EnerSysENS
EnerSys Income Taxes Disclosure
Income Taxes
The amount of cash income taxes paid by the Company during the years ended March 31, 2025 and 2024 was $40,410 and $28,810, respectively.
The components of provision for income taxes for all periods presented were as follows:
| Fiscal year ended March 31, | ||||||||||||||||||||
| Current income tax expense | 2026 | 2025 | 2024 | |||||||||||||||||
| Federal | $ | 10,886 | $ | 39,021 | $ | 21,785 | ||||||||||||||
| State | 3,943 | 11,147 | 3,252 | |||||||||||||||||
| Foreign | 24,609 | 24,599 | 27,396 | |||||||||||||||||
| Total current income tax expense | 39,438 | 74,767 | 52,433 | |||||||||||||||||
| Deferred income tax (benefit) expense | ||||||||||||||||||||
| Federal | $ | 3,162 | $ | (6,000) | $ | (25,008) | ||||||||||||||
| State | (663) | (1,446) | (3,564) | |||||||||||||||||
| Foreign | 11,912 | (24,479) | (772) | |||||||||||||||||
| Total deferred income tax (benefit) expense | 14,411 | (31,925) | (29,344) | |||||||||||||||||
| Total income tax expense | ||||||||||||||||||||
| Federal | $ | 14,048 | $ | 33,021 | $ | (3,223) | ||||||||||||||
| State | 3,280 | 9,701 | (312) | |||||||||||||||||
| Foreign | 36,521 | 120 | 26,624 | |||||||||||||||||
| Total income tax expense | $ | 53,849 | $ | 42,842 | $ | 23,089 | ||||||||||||||
Income before provision for income taxes for fiscal years ended March 31, 2026, 2025, and 2024 were as follows:
| Fiscal year ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| Income from continuing operations before income tax expense | ||||||||||||||||||||
| United States | $ | 196,721 | $ | 201,332 | $ | 99,230 | ||||||||||||||
| Foreign | 150,685 | 205,245 | 192,955 | |||||||||||||||||
| Total income from continuing operations before income tax expense | $ | 347,406 | $ | 406,577 | $ | 292,185 | ||||||||||||||
The following table sets forth the tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities:
| March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Deferred tax assets: | ||||||||||||||
| Accounts receivable | $ | — | $ | 278 | ||||||||||
| Inventories | 13,657 | 13,154 | ||||||||||||
| Net operating loss carryforwards | 48,813 | 44,442 | ||||||||||||
| Lease liabilities | 18,488 | 21,016 | ||||||||||||
| Capitalized R&D Expenditures | 51,128 | 48,856 | ||||||||||||
| Accrued expenses | 55,119 | 42,909 | ||||||||||||
| Other assets | 23,305 | 22,080 | ||||||||||||
| Gross deferred tax assets | 210,510 | 192,735 | ||||||||||||
| Less valuation allowance | (34,223) | (25,594) | ||||||||||||
| Total deferred tax assets | 176,287 | 167,141 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Accounts receivable | 90 | — | ||||||||||||
| Property, plant and equipment | 60,593 | 49,025 | ||||||||||||
| Lease Right-of-use assets | 18,488 | 21,016 | ||||||||||||
| Intangible assets | 36,968 | 32,332 | ||||||||||||
| Other liabilities | 5,049 | 7,616 | ||||||||||||
| Total deferred tax liabilities | 121,188 | 109,989 | ||||||||||||
| Net deferred tax assets (liabilities) | $ | 55,099 | $ | 57,152 | ||||||||||
The Company has approximately $179 in United States federal net operating loss carryforwards, all of which are limited by Section 382 of the Internal Revenue Code, that expire in fiscal 2027. The Company has approximately $175,133 of foreign net operating loss carryforwards, of which $126,150 may be carried forward indefinitely and $48,983 expire between fiscal 2027 and fiscal 2046. In addition, the Company also has approximately $17,085 of state net operating loss carryforwards with expirations between fiscal 2028 and fiscal 2046.
The following table sets forth the changes in the Company's valuation allowance for fiscal 2026, 2025 and 2024:
| Balance at Beginning of Period | Additions Charged to Expense | Valuation Allowance Reversal | Other(1) | Balance at End of Period | ||||||||||||||||||||||||||||
| Fiscal year ended March 31, 2024 | 31,172 | 9,463 | (2,614) | (2,267) | 35,754 | |||||||||||||||||||||||||||
| Fiscal year ended March 31, 2025 | 35,754 | 4,949 | (9,219) | (5,890) | 25,594 | |||||||||||||||||||||||||||
| Fiscal year ended March 31, 2026 | 25,594 | 9,314 | (1,426) | 741 | 34,223 | |||||||||||||||||||||||||||
(1)Includes the impact of currency changes and the expiration of net operating losses for which a full valuation allowance was recorded.
As of March 31, 2026 and 2025, the Company had no federal valuation allowance and the valuation allowance associated with the state tax jurisdictions was $468.
As of March 31, 2026 and 2025, the valuation allowance associated with certain foreign tax jurisdictions was $33,755 and $25,126, respectively. Of the net increase of $8,629, $7,888 was recorded as a increase to tax expense primarily related to deferred tax assets generated in the current year that the Company believes are not more likely than not to be realized, and by $741 primarily related to foreign currency translation adjustments and expiration of foreign net operating losses for which a full valuation allowance was recorded.
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes after the adoption of ASU 2023-09 is as follows:
| Fiscal year ended March 31, | |||||||||||
| 2026 | |||||||||||
| US federal statutory income tax rate | 72,955 | 21.0 | % | ||||||||
| Domestic federal | |||||||||||
| Tax credits | |||||||||||
| AMPC Impact | (33,305) | (9.6) | % | ||||||||
| Other tax credits | (970) | (0.3) | % | ||||||||
| Nontaxable and nondeductible items | |||||||||||
| Nondeductible officer’s compensation | 4,724 | 1.4 | % | ||||||||
| Other | (894) | (0.3) | % | ||||||||
| Cross-border tax laws | |||||||||||
| Global intangible low-taxed income | 4,129 | 1.2 | % | ||||||||
| Other | 724 | 0.2 | % | ||||||||
| Other reconciling items | (53) | — | % | ||||||||
| Domestic state and local income taxes, net of federal (1) | 2,453 | 0.7 | % | ||||||||
| Foreign tax effects | |||||||||||
| Brazil | |||||||||||
| Changes in valuation | 8,384 | 2.4 | % | ||||||||
| Other | (2,180) | (0.6) | % | ||||||||
| Mexico | |||||||||||
| Tax incentives | (5,310) | (1.5) | % | ||||||||
| Other | 2,243 | 0.6 | % | ||||||||
| Switzerland | |||||||||||
| Statutory income tax rate | (14,472) | (4.2) | % | ||||||||
| Cantonal Taxes | 5,476 | 1.6 | % | ||||||||
| IP Transaction | 4,208 | 1.2 | % | ||||||||
| Other | 1,215 | 0.3 | % | ||||||||
| Other foreign jurisdictions | 5,313 | 1.5 | % | ||||||||
| Changes in unrecognized tax benefits | (791) | (0.2) | % | ||||||||
| Total income tax | 53,849 | 15.5 | % | ||||||||
(1) During the year ended March 31, 2026, state taxes in California, Florida, Illinois, Pennsylvania, and Texas comprise the majority (greater than 50%) of the tax effect in this category.
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for years prior to the adoption of ASU 2023-09 is as follows:
| Fiscal year ended March 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| United States statutory income tax expense | $ | 85,381 | $ | 61,358 | ||||||||||
| Increase (decrease) resulting from: | ||||||||||||||
| State income taxes, net of federal effect | 7,361 | (995) | ||||||||||||
| Nondeductible expenses and other | 14,135 | 3,833 | ||||||||||||
| Net effect of GILTI, FDII, BEAT | 3,322 | 3,313 | ||||||||||||
| Effect of foreign operations | (14,074) | (17,475) | ||||||||||||
| Valuation allowance | (4,270) | 6,849 | ||||||||||||
| Research and Development Credit | (5,652) | (5,158) | ||||||||||||
| AMPC Impact | (38,764) | $ | (28,636) | |||||||||||
| Tax Act | (4,597) | $ | — | |||||||||||
| Total | $ | 42,842 | $ | 23,089 | ||||||||||
The Organization for Economic Co-operation and Development (OECD) has adopted model rules to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective for taxable years beginning after December 31, 2023.
On January 5, 2026, the OECD issued the Side-by-Side package (the “SbS Package”), which provides administrative guidance that modifies the application of the Pillar Two rules. The SbS Package includes simplifications and additional safe harbors intended to facilitate coordination between domestic and international tax regimes and the Pillar Two framework. If adopted by relevant jurisdictions, certain provisions of the SbS Package could result in U.S.-parented groups being exempt from the application of two of the three Pillar Two top-up taxes.
The SbS Package is expected to be available for fiscal years beginning on or after January 1, 2026. The safe harbors are not self-executing and generally would require enactment through domestic legislation (and related interpretive guidance) by each Inclusive Framework member, subject to local legislative processes and timelines, as well as potential guidance related to the European Union (“EU”) Minimum Tax Directive. The Company continues to monitor developments and assess the potential impact of the SbS Package on its results of operations. In addition, the SbS Package extends the Transitional Country-by-Country Reporting (“CbCR”) Safe Harbor by one year, through the end of fiscal year 2027. The Company continues to refine the effective tax rate and cash tax impact for Pillar 2 considering legislative changes in multiple countries.
On July 4, 2025, the “One Big Beautiful Bill Act” (“OBBBA”) was enacted into law. The law included permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, and changes to the tax treatment for certain business provisions and energy credits.
The impact of the enacted legislation is included in our effective tax rate. The Company will continue to monitor and evaluate as new legislation and guidance is issued.
On August 26, 2024, the U.S. Tax Court issued a ruling in Varian Medical Systems, Inc. v. Commissioner ("Varian"). The ruling related to the U.S. taxation of deemed foreign dividends in the transition tax of the Tax Cuts and Jobs Act (“Tax Act”) which was originally recorded in fiscal 2018. The impact of the ruling was included in our fiscal 2025 results.
In fiscal 2025 the Company entered into a cost sharing arrangement and platform contribution transaction (“IP Transaction”) related to certain intellectual property between the EnerSys U.S. and a Swiss subsidiary. Although the transaction between consolidated entities did not result in any gain in the consolidated statement of operations, the Company recorded a net tax expense of approximately $2,500 in fiscal 2025 and $5,897 in fiscal 2026. The net expense represents the tax recognized by the selling jurisdiction offset by the value of future tax deductions for amortization of the assets in the acquiring jurisdiction.
The effective income tax rates for the fiscal years ended March 31, 2026, 2025 and 2024 were 15.5%, 10.5% and 7.9%, respectively. The effective income tax rate with respect to any period may be volatile based on the mix of income in the tax jurisdictions in which the Company operates and the amount of its consolidated income before taxes. The rate increase in fiscal 2026 compared to fiscal 2025 is primarily due to the impact of changes in valuation allowances, IP Transaction, the impact of Varian in fiscal 2025, and mix of earnings among tax jurisdictions. The rate increase in fiscal 2025 compared to fiscal 2024 is primarily due to the impact of Pillar 2, IP Transaction, and mix of earnings among tax jurisdictions offset by the impact of Varian.
In fiscal 2026, the foreign effective income tax rate on foreign pre-tax income of $150,685 was 24.2%. In fiscal 2025, the foreign effective income tax rate on foreign pre-tax income of $205,245 was 0.1% and in fiscal 2024, the foreign effective
income tax rate on foreign pre-tax income of $192,955 was 13.8%. The rate increase in fiscal 2026 compared to fiscal 2025 is primarily due to the impact of changes in valuation allowances, IP Transaction, and changes in mix of earnings among tax jurisdictions. The rate decrease in fiscal 2025 compared to fiscal 2024 is primarily due to the IP Transaction offset by changes in mix of earnings among tax jurisdictions.
Income from the Company's Swiss subsidiary comprised a substantial portion of its overall foreign mix of income for the fiscal years ended March 31, 2026, 2025 and 2024 and was taxed at approximately 16%, 13% and 9%, respectively.The rate increase in fiscal 2026 compared to fiscal 2025 is primarily related to the IP Transaction.
A portion of the Company’s undistributed earnings of foreign subsidiaries is not considered indefinitely reinvested and, accordingly, the Company recorded additional income taxes in prior years. The Company intends to continue to indefinitely reinvest the remaining undistributed foreign earnings and outside basis differences. While substantially all of the Company’s undistributed earnings of foreign subsidiaries have been taxed in the United States, distributions may be subject to foreign withholding taxes and additional U.S. income taxes (net of applicable foreign tax credits). The determination of the deferred tax liability related to unremitted earnings and outside basis differences for which the Company asserts indefinite reinvestment is not practicable.
Uncertain Tax Positions
The following table summarizes activity of the total amounts of unrecognized tax benefits:
| Fiscal year ended March 31, | ||||||||||||||||||||
| 2026 | 2025 | 2024 | ||||||||||||||||||
| Balance at beginning of year | $ | 2,880 | $ | 2,845 | $ | 3,495 | ||||||||||||||
| Increases related to current year tax positions | 243 | 630 | (2) | |||||||||||||||||
| Decreases related to prior tax positions | — | — | (129) | |||||||||||||||||
| Decreases related to prior year tax positions settled | — | — | — | |||||||||||||||||
| Lapse of statute of limitations | (723) | (595) | (519) | |||||||||||||||||
| Balance at end of year | $ | 2,400 | $ | 2,880 | $ | 2,845 | ||||||||||||||
All of the balance of unrecognized tax benefits at March 31, 2026, if recognized, would be included in the Company’s Consolidated Statements of Income and have a favorable impact on both the Company’s net earnings and effective tax rate.
The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions and is routinely subject to income tax examinations. As of March 31, 2026, the most significant tax examinations in process are the United States and Switzerland. The Company regularly assesses the likely outcomes of its tax audits and disputes to determine the appropriateness of its tax reserves. However, any tax authority could take a position on tax treatment that is contrary to the Company’s expectations, which could result in tax liabilities in excess of reserves. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2009.
The Company recognizes tax related interest and penalties in income tax expense in its Consolidated Statements of Income. As of March 31, 2026 and 2025, the Company had an accrual of $390 and $455, respectively, for interest and penalties.
The amounts of cash income taxes paid by the Company were as follows:
Fiscal year ended March 31, | ||||||||
2026 | ||||||||
Federal | $ | 14,689 | ||||||
State | 12,238 | |||||||
Foreign | ||||||||
France | 3,000 | |||||||
Switzerland - Federal | 5,913 | |||||||
Switzerland – Cantonal/Communal | 2,718 | |||||||
Other | 12,950 | |||||||
Total income taxes paid | $ | 51,508 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 20, 2026 | Showing above |
| 2025 | May 21, 2025 | |
| 2024 | May 22, 2024 | |
| 2023 | May 24, 2023 | |
| 2022 | May 25, 2022 | |
| 2021 | May 26, 2021 | |
| 2020 | Jun 1, 2020 | |
| 2019 | May 29, 2019 | |
| 2018 | May 30, 2018 | |
| 2017 | May 30, 2017 | |
| 2016 | May 31, 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.