BWX Technologies, Inc.BWXT
BWX Technologies, Inc. Income Taxes Disclosure
INCOME TAXES
We are subject to federal income tax in the U.S., Canada, and various other jurisdictions., as well as income tax within multiple U.S. state jurisdictions. We provide for income taxes based on the enacted tax laws and rates in the jurisdictions in which we conduct our operations. These jurisdictions may have regimes of taxation that vary with respect to nominal rates and with respect to the basis on which these rates are applied. This variation, along with the changes in our mix of income within these jurisdictions, can contribute to shifts in our effective tax rate from period to period.
We are currently under audit by various state and international authorities. We do not have any returns under examination for years prior to 2020.
Certain jurisdictions now implement the Organization for Economic Cooperation and Development's (OECD) Pillar Two rules regarding a global minimum tax. As of December 31, 2025, these new rules have not impacted our provision for income taxes.
We apply the provisions of FASB Topic Income Taxes regarding the treatment of uncertain tax positions. A reconciliation of unrecognized tax benefits (exclusive of interest and federal and state benefits) is as follows:
| Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (In thousands) | ||||||||||||||
Balance at beginning of period (1) | $ | 21,148 | $ | — | ||||||||||
| Increases based on tax positions taken in the current year | 1,920 | 2,121 | ||||||||||||
| Increases based on tax positions taken in prior years | — | 19,027 | ||||||||||||
| Decreases based on tax positions taken in prior years | (8,005) | — | ||||||||||||
| Decreases due to settlements with tax authorities | — | — | ||||||||||||
| Decreases due to lapse of applicable statute of limitation | — | — | ||||||||||||
| Other, net | — | — | ||||||||||||
| Balance at end of period | $ | 15,063 | $ | 21,148 | ||||||||||
The unrecognized tax benefits balance of $15.1 million at December 31, 2025 would reduce our effective tax rate if recognized.
Deferred income taxes reflect the net tax effects of temporary differences between the financial and tax bases of assets and liabilities. Significant components of deferred tax assets and liabilities as of December 31, 2025 and 2024 were as follows:
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| (In thousands) | ||||||||||||||
| Deferred tax assets: | ||||||||||||||
| Pension liability | $ | 16,616 | $ | 17,359 | ||||||||||
| Accrued warranty expense | 1,829 | 1,570 | ||||||||||||
| Capitalized Section 174 expenditures | 57,870 | 64,775 | ||||||||||||
| Accrued vacation pay | 2,721 | 2,434 | ||||||||||||
| Accrued liabilities for executive and employee incentive compensation | 22,834 | 18,736 | ||||||||||||
| Environmental and products liabilities | 21,220 | 20,945 | ||||||||||||
| Lease liabilities | 5,136 | 5,055 | ||||||||||||
| Investments in joint ventures and affiliated companies | 3,065 | 2,746 | ||||||||||||
| Convertible debt premium | 34,275 | — | ||||||||||||
| U.S. federal tax credits and loss carryforward | 3,399 | 3,071 | ||||||||||||
| U.S. state tax credits and loss carryforward | 11,545 | 10,119 | ||||||||||||
| Foreign tax credit and loss carryforward | 19,820 | 23,394 | ||||||||||||
| Other | 1,145 | 1,692 | ||||||||||||
| Gross deferred tax assets | 201,475 | 171,896 | ||||||||||||
| Valuation allowance for deferred tax assets | (14,939) | (17,039) | ||||||||||||
| Total deferred tax assets | 186,536 | 154,857 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Property, plant and equipment | 105,046 | 88,090 | ||||||||||||
| Long-term contracts | 24,937 | 54,714 | ||||||||||||
| Right-of-use lease assets | 10,947 | 10,590 | ||||||||||||
| Accrued liabilities for self-insurance (including postretirement health care benefits) | 502 | 826 | ||||||||||||
| Intangibles | 58,033 | 19,589 | ||||||||||||
| Total deferred tax liabilities | 199,465 | 173,809 | ||||||||||||
| Net deferred tax liabilities | $ | (12,929) | $ | (18,952) | ||||||||||
The components of Income before Provision for Income Taxes were as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| U.S. | $ | 295,117 | $ | 301,018 | $ | 282,459 | ||||||||||||||
| Other than U.S. | 103,003 | 47,702 | 38,941 | |||||||||||||||||
| Income before Provision for Income Taxes | $ | 398,120 | $ | 348,720 | $ | 321,400 | ||||||||||||||
The components of Provision for Income Taxes were as follows:
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| (In thousands) | ||||||||||||||||||||
| Current: | ||||||||||||||||||||
| U.S. – federal | $ | 40,026 | $ | 36,553 | $ | 69,254 | ||||||||||||||
| U.S. – state and local | 2,683 | 2,005 | 4,255 | |||||||||||||||||
| Other than U.S. | 10,408 | 8,019 | 6,698 | |||||||||||||||||
| Total current | 53,117 | 46,577 | 80,207 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| U.S. – federal | 8,789 | 15,439 | (8,968) | |||||||||||||||||
| U.S. – state and local | (122) | 2,648 | (376) | |||||||||||||||||
| Other than U.S. | 6,475 | 1,758 | 4,216 | |||||||||||||||||
| Total deferred | 15,142 | 19,845 | (5,128) | |||||||||||||||||
| Provision for Income Taxes | $ | 68,259 | $ | 66,422 | $ | 75,079 | ||||||||||||||
The following is a reconciliation of our income tax provision from the U.S. statutory federal tax rate to our consolidated effective tax rate for the year ended December 31, 2025, updated to reflect the adoption of ASU 2023-09:
| Year Ended December 31, | ||||||||||||||
| 2025 | ||||||||||||||
| (In thousands) | ||||||||||||||
| Income before provision for income taxes | $ | 398,120 | ||||||||||||
| U.S. federal statutory tax rate | 83,605 | 21.0 | % | |||||||||||
State and local income taxes, net of Federal income tax effects (1) | 2,561 | 0.6 | % | |||||||||||
| Foreign tax effects | ||||||||||||||
| Canada - capital loss realization | (3,654) | (0.9) | % | |||||||||||
| Other | (943) | (0.2) | % | |||||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | % | |||||||||||
| Effect of cross-border tax laws | 2,574 | 0.6 | % | |||||||||||
| Tax credits | ||||||||||||||
| U.S. research and development tax credit | (5,761) | (1.4) | % | |||||||||||
| Nontaxable or nondeductible items | (1,051) | (0.3) | % | |||||||||||
| Changes in unrecognized tax benefits | (7,934) | (2.0) | % | |||||||||||
| Other adjustments | (1,138) | (0.3) | % | |||||||||||
| Effective tax rate | $ | 68,259 | 17.1 | % | ||||||||||
(1)State taxes in Virginia, Tennessee, Ohio, California and New Mexico made up greater than 50% of the tax effect in this category.
The following is a reconciliation of our income tax provision from the U.S. statutory federal tax rate to our consolidated effective tax rate as previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09:
| Year Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| U.S. federal statutory tax rate | 21.0 | % | 21.0 | % | ||||||||||
| State and local income taxes | 1.3 | % | 1.2 | % | ||||||||||
| Research and development tax credit | (4.0) | % | — | % | ||||||||||
| Excess tax deductions on equity compensation | (0.5) | % | (0.3) | % | ||||||||||
| Other, net | 1.2 | % | 1.5 | % | ||||||||||
| Effective tax rate | 19.0 | % | 23.4 | % | ||||||||||
The effective tax rate benefit related to research and development tax credits is presented net of reserves for uncertain tax positions and includes credits corresponding to current year activities, as well as credits corresponding to activities in the prior reporting period.
The amounts of cash taxes paid by the Company are as follows:
| Year Ended December 31, | 2025 | ||||
| U.S. – federal | $ | 30,359 | |||
| U.S. – state | 3,805 | ||||
| Canada | 13,618 | ||||
| Other | 110 | ||||
| Income taxes, net of amounts refunded | $ | 47,892 | |||
At December 31, 2025, we had a valuation allowance of $14.9 million for deferred tax assets, which we expect cannot be realized through carrybacks, future reversals of existing taxable temporary differences and our estimate of future taxable income. We believe that our remaining deferred tax assets are more likely than not realizable through carrybacks, future reversals of existing taxable temporary differences, our estimate of future taxable income and potential tax planning. Any changes to our estimated valuation allowance could be material to our consolidated financial statements.
The following is an analysis of our valuation allowance for deferred tax assets:
| Beginning Balance | Charges To Costs and Expenses | Charged To Other Accounts | Ending Balance | |||||||||||||||||||||||
| (In thousands) | ||||||||||||||||||||||||||
| Year Ended December 31, 2025 | $ | (17,039) | $ | 5,498 | $ | (3,398) | $ | (14,939) | ||||||||||||||||||
| Year Ended December 31, 2024 | $ | (17,421) | $ | 382 | $ | — | $ | (17,039) | ||||||||||||||||||
| Year Ended December 31, 2023 | $ | (13,022) | $ | (4,399) | $ | — | $ | (17,421) | ||||||||||||||||||
We have federal net operating losses of $3.4 million available to offset future taxable income. The federal net operating losses have an indefinite carryforward period. We are carrying a full valuation allowance of $3.4 million against the deferred tax asset related to these federal net operating loss carryforwards.
We have state credits and state net operating losses of $14.6 million ($11.5 million net of federal tax benefit) available to offset future taxable income in various states. These state net operating loss carryforwards begin to expire in 2026. We are carrying a full valuation allowance of $14.6 million ($11.5 million net of federal tax benefit) against the deferred tax asset related to the state credits and state loss carryforwards.
We would be subject to withholding taxes if we were to distribute earnings from certain foreign subsidiaries. All of our foreign earnings are considered indefinitely reinvested. Determination of the amount of unrecognized deferred taxes related to these undistributed earnings is not practicable.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 22, 2021 | |
| 2019 | Feb 24, 2020 | |
| 2018 | Feb 25, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 27, 2017 | |
| 2015 | Feb 24, 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.