AVIENT CORPAVNT
AVIENT CORP Income Taxes Disclosure
Note 11 — INCOME TAXES
Income (loss) from continuing operations, before income taxes consists of the following:
| (In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Domestic | $ | (112.9) | $ | (25.3) | $ | (2.7) | ||||||||||||||
| International | 224.6 | 250.1 | 90.0 | |||||||||||||||||
Income from continuing operations, before income taxes | $ | 111.7 | $ | 224.8 | $ | 87.3 | ||||||||||||||
A summary of income tax expense (benefit) from continuing operations is as follows:
| (In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Current income tax expense: | ||||||||||||||||||||
| Domestic | $ | 3.4 | $ | 7.5 | $ | 18.5 | ||||||||||||||
| International | 70.1 | 70.4 | 53.8 | |||||||||||||||||
| Total current income tax expense | $ | 73.5 | $ | 77.9 | $ | 72.3 | ||||||||||||||
| Deferred income tax benefit: | ||||||||||||||||||||
| Domestic | $ | (31.9) | $ | (11.4) | $ | (35.8) | ||||||||||||||
| International | (13.5) | (12.4) | (25.5) | |||||||||||||||||
| Total deferred income tax benefit | $ | (45.4) | $ | (23.8) | $ | (61.3) | ||||||||||||||
| Total income tax expense | $ | 28.1 | $ | 54.1 | $ | 11.0 | ||||||||||||||
A reconciliation of the applicable U.S. federal statutory tax rate to the consolidated effective income tax rate along with a description of significant reconciling items is included below for the year ended December 31, 2025.
| 2025 | ||||||||||||||
| (Dollars in millions) | Amount | Rate | ||||||||||||
| U.S. federal income tax rate | $ | 23.5 | 21.0 | % | ||||||||||
| Domestic: | ||||||||||||||
| Effects of cross border tax laws: | ||||||||||||||
| Global Intangible Low-taxed Income, net of credits | 3.6 | 3.2 | ||||||||||||
| Subpart F income, net of credits | (1.6) | (1.4) | ||||||||||||
| Withholding tax | 3.8 | 3.4 | ||||||||||||
| Tax credits: | ||||||||||||||
| Research & development credits | (3.9) | (3.5) | ||||||||||||
| Non-deductible executive compensation | 2.0 | 1.8 | ||||||||||||
| Domestic state & local income taxes, net of federal benefit (a) | (4.5) | (4.0) | ||||||||||||
| Foreign: | ||||||||||||||
| Luxembourg | ||||||||||||||
| Foreign rate differential | (1.8) | (1.6) | ||||||||||||
| Statutory impairment | (28.9) | (25.9) | ||||||||||||
| Intellectual property transfer | (18.1) | (16.2) | ||||||||||||
| Valuation allowance | 41.2 | 36.9 | ||||||||||||
| Withholding tax | 1.3 | 1.2 | ||||||||||||
| Other | 0.8 | 0.7 | ||||||||||||
| Cyprus | ||||||||||||||
| Foreign rate differential | (1.5) | (1.4) | ||||||||||||
| Intellectual property transfer | 6.0 | 5.4 | ||||||||||||
| Tax incentives | (2.0) | (1.8) | ||||||||||||
| Other | 1.0 | 0.9 | ||||||||||||
| Netherlands | ||||||||||||||
| Foreign rate differential | 2.9 | 2.6 | ||||||||||||
| Tax incentives | (5.5) | (4.9) | ||||||||||||
| Other | 0.7 | 0.6 | ||||||||||||
| Switzerland | ||||||||||||||
| Withholding tax | 4.1 | 3.6 | ||||||||||||
| Other | (0.8) | (0.7) | ||||||||||||
| China | ||||||||||||||
| Foreign rate differential | 1.6 | 1.4 | ||||||||||||
| Valuation allowance | (2.2) | (2.0) | ||||||||||||
| Other | 0.9 | 0.9 | ||||||||||||
| Germany | ||||||||||||||
| Valuation allowance | 3.0 | 2.6 | ||||||||||||
| Other | 0.3 | 0.4 | ||||||||||||
| Other foreign jurisdictions | 6.7 | 6.0 | ||||||||||||
| Worldwide changes in unrecognized tax benefits | (4.5) | (4.0) | ||||||||||||
| Total income tax expense | $ | 28.1 | 25.2 | % | ||||||||||
(a)California, Wisconsin, and Georgia make up the majority of the state & local income tax benefit.
In 2025, Luxembourg recognized a statutory impairment that gave rise to a $28.9 million tax benefit. Further, in 2025, the Company completed an intercompany transfer of intellectual property between entities in different tax jurisdictions resulting in a net tax benefit of $12.1 million. These benefits increased deferred tax assets in Luxembourg; however, based on an evaluation of available evidence, the Company determined that it is more likely than not that a portion of these deferred tax assets will not be fully realized. As a result, the Company recorded a valuation allowance of $41.2 million in Luxembourg.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective tax rate differs from the statutory tax rate as follows:
2024 | 2023 | |||||||||||||
| U.S. federal income tax rate | 21.0 | % | 21.0 | % | ||||||||||
| International tax rate differential: | ||||||||||||||
| Asia | 0.4 | 0.9 | ||||||||||||
| Europe | (0.8) | (5.2) | ||||||||||||
| North and South America | 2.1 | 4.5 | ||||||||||||
| Total international tax rate differential | 1.7 | 0.2 | ||||||||||||
| Net tax on GILTI and Subpart F Income | (0.5) | 2.2 | ||||||||||||
| International tax on certain current and prior year earnings | 1.6 | 3.9 | ||||||||||||
| Non-deductible interest | 0.4 | 5.3 | ||||||||||||
| Research and development credit | (1.7) | (3.7) | ||||||||||||
| Capital losses | — | (5.4) | ||||||||||||
| State and local tax, net | (0.7) | (2.3) | ||||||||||||
| International permanent items | 0.7 | (7.5) | ||||||||||||
| U.S. permanent items | 2.1 | 2.5 | ||||||||||||
| Net impact of uncertain tax positions | (1.1) | (5.3) | ||||||||||||
| Changes in valuation allowances | — | 3.6 | ||||||||||||
| Other | 0.6 | (1.9) | ||||||||||||
| Effective income tax rate | 24.1 | % | 12.6 | % | ||||||||||
In 2023, the tax rate included the recognition of tax benefits of 7.5% associated with tax impairments of investments in affiliates, driven in part from European restructuring actions. Further, we recognized a 5.4% tax benefit from federal and state capital losses associated with an international affiliate's tax status change in 2022. Finally, we recognized tax benefits from the reduction of uncertain tax positions as well as the U.S. R&D tax credit, which reduced the tax rate, 5.3% and 3.7%, respectively. Partially offsetting these benefits were non-deductible foreign interest, 5.3%, tax associated with foreign income repatriation, 3.9%, and an increase of our valuation allowance which impacted the rate 3.6%.
Components of our deferred tax assets (liabilities) as of December 31, 2025 and 2024 were as follows:
| (In millions) | 2025 | 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Employment costs | 21.3 | 22.0 | ||||||||||||
| Environmental accruals | 34.1 | 35.5 | ||||||||||||
| Net operating loss carryforwards | 96.9 | 60.8 | ||||||||||||
| Operating leases | 8.9 | 9.5 | ||||||||||||
| Research and development | 62.7 | 53.0 | ||||||||||||
| Capitalized and carryforward interest | 105.2 | 78.5 | ||||||||||||
| Financial derivatives | 73.7 | 4.5 | ||||||||||||
| Other | 26.5 | 32.7 | ||||||||||||
| Gross deferred tax assets | $ | 429.3 | $ | 296.5 | ||||||||||
| Valuation allowances | (76.3) | (30.3) | ||||||||||||
| Total deferred tax assets, net of valuation allowances | $ | 353.0 | $ | 266.2 | ||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Property, plant and equipment | $ | (100.4) | $ | (100.4) | ||||||||||
| Goodwill and intangibles | (325.7) | (318.5) | ||||||||||||
| Operating leases | (9.0) | (9.7) | ||||||||||||
| Other | (8.9) | (16.7) | ||||||||||||
| Total deferred tax liabilities | $ | (444.0) | $ | (445.3) | ||||||||||
| Net deferred tax liabilities | $ | (91.0) | $ | (179.1) | ||||||||||
| Consolidated Balance Sheets: | ||||||||||||||
| Non-current deferred income tax assets | $ | 194.7 | $ | 81.3 | ||||||||||
| Non-current deferred income tax liabilities | $ | (285.7) | $ | (260.4) | ||||||||||
As of December 31, 2025, we had gross state net operating loss carryforwards of $68.1 million that expire between 2026 and 2044 or that have indefinite carryforward periods. Various international subsidiaries have gross net operating loss carryforwards totaling $357.4 million that expire between 2026 and 2042 or that have indefinite carryforward periods.
As of December 31, 2025, no tax provision has been made relating to undistributed earnings of certain non-U.S. subsidiaries, as these amounts continue to be indefinitely reinvested, consistent with our policy. The cash that is permanently reinvested is typically used for operations. It is not practical to estimate the additional income taxes and applicable withholding taxes that would be payable upon the remittance of such undistributed earnings. Taxes on certain foreign earnings as of December 31, 2025 and 2024 included in the Other deferred tax liabilities line in the table above are $10.0 million and $9.7 million, respectively.
In accordance with the updated requirements of ASU 2023-09 for the year ended December 31, 2025, cash paid for income taxes was as follows:
| (In millions) | 2025 | |||||||
| Income taxes paid, net of refunds: | ||||||||
| U.S. Federal | $ | 4.2 | ||||||
| U.S. State | (0.7) | |||||||
| Brazil | 4.6 | |||||||
| China | 8.8 | |||||||
| Italy | 4.3 | |||||||
| Mexico | 7.5 | |||||||
| Netherlands | 5.5 | |||||||
| Switzerland | 4.2 | |||||||
| Other International | 27.4 | |||||||
| Total income taxes paid, net of refunds | $ | 65.8 | ||||||
For the years ended December 31, 2024 and 2023, income taxes paid, net of refunds, were $65.9 million and $151.2 million, respectively.
A reconciliation of unrecognized tax benefits is as follows:
| Unrecognized Tax Benefits | ||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Balance as of January 1, | $ | 13.6 | $ | 16.9 | $ | 25.4 | ||||||||||||||
| Increases as a result of positions taken during current year | 0.9 | 0.3 | 1.9 | |||||||||||||||||
| Increases as a result of positions taken for prior years | 0.6 | 0.7 | 0.4 | |||||||||||||||||
| Reductions for tax positions of prior years | — | (0.6) | (10.7) | |||||||||||||||||
| Decreases as a result of lapse of statute of limitations | (5.8) | (3.2) | (0.6) | |||||||||||||||||
| Other, net | 0.5 | (0.5) | 0.5 | |||||||||||||||||
| Balance as of December 31, | $ | 9.8 | $ | 13.6 | $ | 16.9 | ||||||||||||||
We recognize interest and penalties related to uncertain tax positions in the tax provision. We had $2.2 million and $2.5 million accrued as of December 31, 2025 and 2024, respectively.
If all unrecognized tax benefits were recognized, the net impact on the tax provision would be a benefit of $9.8 million.
In December 2024, Avient received a Notice of Deficiency (Notice) from the U.S. Internal Revenue Service (IRS) proposing an adjustment to the 2019 tax year resulting from a disallowed capital loss. The proposed incremental tax associated with the Notice is $23.8 million plus estimated interest of $7.3 million. We contested the Notice by filing a petition in U.S. Tax Court on March 4, 2025. The IRS' answer to Avient's petition included an additional accuracy-related penalty of $4.8 million and is subject to interest. The Company believes that the proposed penalty is also without merit, and we intend to contest the penalty vigorously in U.S. Tax Court. However, there can be no assurance this dispute with the IRS will be resolved favorably. As of December 31, 2025, the Company has not recorded any income tax provision related to this matter; therefore an unfavorable ruling or settlement in U.S. Tax Court would adversely impact our effective tax rate and result in a cash tax payment.
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 22, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 19, 2020 | |
| 2018 | Feb 19, 2019 | |
| 2017 | Feb 15, 2018 | |
| 2016 | Feb 16, 2017 | |
| 2015 | Feb 12, 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.