CURTISS WRIGHT CORPCW
CURTISS WRIGHT CORP Income Taxes Disclosure
12. INCOME TAXES
In conjunction with the enactment of the 2017 Tax Cuts and Jobs Act ("TCJA"), the Corporation recorded provisional income tax expense of $18.2 million for the year ended December 31, 2017 related to the one-time transition tax on certain foreign earnings. The finalized transition tax of $23.6 million was to be paid over 8 years pursuant to the TCJA. The transition tax liability, which was $6.1 million as of December 31, 2024, was fully settled as of December 31, 2025.
On July 4, 2025, the U.S. signed into law H.R.1, also known as the One Big Beautiful Bill Act ("OBBBA"). The OBBBA extends various expiring tax provisions from the TCJA and introduces a variety of other substantial tax law changes. For the Corporation, the most significant impact relates to the immediate expensing of research and development expenditures. The enactment of OBBBA did not have a material impact on the effective tax rate of the Corporation.
As of December 31, 2025, the Corporation reassessed its assertion around whether foreign undistributed earnings should continue to no longer be considered permanently reinvested. The Corporation remains no longer permanently reinvested with the exception of three foreign subsidiaries. The Corporation has recorded a liability for withholding taxes that would arise upon distribution of the Corporation’s foreign undistributed earnings.
Except as noted above, the Corporation remains permanently reinvested to the extent of any outside basis differences in its foreign subsidiaries in excess of the amount of undistributed earnings, as it is not practicable to determine the provision impact, if any, due to the complexities associated with this calculation.
Earnings before income taxes for the years ended December 31 consists of:
| (In thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Domestic | $ | 368,512 | $ | 323,898 | $ | 300,200 | ||||||||||||||
| Foreign | 251,498 | 198,158 | 162,870 | |||||||||||||||||
| $ | 620,010 | $ | 522,056 | $ | 463,070 | |||||||||||||||
The provision for income taxes for the years ended December 31 consists of:
| (In thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | 58,205 | $ | 62,165 | $ | 58,629 | ||||||||||||||
| State | 17,411 | 18,272 | 13,098 | |||||||||||||||||
| Foreign | 50,309 | 43,200 | 36,791 | |||||||||||||||||
| Total current | 125,925 | 123,637 | 108,518 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | 11,381 | (5,507) | (180) | |||||||||||||||||
| State | (606) | 950 | 507 | |||||||||||||||||
| Foreign | (918) | (2,002) | (284) | |||||||||||||||||
| Total deferred | 9,857 | (6,559) | 43 | |||||||||||||||||
| Provision for income taxes | $ | 135,782 | $ | 117,078 | $ | 108,561 | ||||||||||||||
As noted in Note 1 to the Consolidated Financial Statements, the Company adopted ASU 2023-09 during the current period. As the update pertained solely to income tax disclosure improvements and did not require a change in accounting or retrospective restatement of previously issued financial statements, the Company has adopted the required changes prospectively. Upon adoption, the Company modified its approach for calculating estimated state income taxes, moving from a blended state income tax rate approach to applying a state-by-state calculation. The effects are reflected in the rate reconciliation table, including components of state taxation and other reconciling items in accordance with the requirements in the standard.
The effective tax rate varies from the U.S. federal statutory tax rate for the year ended December 31, 2025, principally:
$'s | %'s | |||||||||||||
| U.S. federal statutory tax rate | $ | 130,202 | 21.0 | % | ||||||||||
| Add (deduct): | ||||||||||||||
State and local taxes, net of federal benefit(1) | 14,414 | 2.3 | % | |||||||||||
Foreign earnings(2) | ||||||||||||||
| Canada | ||||||||||||||
Provincial taxes | 8,704 | 1.4 | % | |||||||||||
| Other | (1,769) | (0.3) | % | |||||||||||
Other foreign jurisdictions | 5,106 | 0.8 | % | |||||||||||
| Effect of Cross-border Tax Laws | ||||||||||||||
Foreign-Derived Deduction - Eligible Income ("FDDEI") | (8,052) | (1.3) | % | |||||||||||
Financing arrangement(3) | (10,453) | (1.7) | % | |||||||||||
| Other | 1,883 | 0.3 | % | |||||||||||
| R&D tax credits | (7,050) | (1.1) | % | |||||||||||
Nontaxable or nondeductible items | 2,407 | 0.4 | % | |||||||||||
Changes in unrecognized tax benefits | 390 | 0.1 | % | |||||||||||
| $ | 135,782 | 21.9 | % | |||||||||||
(1) State Taxes in Pennsylvania and Maryland contributed to the majority of the tax effect in this category.
(2) Foreign earnings primarily include the net impact of differences between local statutory rates and the U.S. Federal statutory rate, the cost of repatriating foreign earnings, and the impact of changes to foreign valuation allowances.
(3) In an effort to simplify its organizational structure and facilitate repatriation, the Corporation underwent a substantial internal reorganization of its foreign ownership structure in 2024 that included the establishment of financing arrangements.
The effective tax rate varies from the U.S. federal statutory tax rate for the years ended December 31, 2024 and 2023, principally:
| 2024 | 2023 | |||||||||||||
| U.S. federal statutory tax rate | 21.0 | % | 21.0 | % | ||||||||||
| Add (deduct): | ||||||||||||||
| State and local taxes, net of federal benefit | 3.0 | 2.3 | ||||||||||||
Foreign earnings | 1.1 | 1.3 | ||||||||||||
Financing arrangement | (1.0) | — | ||||||||||||
| R&D tax credits | (1.3) | (1.1) | ||||||||||||
| Foreign-derived intangible income | (1.4) | (1.2) | ||||||||||||
| All other, net | 1.0 | 1.1 | ||||||||||||
| Effective tax rate | 22.4 | % | 23.4 | % | ||||||||||
The components of the Corporation’s deferred tax assets and liabilities as of December 31 are as follows:
| (In thousands) | 2025 | 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Capitalized R&D expenses | $ | 52,527 | $ | 60,818 | ||||||||||
| Operating lease liabilities | 37,733 | 40,840 | ||||||||||||
| Inventories, net | 24,649 | 23,926 | ||||||||||||
| Incentive compensation | 12,402 | 11,011 | ||||||||||||
| Environmental reserves | 9,961 | 9,324 | ||||||||||||
| Net operating loss | 5,264 | 6,431 | ||||||||||||
| Other | 44,527 | 34,264 | ||||||||||||
| Total deferred tax assets | 187,063 | 186,614 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Goodwill amortization | 127,615 | 117,340 | ||||||||||||
| Other intangible amortization | 55,610 | 62,277 | ||||||||||||
| Pension and other postretirement assets | 53,468 | 46,828 | ||||||||||||
| Operating lease right-of-use assets, net | 35,005 | 38,741 | ||||||||||||
| Withholding taxes | 14,682 | 13,017 | ||||||||||||
| Depreciation | 18,507 | 14,880 | ||||||||||||
| Contract revenue recognition | 13,296 | 15,256 | ||||||||||||
| Other | 9,410 | 3,776 | ||||||||||||
| Total deferred tax liabilities | 327,593 | 312,115 | ||||||||||||
| Valuation allowance | 3,953 | 4,988 | ||||||||||||
| Net deferred tax liabilities | $ | 144,483 | $ | 130,489 | ||||||||||
Deferred tax assets and liabilities are reflected on the Corporation’s Consolidated Balance Sheets as of December 31 as follows:
| (In thousands) | 2025 | 2024 | ||||||||||||
Net noncurrent deferred tax assets(1) | $ | 9,519 | $ | 10,170 | ||||||||||
| Net noncurrent deferred tax liabilities | 154,002 | 140,659 | ||||||||||||
| Net deferred tax liabilities | $ | 144,483 | $ | 130,489 | ||||||||||
(1)Amount is classified within the "Other Assets" caption in the Corporation's Consolidated Balance Sheets as of December 31, 2025 and December 31, 2024, respectively.
The Corporation has income tax net operating loss carryforwards related to international operations of $15.9 million, all of which have an indefinite life. The Corporation has federal and state income tax net loss carryforwards of $21.3 million, all of which are net operating losses that expire through 2043. The Corporation has recorded a deferred tax asset of $5.3 million, reflecting the benefit of the loss carryforwards related to international and domestic operations.
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. As of December 31, 2025, the Corporation decreased its valuation allowance by $1.0 million to $4.0 million, in order to measure only the portion of deferred tax assets that more likely than not will be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as projections for growth.
The Corporation has recorded a liability in "Other liabilities" for interest of $5.6 million and penalties of $3.7 million as of December 31, 2025.
Income tax payments, net of refunds, of $134.3 million, $135.7 million, and $136.4 million were made in 2025, 2024, and 2023, respectively.
Income tax payments, net of refunds, by jurisdiction for the year ended December 31, 2025 were as follows:
| 2025 | ||||||||
Federal(1) | $ | 74,018 | ||||||
State | 15,990 | |||||||
Foreign | ||||||||
| Canada | ||||||||
| Federal | 10,029 | |||||||
| Ontario | 6,915 | |||||||
Other Canadian jurisdictions | 659 | |||||||
| United Kingdom | 13,621 | |||||||
Other Foreign jurisdictions | 13,046 | |||||||
| Total Foreign | 44,270 | |||||||
Total | $ | 134,278 | ||||||
(1) The immediate expensing of research and development expenditures under the OBBBA resulted in lower income tax payments in the current year.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| (In thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
| Balance as of January 1, | $ | 19,012 | $ | 17,888 | $ | 17,371 | ||||||||||||||
| Additions for tax positions of prior periods | 3,201 | 1,805 | 2,387 | |||||||||||||||||
| Reductions for tax positions of prior periods | (2,150) | (2,213) | (2,419) | |||||||||||||||||
| Additions for tax positions related to the current year | 948 | 1,747 | 1,744 | |||||||||||||||||
| Settlements | — | (215) | (1,195) | |||||||||||||||||
| Balance as of December 31, | $ | 21,011 | $ | 19,012 | $ | 17,888 | ||||||||||||||
In many cases, the Corporation’s uncertain tax positions are related to tax years that remain subject to examination by tax authorities.
The following describes the open tax years, by major tax jurisdiction, as of December 31, 2025:
| United States (Federal) | 2020 | - | present | ||||||||
| United States (Various states) | 2014 | - | present | ||||||||
| United Kingdom | 2023 | - | present | ||||||||
| Canada | 2020 | - | present | ||||||||
The Corporation does not expect any significant changes to the estimated amount of liability associated with its uncertain tax positions through the next twelve months. Included in total unrecognized tax benefits as of December 31, 2025, 2024, and 2023 is $18.2 million, $16.2 million, and $15.3 million, respectively, which if recognized, would favorably impact the effective income tax rate.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 21, 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.