Atmus Filtration Technologies Inc.ATMU
Atmus Filtration Technologies Inc. Income Taxes Disclosure
INCOME TAXES
Total income taxes paid were approximately $66.9 million and $41.3 million in 2024 and 2023, respectively.
The following table summarizes income before income taxes:
| Years ended December 31, | ||||||||||||||||||||
| In millions | 2025 | 2024 | 2023 | |||||||||||||||||
U.S. income | $ | 151.8 | $ | 126.0 | $ | 136.3 | ||||||||||||||
Foreign income | 114.4 | 108.8 | 90.1 | |||||||||||||||||
| Income before income taxes | $ | 266.2 | $ | 234.8 | $ | 226.4 | ||||||||||||||
Income tax expense (benefit) consisted of the following:
| Years ended December 31, | ||||||||||||||||||||
| In millions | 2025 | 2024 | 2023 | |||||||||||||||||
| Current | ||||||||||||||||||||
| U.S. federal and state | $ | 12.0 | $ | 30.5 | $ | 38.4 | ||||||||||||||
| Foreign | 28.1 | 26.4 | 26.7 | |||||||||||||||||
| Total current income tax expense | 40.1 | 56.9 | 65.1 | |||||||||||||||||
| Deferred | ||||||||||||||||||||
| U.S. federal and state | $ | 15.7 | $ | (5.4) | $ | (10.4) | ||||||||||||||
| Foreign | 3.0 | (2.3) | 0.4 | |||||||||||||||||
| Total deferred income tax expense (benefit) | 18.7 | (7.7) | (10.0) | |||||||||||||||||
| Income tax expense | $ | 58.8 | $ | 49.2 | $ | 55.1 | ||||||||||||||
The Company adopted ASU 2023-09 on a prospective basis as of January 1, 2025. A reconciliation of the statutory U.S. federal income tax rate beginning with a computed income tax expense amount calculated by applying income before income taxes to the US Federal income tax rate to the effective tax rate and income tax expense amount was as follow:
Year ended December 31, 2025 | |||||||||||
Amount | Percent | ||||||||||
| (in millions) | |||||||||||
U.S. Federal Statutory Tax Rate | $ | 55.9 | 21.0 | % | |||||||
Domestic Federal | |||||||||||
Cross-Border Tax Laws | |||||||||||
| Other | 0.9 | 0.3 | % | ||||||||
Tax Credits | |||||||||||
Research Credits | (1.6) | (0.6) | % | ||||||||
Changes in valuation allowances | 1.1 | 0.4 | % | ||||||||
Other | (1.8) | (0.7) | % | ||||||||
State and Local Income Taxes, Net of Federal Income Tax Effect(1) | 3.3 | 1.3 | % | ||||||||
Foreign Tax Effects | |||||||||||
India | |||||||||||
| Equity in Earnings - Joint Ventures | (4.4) | (1.7) | % | ||||||||
| Withholding Taxes | 2.9 | 1.1 | % | ||||||||
| Other | (0.1) | — | % | ||||||||
| South Africa | |||||||||||
| Changes in valuation allowances | (3.1) | (1.2) | % | ||||||||
| Other | (0.5) | (0.2) | % | ||||||||
| Other foreign jurisdictions | 5.8 | 2.3 | % | ||||||||
Worldwide changes in unrecognized tax benefits | 0.4 | 0.1 | % | ||||||||
Effective Tax Rate | $ | 58.8 | 22.1 | % | |||||||
(1)The states that contribute to the majority (greater than 50%) of the tax effect in this category include California, Illinois, Indiana, Kentucky, Pennsylvania, and Tennessee.
A reconciliation of the statutory U.S. federal income tax rate to the effective tax rate for the periods before the adoption of the ASU 2023-09 was as follows:
| Years ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Statutory U.S. federal income tax rate | 21.0 | % | 21.0 | % | |||||||
| State income tax, net of federal effect | 1.3 | % | 1.4 | % | |||||||
| Differences in rates and taxability of foreign subsidiaries and joint ventures | (0.7) | % | 3.9 | % | |||||||
| Research tax credits | (1.1) | % | (1.3) | % | |||||||
| Foreign derived intangible income | (1.3) | % | (1.7) | % | |||||||
| Valuation allowance | 2.0 | % | — | % | |||||||
| Uncertain tax positions | 0.1 | % | 0.1 | % | |||||||
| Other, net | (0.3) | % | 0.9 | % | |||||||
| Effective tax rate | 21.0 | % | 24.3 | % | |||||||
Our effective tax rate for 2025 was 22.1%, compared to 21.0% for 2024 and 24.3% for 2023. The increase in the effective tax rate from 2024 to 2025 was driven by unfavorable changes in the mix of earnings and lower U.S. credits and incentives following cash tax planning around recent U.S. tax law changes, partially offset by a valuation allowance release on foreign deferred tax assets.
At December 31, 2025, $181.3 million of non-U.S. earnings are considered indefinitely reinvested in operations outside the U.S. for which deferred taxes have not been provided. Determination of the related deferred tax liability, if any, is not practicable because of the complexities associated with the hypothetical calculation.
Carryforward tax benefits and the tax effect of temporary differences between financial and tax reporting that give rise to net deferred tax assets (liabilities) were as follows:
| December 31, | ||||||||||||||
| In millions | 2025 | 2024 | ||||||||||||
Deferred tax assets | ||||||||||||||
Employee benefit plans | $ | 9.9 | $ | 8.2 | ||||||||||
| Foreign carryforward benefits | 9.7 | 8.6 | ||||||||||||
| Accrued expenses | 10.0 | 10.8 | ||||||||||||
| Warranty expenses | 2.7 | 3.1 | ||||||||||||
| Lease liabilities | 10.3 | 10.8 | ||||||||||||
| Research and development capitalization | 2.4 | 19.2 | ||||||||||||
| Other | 4.1 | 3.0 | ||||||||||||
| Gross deferred tax assets | 49.1 | 63.7 | ||||||||||||
| Valuation allowance | (6.7) | (8.5) | ||||||||||||
| Total deferred tax assets | 42.4 | 55.2 | ||||||||||||
| Deferred tax liabilities | ||||||||||||||
| Property, plant and equipment | 14.1 | 11.6 | ||||||||||||
| Unremitted income of foreign subsidiaries and joint ventures | 17.0 | 16.2 | ||||||||||||
| Lease assets | 9.8 | 9.8 | ||||||||||||
| Other | 0.6 | 0.7 | ||||||||||||
| Total deferred tax liabilities | 41.5 | 38.3 | ||||||||||||
| Net deferred tax assets | $ | 0.9 | $ | 16.9 | ||||||||||
Our foreign carryforward benefits as of December 31, 2025 may be carried forward indefinitely, subject to certain utilization limitations.
A valuation allowance is recorded to reduce the gross deferred tax assets to an amount we believe is more likely than not to be realized. The valuation allowance is primarily attributable to the uncertainty regarding the realization of foreign net operating loss, foreign currency loss and foreign tax credits.
A reconciliation of the valuation allowance for the years ended December 31, 2025, 2024 and 2023 was as follows:
| Years ended December 31, | ||||||||||||||||||||
| In millions | 2025 | 2024 | 2023 | |||||||||||||||||
| Balance at beginning of year | $ | 8.5 | $ | 3.7 | $ | 16.4 | ||||||||||||||
| Additions charged to tax expense | 2.8 | 5.4 | 0.1 | |||||||||||||||||
| Valuation allowance reversal | (4.6) | (0.6) | — | |||||||||||||||||
Other(1) | — | — | (12.8) | |||||||||||||||||
| Balance at end of year | $ | 6.7 | $ | 8.5 | $ | 3.7 | ||||||||||||||
(1)Pursuant to the Separation Agreement, includes certain assets and liabilities, including deferred tax assets, and corresponding valuation allowances which were retained by Cummins and includes the impact of currency changes and the expiration of net operating losses for which a full valuation allowance was recorded.
Our Consolidated Balance Sheets contain the following tax related items:
| December 31, | ||||||||||||||
| In millions | 2025 | 2024 | ||||||||||||
| Prepaid expenses and other current assets | ||||||||||||||
| Refundable income taxes | $ | 20.5 | $ | 14.2 | ||||||||||
| Other assets | ||||||||||||||
| Deferred income tax assets | $ | 14.0 | $ | 18.5 | ||||||||||
| Other accrued expenses | ||||||||||||||
| Income tax payable | $ | 9.4 | $ | 6.8 | ||||||||||
| Other liabilities | ||||||||||||||
| Deferred income tax liabilities | $ | 13.1 | $ | 1.4 | ||||||||||
A reconciliation of unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023 was as follows:
| December 31, | ||||||||||||||||||||
| In millions | 2025 | 2024 | 2023 | |||||||||||||||||
| Balance at beginning of year | $ | 0.4 | $ | 0.2 | $ | 22.2 | ||||||||||||||
| Additions to current year tax positions | 0.4 | 0.2 | 0.2 | |||||||||||||||||
Reductions to prior years’ tax positions(1) | — | — | (22.2) | |||||||||||||||||
| Balance at end of year | $ | 0.8 | $ | 0.4 | $ | 0.2 | ||||||||||||||
(1)Pursuant to the Separation Agreement, includes certain assets and liabilities, including contingency reserves which were retained by Cummins
The total amount of unrecognized tax benefits in 2025, 2024 and 2023, if recognized, would favorably impact the effective tax rate in future periods.
We have accrued interest expense related to the unrecognized tax benefits of $0.1 million, $0 million and $0 million as of December 31, 2025, 2024 and 2023, respectively. We recognize potential accrued interest and penalties related to unrecognized tax benefits in income tax expense.
Audit outcomes and the timing of audit settlements are subject to significant uncertainty. Although we believe that adequate provision has been made for such issues, there is the possibility that the ultimate resolution of such issues could have an adverse effect on our earnings. Conversely, if these issues are resolved favorably in the future, the related provision would be reduced, thus having a positive impact on earnings.
As a result of our global operations, we file income tax returns in various jurisdictions including U.S. federal, state and foreign jurisdictions. We are routinely subject to examination by taxing authorities throughout the world, including Australia, Belgium, Brazil, Canada, China, France, India, Mexico, the U.K. and the U.S. With few exceptions, our U.S. federal, major state and foreign jurisdictions are no longer subject to income tax assessments for years before 2020.
Total income taxes paid were as follows:
| In millions | Year ended December 31, 2025 | |||||||
| U.S. federal | $ | 3.4 | ||||||
| Total state taxes paid | 5.1 | |||||||
| Foreign | ||||||||
| Australia | $ | 4.5 | ||||||
| Belgium | 5.5 | |||||||
| Brazil | 2.7 | |||||||
| China | 6.0 | |||||||
| India | 3.5 | |||||||
| Korea | 4.0 | |||||||
| Mexico | 5.5 | |||||||
| Other | 2.9 | |||||||
| Total foreign taxes paid | $ | 34.6 | ||||||
| Total income taxes paid | $ | 43.1 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 14, 2024 | |
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.