DARLING INGREDIENTS INC.DAR
DARLING INGREDIENTS INC. Income Taxes Disclosure
INCOME TAXES
U.S. and foreign income before income taxes are as follows (in thousands):
| January 3, 2026 | December 28, 2024 | December 30, 2023 | |||||||||||||||
| United States | $ | (165,040) | $ | (17,062) | $ | 399,378 | |||||||||||
| Foreign | 226,066 | 264,570 | 320,579 | ||||||||||||||
| Income before income taxes | $ | 61,026 | $ | 247,508 | $ | 719,957 | |||||||||||
Income tax expense/(benefit) attributable to income before income taxes consists of the following (in thousands):
| January 3, 2026 | December 28, 2024 | December 30, 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (213) | $ | 287 | $ | 1,574 | |||||||||||
| State | 1,875 | 1,956 | 1,336 | ||||||||||||||
| Foreign | 92,154 | 81,704 | 104,997 | ||||||||||||||
| Total current | 93,816 | 83,947 | 107,907 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (86,252) | (121,872) | (22,868) | ||||||||||||||
| State | (5,846) | (1,643) | (28,511) | ||||||||||||||
| Foreign | (11,077) | 1,231 | 3,040 | ||||||||||||||
| Total deferred | (103,175) | (122,284) | (48,339) | ||||||||||||||
| $ | (9,359) | $ | (38,337) | $ | 59,568 | ||||||||||||
As further described in Note 26, New Accounting Pronouncements, the Company has elected to prospectively adopt the guidance in Accounting Standard Update (“ASU”) No. 2023-09, Income Taxes (Topic 740) Improvements to Income Tax Disclosures, or ASU 2023-09. The following table is a reconciliation of the U.S. federal statutory rate to the Company’s effective rate in accordance with the guidance in ASU No. 2023-09 (in thousands, except percentages):
| January 3, 2026 | |||||||||||
| Amount | Percent | ||||||||||
| U.S. federal statutory tax rate | $ | 12,816 | 21.0 | % | |||||||
| State and local income taxes, net of federal effect (1) | (3,640) | (6.0) | % | ||||||||
| Foreign tax effects | |||||||||||
| Belgium | 2,120 | 3.5 | % | ||||||||
| Brazil | |||||||||||
| Non-taxable change in contingent payment liability | 6,115 | 10.0 | % | ||||||||
| Deductible outside basis difference | (12,720) | (20.8) | % | ||||||||
| Withholding taxes | 15,397 | 25.2 | % | ||||||||
| Change in tax law | 12,703 | 20.8 | % | ||||||||
| Changes in valuation allowance | 11,764 | 19.3 | % | ||||||||
| Other | (2,046) | (3.3) | % | ||||||||
| Canada | |||||||||||
| Statutory rate differential | (3,400) | (5.6) | % | ||||||||
| Provincial income taxes | 6,476 | 10.6 | % | ||||||||
| Deferred tax on unremitted foreign earnings | 2,162 | 3.5 | % | ||||||||
| Other | (76) | (0.1) | % | ||||||||
| Germany | |||||||||||
| Local income taxes | 3,674 | 6.0 | % | ||||||||
| Other | (2,003) | (3.3) | % | ||||||||
| Netherlands | |||||||||||
| Statutory rate differential | 2,625 | 4.3 | % | ||||||||
| Tax credits – withholding taxes | (15,838) | (25.9) | % | ||||||||
| Tax credits – Brazil tax sparing | (5,088) | (8.3) | % | ||||||||
| Nondeductible goodwill impairment | 4,159 | 6.8 | % | ||||||||
| Changes in valuation allowance | 2,144 | 3.5 | % | ||||||||
| Other | 3,483 | 5.7 | % | ||||||||
| Other foreign jurisdictions | 1,951 | 3.2 | % | ||||||||
| Effects of cross – border tax laws | 953 | 1.6 | % | ||||||||
| Tax credits | |||||||||||
| Biofuel tax incentives | (59,625) | (97.7) | % | ||||||||
| Other | (153) | (0.2) | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Nondeductible compensation expenses | 2,843 | 4.7 | % | ||||||||
| Other | 2,705 | 4.4 | % | ||||||||
| Changes in unrecognized tax benefits | (285) | (0.5) | % | ||||||||
| Other adjustments | 1,425 | 2.3 | % | ||||||||
| Effective tax rate | $ | (9,359) | (15.3) | % | |||||||
(1) Louisiana, Illinois, Texas, California, Minnesota, Iowa and Indiana represent the majority of the tax effect in this category.
The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the years ended December 28, 2024 and December 30, 2023 in accordance with the guidance prior to the adoption of ASU 2023-09. Income tax expense/(benefit) for the years ended December 28, 2024 and December 30, 2023, differed from the amount computed by applying the statutory U.S. federal income tax rate to income before income taxes as a result of the following (in thousands):
| December 28, 2024 | December 30, 2023 | ||||||||||
| Computed "expected" tax expense | $ | 51,977 | $ | 151,191 | |||||||
| Change in valuation allowance | 50,231 | 27,713 | |||||||||
| Non-deductible compensation expenses | 3,443 | 5,779 | |||||||||
| Deferred tax on unremitted foreign earnings | 1,897 | 3,686 | |||||||||
| Foreign rate differential | 13,817 | 16,607 | |||||||||
| Withholding taxes | (4,063) | (4,696) | |||||||||
| Change in uncertain tax positions | (2,594) | (3,477) | |||||||||
| State income taxes, net of federal benefit | (9,786) | (20,868) | |||||||||
| Biofuel tax incentives | (127,081) | (125,006) | |||||||||
| Global intangible low taxed income | 1,882 | 14,943 | |||||||||
| Change in contingent payment liability | (16,029) | (655) | |||||||||
| Change in tax law | — | (5,890) | |||||||||
| Equity compensation windfall | (341) | (2,241) | |||||||||
| Other, net | (1,690) | 2,482 | |||||||||
| $ | (38,337) | $ | 59,568 | ||||||||
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at January 3, 2026 and December 28, 2024 are presented below (in thousands):
| January 3, 2026 | December 28, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Loss contingency reserves | $ | 14,427 | $ | 14,099 | |||||||
| Employee benefits | 14,221 | 13,715 | |||||||||
| Pension liability | 3,397 | 3,307 | |||||||||
| Interest expense carryforwards | 98,885 | 87,702 | |||||||||
| Tax loss carryforwards | 519,940 | 417,119 | |||||||||
| Tax credit carryforwards | 6,125 | 2,771 | |||||||||
| Operating lease liabilities | 58,718 | 56,484 | |||||||||
| Inventory | 11,701 | 9,705 | |||||||||
| Accrued liabilities and other | 63,959 | 62,800 | |||||||||
| Total gross deferred tax assets | 791,373 | 667,702 | |||||||||
| Less valuation allowance | (115,163) | (86,927) | |||||||||
| Net deferred tax assets | 676,210 | 580,775 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets amortization, including tax deductible goodwill | (290,426) | (256,453) | |||||||||
| Property, plant and equipment depreciation | (153,948) | (192,280) | |||||||||
| Investment in DGD Joint Venture | (326,010) | (316,993) | |||||||||
| Operating lease assets | (58,516) | (55,221) | |||||||||
| Tax on unremitted foreign earnings | (40,173) | (16,492) | |||||||||
| Other | (23,162) | (13,990) | |||||||||
| Total gross deferred tax liabilities | (892,235) | (851,429) | |||||||||
| Net deferred tax liability | $ | (216,025) | $ | (270,654) | |||||||
| Amounts reported on Consolidated Balance Sheets: | |||||||||||
| Non-current deferred tax asset | $ | 24,536 | $ | 22,368 | |||||||
| Non-current deferred tax liability | (240,561) | (293,022) | |||||||||
| Net deferred tax liability | $ | (216,025) | $ | (270,654) | |||||||
At January 3, 2026, the Company had net operating loss carryforwards for federal income tax purposes of approximately $1.7 billion which can be carried forward indefinitely. The Company had interest expense carryforwards of approximately $426.4 million and $205.4 million for federal and state income tax purposes, which may be carried forward indefinitely. The Company had approximately $729.3 million of net operating loss
carryforwards for state income tax purposes, $549.8 million of which expire in 2026 through 2055 and $179.5 million of which can be carried forward indefinitely. The Company had foreign net operating loss carryforwards of approximately $384.9 million, $34.7 million of which expire in 2026 through 2038 and $350.2 million of which can be carried forward indefinitely. Also at January 3, 2026, the Company had U.S. federal and state tax credit carryforwards of approximately $3.9 million. As of January 3, 2026, the Company also had a valuation allowance of $115.2 million due to uncertainties in its ability to utilize certain of its state net operating loss and credit carryforwards, foreign net operating loss carryforwards and other foreign deferred tax assets.
At January 3, 2026, the Company had unrecognized tax benefits of approximately $9.9 million. All of the unrecognized tax benefits would favorably impact the Company’s effective tax rate if recognized. The Company recognizes accrued interest and penalties, as appropriate, related to unrecognized tax benefits as a component of income tax expense. As of January 3, 2026, interest and penalties related to unrecognized tax benefits were $2.7 million.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows (in thousands):
| January 3, 2026 | December 28, 2024 | ||||||||||
| Balance at beginning of Year | $ | 10,752 | $ | 13,872 | |||||||
| Change in tax positions related to current year | (4,015) | (4,600) | |||||||||
| Change in tax positions related to prior years | 3,165 | 1,480 | |||||||||
| Change in tax positions due to settlement with tax authorities | — | — | |||||||||
| Expiration of the statute of limitations | — | — | |||||||||
| Balance at end of year | $ | 9,902 | $ | 10,752 | |||||||
In fiscal 2025, the Company’s major taxing jurisdictions are U.S. (federal and state), Belgium, Brazil, Canada, China, France, Germany, the Netherlands and Poland. The Company is subject to regular examination by various tax authorities. Although the final outcome of these examinations is not yet determinable, the Company does not anticipate that any of the examinations will have a significant impact on the Company’s results of operations or financial position. The statute of limitations for the Company’s major jurisdictions is open for varying periods, but is generally closed through the 2013 tax year.
The Company expects to have access to its offshore earnings with minimal to no additional U.S. tax impact. Therefore, the Company does not consider these earnings to be permanently reinvested offshore. As of January 3, 2026, a deferred tax liability of approximately $40.2 million has been recorded for any incremental taxes, including foreign withholding taxes, that are estimated to be incurred when those earnings are distributed to the U.S. in future years.
On August 16, 2022 the U.S. government enacted the IR Act that includes a new 15% alternative minimum tax based upon financial statement income (“book minimum tax”), a 1% excise tax on stock buybacks and tax incentives for energy and climate initiatives, among other provisions. The provisions of the IR Act are generally effective for periods after December 31, 2022. The blender tax credits, which are refundable excise tax credits, expired on December 31, 2024. The CFPC, a transferable income tax credit, becomes effective from 2025.
On January 10, 2025, the U.S. Department of the Treasury and Internal Revenue Service released Notices 2025-10 and 2025-11, which provide clarity on issues including which entities and fuels are eligible for the credit and how taxpayers determine lifecycle emissions. In conjunction with such guidance, the Department of Energy released the 45ZCF-GREET Model allowing clean fuel producers to compute and claim the CFPC. Like the blenders tax credits, the CFPC is generated by DGD and significantly impacts our effective tax rate relative to the federal statutory rate of 21%.
On July 4, 2025, the OBBBA was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The legislation did not have a material effect on the Company’s results or financial position in 2025. We are currently
evaluating the changes, such as foreign feedstock restrictions and a reduction of the SAF elevated, base rate with respect to the CFPC, that become effective beginning in 2026.
The Organization for Economic Co-operation and Development (OECD) has a framework to implement a global minimum corporate income tax of 15% for companies with global revenues above certain thresholds (referred to as Pillar 2) that has been agreed upon in principle by over 140 countries. While it is not expected that the U.S. will enact legislation to adopt Pillar 2, certain countries in which the Company operates have adopted Pillar 2 legislation or are in the process of introducing legislation to implement Pillar 2. Although the framework provides model rules for applying the minimum tax, countries may enact Pillar 2 differently than the model rules and on different timelines and may adjust their domestic tax incentives in response to Pillar 2. Since the Company does not have significant operations in foreign jurisdictions with tax rates below the 15% minimum, Pillar 2 did not have a material impact in 2025. On January 5, 2026, the OECD approved changes to the model rules that included the introduction of a “side-by-side” rule which would exempt U.S.-parented companies from certain aspects of the global minimum tax regime. We are evaluating the potential consequences of Pillar 2 and the side-by-side rule on our longer-term financial position.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 3, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 1, 2022 | |
| 2021 | Mar 2, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Mar 1, 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.