Fortive CorpFTV
Fortive Corp Income Taxes Disclosure
NOTE 11. INCOME TAXES
Earnings and Income Taxes
Earnings from continuing operations before income taxes for the years ended December 31 were as follows ($ in millions):
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | 408.7 | $ | 285.1 | $ | 244.6 | |||||||||||
| International | 193.5 | 221.2 | 188.5 | ||||||||||||||
| Total | $ | 602.2 | $ | 506.3 | $ | 433.1 | |||||||||||
The continuing operations provision for income taxes for the years ended December 31 were as follows ($ in millions):
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal U.S. | $ | 36.7 | $ | 7.6 | $ | 30.5 | |||||||||||
| Non-U.S. | 67.5 | 39.3 | 66.1 | ||||||||||||||
| State and local | 15.2 | 1.7 | 11.7 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal U.S. | (27.6) | (9.5) | (54.7) | ||||||||||||||
| Non-U.S. | (16.5) | 4.6 | (22.3) | ||||||||||||||
| State and local | (5.8) | (19.9) | (6.6) | ||||||||||||||
Total: | |||||||||||||||||
| Federal U.S. | 9.1 | (1.9) | (24.2) | ||||||||||||||
| Non-U.S. | 51.0 | 43.9 | 43.8 | ||||||||||||||
| State and local | 9.4 | (18.2) | 5.1 | ||||||||||||||
Total income tax provision | $ | 69.5 | $ | 23.8 | $ | 24.7 | |||||||||||
Effective Income Tax Rate
The continuing operations effective income tax rate for the year ended December 31, 2025 varies from the U.S. statutory federal income tax rate as follows, in both dollar amounts (in millions) and as a percentage of earnings from continuing operations before income taxes:
2025 | |||||||||||
Amount | Percent (b) | ||||||||||
| Statutory federal income tax rate | $ | 126.5 | 21.0 | % | |||||||
| Increase (decrease) in tax rate resulting from: | |||||||||||
State income taxes (net of federal income tax benefit) (a) | 8.2 | 1.4 | % | ||||||||
Foreign tax effects | |||||||||||
| Malta | |||||||||||
Nontaxable interest | (13.2) | (2.2) | % | ||||||||
| Other | 4.7 | 0.8 | % | ||||||||
Other foreign jurisdictions | 4.8 | 0.8 | % | ||||||||
Effect of change in tax laws or rates enacted in the current period (b) | (0.1) | — | % | ||||||||
| Effect of cross-border tax laws | |||||||||||
| Foreign-derived intangible income | (51.2) | (8.5) | % | ||||||||
| Other | 7.3 | 1.2 | % | ||||||||
| Tax Credits | |||||||||||
| Research and development tax credits | (10.9) | (1.8) | % | ||||||||
| Other | (0.8) | (0.1) | % | ||||||||
| Nontaxable or nondeductible items | 5.9 | 1.0 | % | ||||||||
Changes in unrecognized tax benefits | (11.6) | (1.9) | % | ||||||||
Other adjustments | (0.1) | — | % | ||||||||
Effective income tax rate | $ | 69.5 | 11.5 | % | |||||||
(a) For the year ended December 31, 2025, state taxes in California, Illinois, New Jersey, New York, Texas, and Massachusetts made up the majority (greater than 50%) of the tax effect in this category. | |||||||||||
(b) The sum of the components of effective income tax rate may not equal due to rounding. | |||||||||||
The continuing operations effective income tax rate for the years ended December 31, 2024 and 2023 varies from the U.S. statutory federal income tax rate as follows:
| Percentage of Pretax Earnings | |||||||||||
| 2024 | 2023 | ||||||||||
| Statutory federal income tax rate | 21.0 | % | 21.0 | % | |||||||
| Increase (decrease) in tax rate resulting from: | |||||||||||
| State income taxes (net of federal income tax benefit) | (3.5) | % | 0.5 | % | |||||||
| Foreign income taxed at different rates than U.S. statutory rate | (1.5) | % | (1.4) | % | |||||||
| U.S. federal permanent differences related to the TCJA | (7.5) | % | (10.2) | % | |||||||
| Effect of change in tax rates enacted in the current period | (0.5) | % | (5.7) | % | |||||||
| Changes in valuation allowances | (0.1) | % | 3.8 | % | |||||||
Uncertain tax positions | (5.4) | % | (3.7) | % | |||||||
| Other | 2.2 | % | 1.4 | % | |||||||
Effective income tax rate | 4.7 | % | 5.7 | % | |||||||
Income tax payments, net of refunds received, related to continuing operations during the year ended December 31, 2025 were as follows ($ in millions):
| 2025 | |||||
| Federal | $ | 40.7 | |||
| State and local | 7.5 | ||||
| United States | 48.2 | ||||
| China | 13.7 | ||||
Germany | 9.8 | ||||
| Other | 28.3 | ||||
| International | 51.8 | ||||
| Total | $ | 100.0 | |||
We made income tax payments, net of refunds received, of $114 million, and $122 million during the years ended December 31, 2024 and 2023, respectively.
Deferred Tax Assets and Liabilities
All deferred tax assets and liabilities have been classified as noncurrent and are included in Other assets and Other long-term liabilities in the Consolidated Balance Sheets. Deferred income tax assets and liabilities from continuing operations as of December 31 were as follows ($ in millions):
| 2025 | 2024 | ||||||||||
| Deferred Tax Assets: | |||||||||||
| Operating lease liabilities | $ | 23.8 | $ | 22.5 | |||||||
| Inventories | 8.0 | 6.9 | |||||||||
| Pension benefits | 21.6 | 19.4 | |||||||||
| Stock-based compensation expense | 31.8 | 31.2 | |||||||||
| Capitalized expenses | 114.7 | 138.5 | |||||||||
| Tax credit and loss carryforwards | 383.4 | 388.7 | |||||||||
| Accruals, prepayments, and other | 99.7 | 1.4 | |||||||||
| Valuation allowances | (267.9) | (270.9) | |||||||||
| Total deferred tax assets | $ | 415.1 | $ | 337.7 | |||||||
| Deferred Tax Liabilities: | |||||||||||
| Property, plant and equipment | $ | (18.0) | $ | (17.2) | |||||||
| Operating lease right-of-use assets | (22.3) | (20.6) | |||||||||
| Insurance, including self-insurance | (122.3) | (126.6) | |||||||||
| Goodwill, other intangibles, and other | (589.6) | (613.4) | |||||||||
| Total deferred tax liabilities | (752.2) | (777.8) | |||||||||
| Net deferred tax liability | $ | (337.1) | $ | (440.1) | |||||||
In accordance with GAAP, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted rates expected to be in effect during the year in which the differences reverse. Deferred tax assets generally represent items that can be used as a tax deduction or credit in our tax return in future years for which the tax benefit has already been reflected in our Consolidated Statements of Earnings. Deferred tax liabilities generally represent items that have already been taken as a deduction on our tax return but have not yet been recognized as an expense in our Consolidated Statements of Earnings. The effect on deferred tax assets and liabilities due to a change in tax rates is recognized in income tax expense in the period that includes the enactment date.
Our deferred tax assets are reduced by a valuation allowance if, based on the weight of available evidence, it is more likely than not (a likelihood of more than 50 percent) that some portion or all of the deferred tax assets will not be realized. We evaluate the realizability of deferred income tax assets for each of the jurisdictions in which we operate. If we experience cumulative pretax income in a particular jurisdiction in the three-year period including the current and prior two years, we normally conclude that the deferred income tax assets will more likely than not be realizable and no valuation allowance is recognized,
unless known or planned operating developments would lead management to conclude otherwise. However, if we experience cumulative pretax losses in a particular jurisdiction in the three-year period including the current and prior two years, we then consider a series of factors in the determination of whether the deferred income tax assets can be realized. These factors include historical operating results, known or planned operating developments, the period of time over which certain temporary differences will reverse, consideration of the utilization of certain deferred income tax liabilities, tax law carryback capability in the particular country, and prudent and feasible tax planning strategies. After evaluation of these factors, if the deferred income tax assets are expected to be realized within the tax carryforward period allowed for that specific country, we would conclude that no valuation allowance would be required. To the extent that the deferred income tax assets exceed the amount that is expected to be realized within the tax carryforward period for a particular jurisdiction, we establish a valuation allowance.
Applying the above methodology, valuation allowances have been established for certain deferred income tax assets to the extent they are not expected to be realized within the particular tax carryforward period.
Deferred taxes associated with U.S. entities from continuing operations consist of net deferred tax liabilities of approximately $336 million and $426 million inclusive of valuation allowances of $21 million and $24 million as of December 31, 2025 and 2024, respectively. Deferred taxes associated with non-U.S. entities from continuing operations consist of net deferred tax liabilities of $1 million and of $15 million, both inclusive of valuation allowances of $247 million, as of December 31, 2025 and 2024. Our valuation allowance decreased by $3.0 million and increased by $15 million during the years ended December 31, 2025 and 2024, respectively, due primarily to foreign credits and net operating losses in both years.
As of December 31, 2025, our U.S. and non-U.S. net operating loss carryforwards totaled $1.6 billion, of which $21 million is related to federal net operating loss carryforwards, $552 million is related to state net operating loss carryforwards, and $1.0 billion is related to non-U.S. net operating loss carryforwards. Included in deferred tax assets as of December 31, 2025 are tax benefits for U.S. and non-U.S. net operating loss carryforwards totaling $191 million, before applicable valuation allowances of $90 million. Certain of these losses can be carried forward indefinitely and others can be carried forward to various dates from 2026 through 2044. Recognition of some of these loss carryforwards is subject to an annual limit, which may cause them to expire before they are used.
As of December 31, 2025, our U.S. and non-U.S. tax credit carryforwards totaled $192 million, which is primarily related to non-U.S. tax credit carryforwards. Certain of these credits can be carried forward indefinitely and other can be carried forward to various dates from 2026 through 2044. As of December 31, 2025, we maintain a $180 million valuation allowance related to certain tax credit carryforwards.
Unrecognized Tax Benefits
We recognize tax benefits from uncertain tax positions only if, in our assessment, it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Judgment is required in evaluating tax positions and determining income tax provisions. We re-evaluate the technical merits of our tax positions and may recognize an uncertain tax benefit in certain circumstances, including when: (i) a tax audit is completed; (ii) applicable tax laws change, including a tax case ruling or legislative guidance; or (iii) the applicable statute of limitations expires. We recognize potential accrued interest and penalties associated with unrecognized tax positions in income tax expense.
As of December 31, 2025, gross unrecognized tax benefits for continuing and discontinued operations were $133 million ($147 million total, including $26 million associated with interest and penalties, and net of the impact of $12 million of indirect tax benefits). As of December 31, 2024, gross unrecognized tax benefits for continuing and discontinued operations were $130 million ($144 million total, including $26 million associated with interest and penalties, and net of the impact of $12 million of indirect tax benefits). We recognized approximately $8 million, $10 million and $11 million in potential interest and penalties associated with uncertain tax positions during 2025, 2024, and 2023, respectively. To the extent taxes are not assessed with respect to uncertain tax positions, substantially all amounts accrued (including interest and penalties and net of indirect offsets) will be reduced and reflected as a reduction of the overall income tax provision. Unrecognized tax benefits and associated accrued interest and penalties are included in our income tax provision.
The Company is subject to examination in the United States, various states, and foreign jurisdictions for the tax years 2011 to 2024. These examinations include filings of tax returns prior to our separation from Danaher, tax returns of enterprises no longer in our portfolio, and tax returns for pre-acquisition periods of enterprises added to our portfolio. Significant obligations are detailed in the tax matters agreements in connection with the separation of Fortive from Danaher on July 1, 2016, the split-off of the A&S business on October 1, 2018, the Vontier separation on October 9, 2020, and the PT Separation on June 28, 2025.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding amounts accrued for potential interest and penalties, is as follows ($ in millions):
| 2025 | 2024 | 2023 | |||||||||||||||
| Unrecognized tax benefits, beginning of year | $ | 130.1 | $ | 160.6 | $ | 168.2 | |||||||||||
| Additions based on tax positions related to the current year | 2.4 | 7.6 | 16.9 | ||||||||||||||
| Additions for tax positions of prior years | 18.3 | 2.2 | 6.3 | ||||||||||||||
| Reductions for tax positions of prior years | (5.3) | (1.8) | (0.7) | ||||||||||||||
| Lapse of statute of limitations | (29.3) | (36.9) | (32.5) | ||||||||||||||
| Settlements | (0.2) | (8.9) | (1.4) | ||||||||||||||
| Effect of foreign currency translation | 2.9 | (1.8) | 0.1 | ||||||||||||||
Acquisition and separation related adjustments | 14.2 | 9.1 | 3.7 | ||||||||||||||
| Unrecognized tax benefits, end of year | $ | 133.1 | $ | 130.1 | $ | 160.6 | |||||||||||
Repatriation and Unremitted Earnings
As of December 31, 2025, we have undistributed earnings of certain foreign subsidiaries that we have indefinitely reinvested, and on which we have not recognized deferred taxes. Estimating the amount of potential tax is not practicable because of the complexity and variety of assumptions necessary to compute the tax.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 28, 2017 | |
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.