DELUXE CORPDLX
DELUXE CORP Income Taxes Disclosure
Income tax provision – The components of the income tax provision were as follows for the years ended December 31:
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Current tax provision: | ||||||||||||||||||||
| Federal | $ | 0.3 | $ | 24.9 | $ | 21.0 | ||||||||||||||
| State | 2.2 | 5.2 | 6.4 | |||||||||||||||||
| Foreign | 7.9 | 13.9 | 18.1 | |||||||||||||||||
| Total current tax provision | 10.4 | 44.0 | 45.5 | |||||||||||||||||
| Deferred tax provision: | ||||||||||||||||||||
| Federal | 22.1 | (21.5) | (20.4) | |||||||||||||||||
| State | 4.4 | (4.5) | (4.4) | |||||||||||||||||
| Foreign | — | 5.6 | (7.1) | |||||||||||||||||
| Total deferred tax provision | 26.5 | (20.4) | (31.9) | |||||||||||||||||
| Total tax provision: | ||||||||||||||||||||
| Federal | $ | 22.4 | $ | 3.4 | $ | 0.6 | ||||||||||||||
| State | 6.6 | 0.7 | 2.0 | |||||||||||||||||
| Foreign | 7.9 | 19.5 | 11.0 | |||||||||||||||||
| Income tax provision | $ | 36.9 | $ | 23.6 | $ | 13.6 | ||||||||||||||
Income before income taxes was comprised of the following for the years ended December 31:
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| U.S. | $ | 91.8 | $ | 11.1 | $ | (7.6) | ||||||||||||||
| Foreign | 27.3 | 65.4 | 47.4 | |||||||||||||||||
| Income before income taxes | $ | 119.1 | $ | 76.5 | $ | 39.8 | ||||||||||||||
Effective tax rate – The effective tax rate on pretax income reconciles to the U.S. federal statutory tax rate for the years ended December 31 as follows:
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| (in millions) | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||||
| U.S. federal statutory tax rate | $ | 25.0 | 21.0 | % | $ | 16.1 | 21.0 | % | $ | 8.4 | 21.0 | % | ||||||||||||||||||||||||||
State income tax, net of federal income tax effect(1) | 4.5 | 3.7 | % | (0.7) | (1.0 | %) | 1.8 | 4.5 | % | |||||||||||||||||||||||||||||
| Foreign tax effects: | ||||||||||||||||||||||||||||||||||||||
| Canada: | ||||||||||||||||||||||||||||||||||||||
| Statutory tax rate difference between Canada and the U.S. | 1.4 | 1.2 | % | 3.2 | 4.2 | % | 2.3 | 5.9 | % | |||||||||||||||||||||||||||||
| Tax on repatriation of earnings | 1.2 | 1.0 | % | 3.0 | 3.9 | % | 2.4 | 6.1 | % | |||||||||||||||||||||||||||||
| Business exits (Note 6) | — | — | — | — | (2.2) | (5.6 | %) | |||||||||||||||||||||||||||||||
| Change in valuation allowances | — | — | — | — | (1.2) | (3.1 | %) | |||||||||||||||||||||||||||||||
| Other | (0.2) | (0.1 | %) | — | — | 0.2 | 0.6 | % | ||||||||||||||||||||||||||||||
| Other foreign jurisdictions | — | — | — | — | (0.1) | (0.3 | %) | |||||||||||||||||||||||||||||||
| Effect of cross-border tax laws: | ||||||||||||||||||||||||||||||||||||||
| Foreign-derived intangible income | (0.3) | (0.3 | %) | (0.2) | (0.2 | %) | (0.3) | (0.7 | %) | |||||||||||||||||||||||||||||
| Global intangible low-taxed income | — | — | 0.5 | 0.6 | % | 5.0 | 12.6 | % | ||||||||||||||||||||||||||||||
| Foreign tax credit | — | — | (0.4) | (0.5 | %) | (4.6) | (11.5 | %) | ||||||||||||||||||||||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||||||||||||||||||||||||||
| Surrender of company-owned life insurance policies | 3.7 | 3.1 | % | — | — | — | — | |||||||||||||||||||||||||||||||
| Non-deductible executive compensation | 2.9 | 2.4 | % | 2.0 | 2.6 | % | 1.8 | 4.6 | % | |||||||||||||||||||||||||||||
| Share-based payment awards | (0.1) | (0.1 | %) | 0.3 | 0.4 | % | 2.1 | 5.2 | % | |||||||||||||||||||||||||||||
| Business exits (Note 6) | — | — | (1.5) | (2.0 | %) | (7.5) | (18.7 | %) | ||||||||||||||||||||||||||||||
| Other | 0.1 | 0.1 | % | 0.8 | 1.1 | % | 0.2 | 0.4 | % | |||||||||||||||||||||||||||||
| Change in valuation allowances | — | — | 1.1 | 1.4 | % | 6.1 | 15.3 | % | ||||||||||||||||||||||||||||||
| Tax credits: | ||||||||||||||||||||||||||||||||||||||
| Research and development tax credit | (1.8) | (1.5 | %) | (2.1) | (2.7 | %) | (1.6) | (4.0 | %) | |||||||||||||||||||||||||||||
| Other | (0.1) | (0.1 | %) | (0.1) | (0.1 | %) | (0.1) | (0.2 | %) | |||||||||||||||||||||||||||||
| Change in unrecognized tax benefits | 0.5 | 0.4 | % | 0.8 | 1.0 | % | (0.3) | (0.9 | %) | |||||||||||||||||||||||||||||
| Other | 0.1 | 0.2 | % | 0.8 | 1.1 | % | 1.2 | 3.0 | % | |||||||||||||||||||||||||||||
| Total | $ | 36.9 | 31.0 | % | $ | 23.6 | 30.8 | % | $ | 13.6 | 34.2 | % | ||||||||||||||||||||||||||
(1) .
In December 2023, we executed an agreement to transition our Canadian payroll and human resources services customers to another service provider. We recognized a capital gain on this transaction for tax purposes, which we were able to partially offset with capital loss carryforwards. These capital loss carryforwards had previously been offset with a valuation allowance, and as a result, we reversed the previously recognized valuation allowance. In June 2023, we completed the sale of our North American web hosting business. We recognized a capital loss on this transaction for tax purposes and recorded a valuation allowance for the portion of the capital loss carryover that we did not expect to realize.
We repatriated foreign earnings held in cash by our Canadian subsidiaries of $20.6 million during 2025, $52.7 million during 2024, and $32.9 million during 2023. We believe the accumulated and remaining cash of our Canadian subsidiaries is sufficient to meet their working capital needs. The historical unremitted Canadian earnings as of December 31, 2021 will continue to be reinvested indefinitely in the operations of those subsidiaries. Deferred income taxes have not been recognized on those
earnings as of December 31, 2025. If we were to repatriate our foreign cash and cash equivalents into the U.S. at one time, the tax effects would generally be limited to foreign withholding taxes on any such distribution. As of December 31, 2025, the amount of cash and cash equivalents held by our foreign subsidiaries was $30.6 million, primarily in Canada.
Deferred income taxes – Tax-effected temporary differences that gave rise to deferred tax assets and liabilities as of December 31 were as follows:
| 2025 | 2024 | |||||||||||||||||||||||||
| (in millions) | Deferred tax assets | Deferred tax liabilities | Deferred tax assets | Deferred tax liabilities | ||||||||||||||||||||||
| Goodwill | $ | — | $ | 52.6 | $ | — | $ | 46.9 | ||||||||||||||||||
| Employee benefit plans | — | 24.1 | — | 20.5 | ||||||||||||||||||||||
| Revenue recognition | — | 8.0 | — | 6.4 | ||||||||||||||||||||||
| Prepaid assets | — | 7.1 | — | 6.7 | ||||||||||||||||||||||
| Cloud computing arrangements | — | 5.4 | — | 6.5 | ||||||||||||||||||||||
| Intangible assets | — | 4.4 | 22.6 | — | ||||||||||||||||||||||
| Property, plant and equipment | — | 3.7 | — | 5.1 | ||||||||||||||||||||||
| Operating leases | 13.8 | 11.2 | 16.8 | 13.2 | ||||||||||||||||||||||
| Deductible interest carryforward | 56.1 | — | 51.0 | — | ||||||||||||||||||||||
Net operating loss, tax credit, and capital loss carryforwards | 24.6 | — | 24.3 | — | ||||||||||||||||||||||
| Reserves and accruals | 6.4 | — | 7.3 | — | ||||||||||||||||||||||
| Inventories | 3.6 | — | 3.7 | — | ||||||||||||||||||||||
| All other | 5.0 | 2.0 | 2.9 | 2.2 | ||||||||||||||||||||||
| Total deferred taxes | 109.5 | 118.5 | 128.6 | 107.5 | ||||||||||||||||||||||
| Valuation allowances | (16.2) | — | (16.2) | — | ||||||||||||||||||||||
| Net deferred taxes | $ | 93.3 | $ | 118.5 | $ | 112.4 | $ | 107.5 | ||||||||||||||||||
In July 2025, the "One Big Beautiful Bill Act" was signed into law. The legislation is a comprehensive tax and spending bill that primarily extends provisions of the 2017 Tax Cuts and Jobs Act that were set to expire and restores provisions that accelerate deductions for certain business expenses and investments. The impact of these changes did not have a material effect on our income tax provision for the year ended December 31, 2025 and resulted in an increase in net deferred income tax liabilities of approximately $30.0 million.
The valuation allowances as of December 31, 2025 and December 31, 2024 related primarily to capital loss carryforwards in the U.S and net operating loss carryforwards in various state jurisdictions that we do not currently expect to fully realize. Changes in our valuation allowances for the years ended December 31 were as follows:
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Balance, beginning of year | $ | (16.2) | $ | (15.0) | $ | (8.0) | ||||||||||||||
| Expense from change in allowances | — | (1.2) | (7.0) | |||||||||||||||||
| Balance, end of year | $ | (16.2) | $ | (16.2) | $ | (15.0) | ||||||||||||||
As of December 31, 2025, we had the following net operating loss, deductible interest, capital loss, and tax credit carryforwards:
•state net operating loss and tax credit carryforwards of $162.0 million, which expire at various dates between 2026 and 2050;
•federal deductible interest carryforwards of $223.0 million, which do not expire; and
•federal capital loss carryforwards of $61.4 million, which expire in 2027 and 2028.
Income tax payments – Income taxes paid, net of refunds received, was as follows for the years ended December 31:
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| U.S. federal | $ | 15.1 | $ | 17.0 | $ | 27.7 | ||||||||||||||
| Canada | 9.1 | 21.0 | 12.5 | |||||||||||||||||
| U.S. state and local | 6.7 | 8.4 | 6.3 | |||||||||||||||||
| Total income taxes paid, net of refunds received | $ | 30.9 | $ | 46.4 | $ | 46.5 | ||||||||||||||
Uncertain tax positions – A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding accrued interest and penalties and the federal benefit of deductible state income tax, was as follows:
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Balance, beginning of year | $ | 3.2 | $ | 2.4 | $ | 2.6 | ||||||||||||||
| Additions for tax positions of current year | 0.5 | 0.4 | 0.3 | |||||||||||||||||
| Additions for tax positions of prior years | 0.3 | 0.6 | 0.1 | |||||||||||||||||
| Settlements | — | — | (0.3) | |||||||||||||||||
| Lapse of statutes of limitations | (0.3) | (0.2) | (0.3) | |||||||||||||||||
| Balance, end of year | $ | 3.7 | $ | 3.2 | $ | 2.4 | ||||||||||||||
If the unrecognized tax benefits as of December 31, 2025 were recognized in the consolidated financial statements, income tax expense would decrease by $3.7 million. Accruals for interest and penalties and expense for interest and penalties included in the provision for income taxes were not material for any of the periods presented.
The statute of limitations for federal tax assessments for 2021 and prior years has expired. In general, income tax returns for the years 2022 through 2025 remain subject to examination by federal, foreign, state, and city tax jurisdictions. In the event that we have determined not to file income tax returns with a particular state or city, all years remain subject to examination by the tax jurisdiction.
The ultimate outcome of tax matters may differ from our estimates and assumptions. Unfavorable settlement of any issue would require the use of cash and could result in increased income tax expense. Favorable resolution would result in reduced income tax expense. Due to the nature of the underlying liabilities and the extended time frame often needed to resolve income tax uncertainties, we cannot provide reliable estimates of the amount or timing of cash payments that may be required to settle these liabilities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 19, 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.