
| Effective tax rate | $ | 124.6 | 16.2 | % | ||||||||||
| Percent of pretax income | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Statutory U.S. rate | 21.0 | % | 21.0 | % | ||||||||||
| Increase (decrease) in rates resulting from: | ||||||||||||||
Non-U.S. tax rate differential(a) | (9.7) | (11.0) | ||||||||||||
State and local income taxes(a) | 2.4 | 2.4 | ||||||||||||
| Global Minimum Tax | 1.4 | — | ||||||||||||
| Reserves for uncertain tax positions | 0.3 | (0.1) | ||||||||||||
| Other adjustments | (0.9) | 0.1 | ||||||||||||
| Effective tax rate | 14.5 | % | 12.4 | % | ||||||||||
(a)Net of changes in valuation allowances
The majority of the Company's earnings are considered permanently reinvested, and therefore, the Company has not recorded any incremental withholding or income tax liabilities on these permanently reinvested earnings.
At December 31, a summary of the deferred tax accounts was as follows:
| In millions | 2025 | 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Inventory and accounts receivable | $ | 11.7 | $ | 12.7 | ||||||||||
| Fixed assets and intangibles | 5.7 | 4.5 | ||||||||||||
| Lease liabilities | 41.0 | 36.2 | ||||||||||||
| Postemployment and other benefit liabilities | 37.7 | 31.8 | ||||||||||||
| Other reserves and accruals | 25.4 | 23.2 | ||||||||||||
| Net operating losses, tax credits and other carryforwards | 597.9 | 557.9 | ||||||||||||
| Other | 1.7 | 1.8 | ||||||||||||
| Gross deferred tax assets | 721.1 | 668.1 | ||||||||||||
| Less: deferred tax valuation allowances | (255.8) | (247.0) | ||||||||||||
| Deferred tax assets net of valuation allowances | $ | 465.3 | $ | 421.1 | ||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Fixed assets and intangibles | $ | (193.5) | $ | (96.7) | ||||||||||
| ROU assets | (39.9) | (35.4) | ||||||||||||
| Postemployment and other benefit liabilities | (9.7) | (6.5) | ||||||||||||
| Unremitted earnings of foreign subsidiaries | (6.1) | (4.1) | ||||||||||||
| Other | (7.6) | (5.8) | ||||||||||||
| Gross deferred tax liabilities | (256.8) | (148.5) | ||||||||||||
| Net deferred tax assets | $ | 208.5 | $ | 272.6 | ||||||||||
At December 31, 2025, $6.1 million of deferred taxes were recorded for certain undistributed earnings of subsidiaries. Historically, no deferred taxes have been provided for any portion of the remaining undistributed earnings of the Company's subsidiaries since these earnings have been, and will continue to be, permanently reinvested in these subsidiaries. For many reasons, including the number of legal entities and jurisdictions involved, the complexity of the Company's legal entity structure, the complexity of tax laws in the relevant jurisdictions and the impact of projections of income for future years to any calculations, the Company believes it is not practicable to estimate, within any reasonable range, the amount of additional taxes which may be payable upon the distribution of earnings.
At December 31, 2025, the Company had the following tax losses and tax credit carryforwards available to offset taxable income in prior and future years:
| In millions | Amount | Expiration Period | ||||||||||||
| Ireland Federal tax loss carryforwards | $ | 67.7 | Unlimited | |||||||||||
| Non-Ireland Federal and State credit carryforwards | 5.2 | 2026-2037 | ||||||||||||
| Non-Ireland tax loss carryforwards | $ | 1,016.8 | 2026-Unlimited | |||||||||||
The non-Ireland tax loss carryforwards were incurred in various jurisdictions, predominantly in Luxembourg and the United Kingdom.
The Company evaluates its deferred income tax assets to determine if valuation allowances are required or should be adjusted. GAAP requires that companies assess whether valuation allowances should be established against their deferred tax assets based on consideration of all available evidence, both positive and negative, using a "more likely than not" standard. This assessment considers the nature, frequency and amount of recent losses, the duration of statutory carryforward periods and tax planning strategies. In making such judgments, significant weight is given to evidence that can be objectively verified.
Activity associated with the Company’s valuation allowance is as follows:
| In millions | 2025 | 2024 | 2023 | |||||||||||||||||
| Beginning balance | $ | 247.0 | $ | 281.0 | $ | 264.7 | ||||||||||||||
| Increase to valuation allowance | 10.9 | 2.9 | 15.7 | |||||||||||||||||
| Decrease to valuation allowance | (5.9) | (26.5) | — | |||||||||||||||||
| Tax rate change | 1.2 | (8.8) | — | |||||||||||||||||
Currency translation | 2.6 | (1.6) | 0.6 | |||||||||||||||||
| Ending balance | $ | 255.8 | $ | 247.0 | $ | 281.0 | ||||||||||||||
During the year ended December 31, 2025, the valuation allowance increased by $8.8 million, while during the year ended December 31, 2024, the valuation allowance decreased by $34.0 million. The Company's valuation allowance will fluctuate from year to year as a result of changes in country specific tax laws, internal restructurings, jurisdictional profitability and changes in judgments and facts regarding the realizability of deferred tax assets.
The Company has total unrecognized tax benefits of $54.8 million and $44.5 million as of December 31, 2025 and 2024, respectively. The amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $54.8 million as of December 31, 2025. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| In millions | 2025 | 2024 | 2023 | |||||||||||||||||
| Beginning balance | $ | 44.5 | $ | 45.1 | $ | 45.2 | ||||||||||||||
| Additions based on tax positions related to the current year | 12.6 | 12.2 | 10.8 | |||||||||||||||||
| Additions based on tax positions related to prior years | 6.9 | 0.1 | 1.4 | |||||||||||||||||
| Reductions based on tax positions related to prior years | (5.1) | (2.4) | (1.9) | |||||||||||||||||
| Reductions related to settlements with tax authorities | (0.2) | (1.0) | — | |||||||||||||||||
| Reductions related to lapses of statute of limitations | (6.0) | (8.4) | (10.9) | |||||||||||||||||
Currency translation | 2.1 | (1.1) | 0.5 | |||||||||||||||||
| Ending balance | $ | 54.8 | $ | 44.5 | $ | 45.1 | ||||||||||||||
The Company records interest and penalties associated with the uncertain tax positions within its provision for income taxes. The Company had reserves associated with interest and penalties, net of tax, of $12.0 million and $9.2 million at December 31, 2025 and 2024, respectively. For the year ended December 31, 2025, the Company recognized $2.0 million in interest and penalties, net of tax, related to these uncertain tax positions. For the year ended December 31, 2024, the Company recognized $1.0 million in interest and penalties, net of tax, related to these uncertain tax positions.
The provision for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which the Company operates. Future changes in applicable laws, projected levels of taxable income and tax planning could change the effective tax rate and tax balances recorded by the Company. In addition, tax authorities periodically review income tax returns filed by the Company and can raise issues regarding its filing positions, timing and amount of income or deductions and the allocation of income among the jurisdictions in which the Company operates. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a tax authority with respect to that return. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Canada, France, Germany, Italy, Mexico, the Netherlands, Poland and the U.S. In general, the examination of the material tax returns of subsidiaries of the Company is complete for the years prior to 2016, with certain matters being resolved through appeals and litigation.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 15, 2022 | |
| 2020 | Feb 16, 2021 | |
| 2019 | Feb 18, 2020 | |
| 2018 | Feb 19, 2019 | |
| 2017 | Feb 20, 2018 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 26, 2016 | |
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.