Babcock & Wilcox Enterprises, Inc.BW
Babcock & Wilcox Enterprises, Inc. Income Taxes Disclosure
INCOME TAXES
Loss from continuing operations before income tax expense is comprised of the following:
| Year ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| United States | $ | (484,927) | $ | (101,182) | $ | (108,484) | |||||||||||
| Other than the United States | 460,359 | 9,711 | 4,876 | ||||||||||||||
Loss from continuing operations before income tax expense | $ | (24,568) | $ | (91,471) | $ | (103,608) | |||||||||||
Significant components of the provision for income taxes from continuing operations are as follows:
| Year ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 111 | $ | (739) | $ | 383 | |||||||||||
| State | 116 | (298) | 540 | ||||||||||||||
| Foreign | 8,316 | 7,505 | 5,025 | ||||||||||||||
| Total current provision | 8,543 | 6,468 | 5,948 | ||||||||||||||
| Deferred: | |||||||||||||||||
Federal | 126 | 3,346 | 132 | ||||||||||||||
State | — | 2,900 | (70) | ||||||||||||||
| Foreign | (389) | 87 | (406) | ||||||||||||||
| Total deferred provision | (263) | 6,333 | (344) | ||||||||||||||
| Provision for income taxes | $ | 8,280 | $ | 12,801 | $ | 5,604 | |||||||||||
The provision for income taxes attributable to continuing operations differs from the amount computed by applying the statutory federal income tax rate to income (loss) before the provision (benefit) for income taxes.
The sources and tax effects of the differences are as follows:
(in thousands, except for percentages) | Year ended December 31, 2025 | ||||||||||
| U.S. Federal Statutory Tax Rate | $ | (5,159) | 21 | % | |||||||
State and Local Income Taxes, Net of Federal Income Tax Effect (1) | 92 | — | % | ||||||||
| Foreign Tax Effects | |||||||||||
| Canada | |||||||||||
| Statutory tax rate difference | (1,067) | 4 | % | ||||||||
| Provincial tax | 2,763 | (11) | % | ||||||||
| Prior period adjustment | (773) | 3 | % | ||||||||
Other | 632 | (3) | % | ||||||||
| Luxembourg | |||||||||||
| Statutory tax rate difference | 14,179 | (58) | % | ||||||||
| Nontaxable income | (104,965) | 427 | % | ||||||||
| Taxable gain from sale of subsidiary | 36,211 | (147) | % | ||||||||
Change in valuation allowance | (204,133) | 831 | % | ||||||||
Write-off of net operating losses | 155,012 | (631) | % | ||||||||
| Other | (4) | — | % | ||||||||
| Panama | |||||||||||
| Statutory tax rate difference | (2,204) | 9 | % | ||||||||
| Nondeductible bad debt expense | 14,229 | (58) | % | ||||||||
| Other nontaxable items | (456) | 2 | % | ||||||||
| Indonesia | |||||||||||
| Withholding Tax | 592 | (2) | % | ||||||||
| Other | 289 | (1) | % | ||||||||
| Other Foreign Jurisdiction | |||||||||||
| Other | 1,831 | (8) | % | ||||||||
| Effect of Cross-Border Tax Laws | |||||||||||
| Subpart F | 1,344 | (5) | % | ||||||||
| Other | (160) | — | % | ||||||||
| Effect of Changes in Tax Laws or Rates Enacted in the Current Period | — | — | % | ||||||||
| Nontaxable or Nondeductible Items | |||||||||||
| IRC Section 162(m) limitation | 821 | (3) | % | ||||||||
| Stock-based compensation | 270 | (1) | % | ||||||||
| Meals and entertainment | 226 | (1) | % | ||||||||
| Parking lot expenses | 514 | (2) | % | ||||||||
| Loss on dissolution | (7,175) | 29 | % | ||||||||
| Other | 8 | — | % | ||||||||
| Tax Credits | |||||||||||
Research and development credit | (601) | 2 | % | ||||||||
| Foreign tax credit | 1,826 | (7) | % | ||||||||
| Changes in Valuation Allowances | 104,540 | (426) | % | ||||||||
| Changes in Unrecognized Tax Benefits | — | — | % | ||||||||
| Other Adjustments | |||||||||||
| Prior period adjustments | (519) | 2 | % | ||||||||
Other | 117 | — | % | ||||||||
Income tax expense | $ | 8,280 | (34) | % | |||||||
(1) State and local taxes in Tennessee, Louisiana, Kentucky and California comprise the majority of this category.
| Year ended December 31, | |||||||||||
| (in thousands) | 2024 | 2023 | |||||||||
| Income tax benefit at federal statutory rate | $ | (19,209) | $ | (21,758) | |||||||
| State and local income taxes | 2,557 | 105 | |||||||||
| Foreign rate differential | 533 | 284 | |||||||||
| Non-deductible (non-taxable) items | (344) | 860 | |||||||||
| Tax credits | (37) | 514 | |||||||||
| Valuation allowances | 17,529 | 19,558 | |||||||||
| Unrecognized tax benefits | — | 278 | |||||||||
| Withholding taxes | 999 | 826 | |||||||||
| Change in indefinite reinvestment assertion | 2,432 | — | |||||||||
| Return to provision and prior year true-up | 6,304 | 4,360 | |||||||||
| Other | 2,037 | 577 | |||||||||
| Income tax expense | $ | 12,801 | $ | 5,604 | |||||||
Deferred income taxes reflect the tax effects of differences between the financial and tax bases of assets and liabilities.
Significant components of deferred tax assets and liabilities are as follows:
| Year ended December 31, | |||||||||||
| (in thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Pension liability | $ | 41,469 | $ | 45,581 | |||||||
| Accruals | 6,445 | 8,058 | |||||||||
| Long-term contracts | 896 | 2,636 | |||||||||
| Net operating loss carryforward | 237,164 | 354,656 | |||||||||
| State net operating loss carryforward | 34,425 | 21,945 | |||||||||
Capital loss carryforward | 9,740 | — | |||||||||
| Interest limitation carryforward | 64,864 | 63,670 | |||||||||
| Foreign tax credit carryforward | — | 1,826 | |||||||||
| Other tax credits | 2,894 | 2,292 | |||||||||
| Lease liability | 11,167 | 15,437 | |||||||||
| Capitalized R&D | 1,835 | 2,299 | |||||||||
| Property, plant and equipment | 1,044 | 1,036 | |||||||||
| Other | 12,667 | 4,707 | |||||||||
| Total deferred tax assets | 424,610 | 524,143 | |||||||||
| Valuation allowance for deferred tax assets | (406,931) | (499,749) | |||||||||
| Total deferred tax assets, net | 17,679 | 24,394 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Pension liability | — | (815) | |||||||||
| Property, plant and equipment | (1,081) | (1,238) | |||||||||
| Right-of-use assets | (12,436) | (16,262) | |||||||||
| Unremitted earnings | (4,118) | (3,943) | |||||||||
| Intangibles | (7,725) | (11,534) | |||||||||
| Other | (2,040) | (235) | |||||||||
| Total deferred tax liabilities | (27,400) | (34,027) | |||||||||
| Net deferred tax liabilities | $ | (9,721) | $ | (9,633) | |||||||
At December 31, 2025 we have foreign NOL carryforward DTAs of approximately $101.4 million available to offset future taxable income in certain foreign jurisdictions. These foreign NOL carryforwards do not expire.
At December 31, 2025, we have U.S. federal NOL carryforward DTAs of approximately $135.8 million. Of this amount, $18.1 million will expire in 2036 and 2037. The remaining amount of U.S. NOL carryforward does not expire. A portion of the net operating loss carryforward is limited under IRC Section 382. Approximately $109.7 million of our U.S. federal NOL carryforward is not subject to the IRC Section 382 limitation.
At December 31, 2025, we have state NOL carryforward DTAs of $34.4 million available to offset future taxable income in various jurisdictions. Of this amount, $21.1 million will expire between 2026 and 2045.
At December 31, 2025, we have U.S. general business and R&D tax credit DTAs of approximately $2.9 million available to offset future taxable income which will begin to expire in 2034.
At December 31, 2025, we have valuation allowances of $406.9 million for deferred tax assets, which we expect will not be realized through carry-backs, reversals of existing taxable temporary differences, estimates of future taxable income or tax-planning strategies. Deferred tax assets are evaluated for realizability under ASC 740, considering all positive and negative evidence. At December 31, 2025, our weighting of positive and negative evidence included an assessment of historical income by jurisdiction adjusted for nonrecurring items, as well as an evaluation of other qualitative factors such as the length
and magnitude of pretax losses. The valuation allowances may be reversed in the future if sufficient positive evidence exists. Any reversal of our valuation allowance could be material to the income or loss for the period in which our assessment changes.
The net change during the year in the total valuation allowance is as follows:
| Year ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of period | $ | (499,749) | $ | (535,256) | $ | (507,493) | |||||||||||
| Charges to costs and expenses | 104,125 | 30,513 | (25,166) | ||||||||||||||
| Charges to other accounts | (11,307) | 4,994 | (2,597) | ||||||||||||||
| Balance at end of period | $ | (406,931) | $ | (499,749) | $ | (535,256) | |||||||||||
Sections 382 and 383 of the IRC limits, for U.S. federal income tax purposes, the annual use of NOL carryforwards (including previously disallowed interest carryforwards) and tax credit carryforwards, respectively, following an ownership change. Under IRC Section 382, an ownership change occurs if shareholders owning at least 5% of our common stock have increased their collective holdings by more than 50% during the prior three-year period. Based on information that is publicly available, we determined that a Section 382 ownership change occurred in July 2019. As a result of this change in ownership, we estimated that the future utilization of our federal NOLs (and certain credits and previously disallowed interest deductions) will become limited to approximately $1.2 million annually ($0.3 million tax effected) We maintain a full valuation allowance on the majority of its U.S. deferred tax assets, including the deferred tax assets associated with the federal NOLs, credits and disallowed interest carryforwards.
Undistributed earnings of certain foreign subsidiaries amounted to approximately $127.4 million. We do not intend to assert indefinite reinvestment with respect to all of the undistributed earnings in foreign subsidiaries. We have recognized a deferred tax liability in the amount of $4.1 million.
We recognize the benefit of a tax position when we conclude that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination. A recognized tax benefit is measured as the largest amount of benefit, on a cumulative probability basis, which is more likely-than-not to be realized upon settlement. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
Below is a tabular roll-forward of the beginning and ending aggregate unrecognized tax benefits on a continuing operations basis:
| Year ended December 31, | |||||||||||||||||
| (in thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of period | $ | 34,866 | $ | 37,329 | $ | 36,196 | |||||||||||
| Increases based on tax positions taken in prior years | 9,740 | — | — | ||||||||||||||
| Decreases based on tax positions taken in prior years | — | — | (9) | ||||||||||||||
| Decreases due to lapse of applicable statute of limitation | — | (512) | — | ||||||||||||||
| Currency translation adjustments | 4,054 | (1,951) | 1,142 | ||||||||||||||
| Balance at end of period | $ | 48,660 | $ | 34,866 | $ | 37,329 | |||||||||||
Unrecognized tax benefits of $2.5 million would, if recognized, impact the effective tax rate. The remaining balance of unrecognized tax benefits relates to deferred tax assets that, if recognized, would require a full valuation allowance. We recognize interest and penalties related to unrecognized tax benefits in our provision for income taxes; however, such amounts are not significant to any period presented.
Tax years 2016 through 2024 remain open to assessment by the United States Internal Revenue Service and various state and international tax authorities. We are currently under audit in the Philippines for tax year 2023 and do not expect the outcome of the audit to have a material impact on the financial statements. We do not have any returns under examination in any other jurisdictions.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 31, 2025 | |
| 2023 | Mar 15, 2024 | |
| 2022 | Mar 16, 2023 | |
| 2021 | Mar 8, 2022 | |
| 2020 | Mar 8, 2021 | |
| 2019 | Mar 30, 2020 | |
| 2018 | Apr 2, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 25, 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.