HNI CORPHNI
HNI CORP Income Taxes Disclosure
Income Taxes
The components for income before income taxes are as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 94.5 | $ | 180.1 | $ | 64.1 | |||||||||||
| Foreign | (3.7) | (0.8) | 0.7 | ||||||||||||||
| Total income before income taxes | $ | 90.8 | $ | 179.3 | $ | 64.8 | |||||||||||
Significant components of the provision for income taxes are as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (4.7) | $ | 44.0 | $ | 11.6 | |||||||||||
| State | 4.3 | 7.2 | 4.1 | ||||||||||||||
| Foreign | 3.2 | 1.9 | 0.9 | ||||||||||||||
| Current provision | 2.8 | 53.1 | 16.6 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 30.1 | (12.0) | (2.0) | ||||||||||||||
| State | 3.0 | (1.3) | 1.1 | ||||||||||||||
| Foreign | 0.6 | 0.0 | (0.1) | ||||||||||||||
| Deferred provision | 33.7 | (13.2) | (1.0) | ||||||||||||||
| Total | |||||||||||||||||
| Federal | 25.4 | 32.0 | 9.6 | ||||||||||||||
| State | 7.3 | 5.9 | 5.2 | ||||||||||||||
| Foreign | 3.8 | 1.9 | 0.8 | ||||||||||||||
| Total income tax expense | $ | 36.5 | $ | 39.8 | $ | 15.6 | |||||||||||
The differences between the actual tax expense and tax expense computed at the statutory United States federal tax rate, along with the corresponding percentage of income before income tax, are attributable to the following:
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| US federal statutory income tax rate | $ | 19.1 | 21.0 | % | $ | 37.7 | 21.0 | % | $ | 13.6 | 21.0 | % | ||||||||||||||
| Domestic federal | ||||||||||||||||||||||||||
| Tax credits | ||||||||||||||||||||||||||
| Research and development tax credits | (5.0) | (5.5) | % | (6.5) | (3.6) | % | (6.3) | (9.7) | % | |||||||||||||||||
| Foreign tax credits | (2.0) | (2.2) | % | — | — | % | — | — | % | |||||||||||||||||
| Other tax credits | (1.0) | (1.2) | % | (0.1) | (0.1) | % | (0.2) | (0.3) | % | |||||||||||||||||
| Nontaxable and nondeductible items | ||||||||||||||||||||||||||
| Equity based compensation | (1.5) | (1.6) | % | 0.3 | 0.2 | % | 0.4 | 0.6 | % | |||||||||||||||||
| Executive compensation limitations | 3.1 | 3.4 | % | 3.0 | 1.7 | % | 1.7 | 2.6 | % | |||||||||||||||||
| Acquisition Costs | 2.6 | 2.9 | % | — | — | % | 1.8 | 2.7 | % | |||||||||||||||||
| Excess parachute payments | 11.2 | 12.3 | % | — | — | % | — | — | % | |||||||||||||||||
| Other | 0.1 | 0.1 | % | (0.4) | (0.2) | % | 0.0 | 0.0 | % | |||||||||||||||||
| Cross-border tax laws | 0.0 | 0.0 | % | (0.3) | (0.2) | % | (0.2) | (0.3) | % | |||||||||||||||||
| Domestic state and local income taxes, net of federal effect (1) | 5.8 | 6.4 | % | 4.3 | 2.4 | % | 3.9 | 6.0 | % | |||||||||||||||||
| Foreign tax effects | ||||||||||||||||||||||||||
| Mexico | 1.7 | 1.9 | % | 1.5 | 0.8 | % | 0.7 | 1.0 | % | |||||||||||||||||
| Other | 2.5 | 2.7 | % | 0.1 | 0.1 | % | 0.0 | 0.0 | % | |||||||||||||||||
| Worldwide changes in unrecognized tax benefits | (0.1) | (0.1) | % | 0.3 | 0.1 | % | 0.1 | 0.2 | % | |||||||||||||||||
| Total income tax expense | $ | 36.5 | 40.2 | % | $ | 39.8 | 22.2 | % | $ | 15.6 | 24.1 | % | ||||||||||||||
(1):The states that contribute to the majority (greater than 50%) of the tax effect in this category include California, Iowa, Illinois, Maryland, Minnesota, Pennsylvania and Texas for 2025; California, Illinois, Maryland, New Jersey, Pennsylvania, Texas and Wisconsin for 2024; California, Illinois, Maryland, New Jersey, Pennsylvania and Texas for 2023
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The amount of cash taxes paid by or refunded to the Corporation are as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| US federal | $ | 17.1 | $ | 40.0 | $ | 14.3 | |||||||||||
| US state and local | 4.3 | 4.6 | 10.0 | ||||||||||||||
| Foreign | |||||||||||||||||
| Malaysia | (1.2) | * | * | ||||||||||||||
| Mexico | 1.9 | * | * | ||||||||||||||
| Other | 1.7 | 1.9 | 0.8 | ||||||||||||||
| Income taxes, net of amounts refunded | $ | 23.8 | $ | 46.5 | $ | 25.0 | |||||||||||
*Cash taxes paid during the year in these jurisdictions are not disaggregated as they were less than 5%.
Significant components of the Corporation’s deferred tax liabilities and assets are as follows:
| January 3, 2026 | December 28, 2024 | ||||||||||
| Deferred Taxes | |||||||||||
| Reserves and allowances | $ | 5.1 | $ | 0.8 | |||||||
| Compensation | 46.0 | 11.1 | |||||||||
| Stock-based compensation | 16.6 | 5.6 | |||||||||
| Accrued employee benefit plan | 14.2 | 4.1 | |||||||||
| Warranty accrual | 10.6 | 4.6 | |||||||||
| Tax loss and tax credit carryforwards | 90.7 | 9.6 | |||||||||
| Lease liability | 75.9 | 37.1 | |||||||||
| Research and development capitalization | 17.4 | 43.0 | |||||||||
| Other - net | 16.5 | 2.8 | |||||||||
| Total deferred tax assets | $ | 293.0 | $ | 118.8 | |||||||
| Deferred income | (4.7) | (5.2) | |||||||||
| Inventory adjustments | (0.9) | (4.7) | |||||||||
| Goodwill and other intangible assets | (182.9) | (64.6) | |||||||||
| Prepaid expenses | (12.3) | (8.1) | |||||||||
| Right of use asset | (72.3) | (33.2) | |||||||||
| Tax over book depreciation | (143.9) | (65.7) | |||||||||
| Total deferred tax liabilities | $ | (417.1) | $ | (181.5) | |||||||
| Valuation allowance | (19.1) | (7.9) | |||||||||
| Total net deferred tax liabilities | $ | (143.2) | $ | (70.6) | |||||||
| Long-term net deferred tax assets | 37.7 | 1.1 | |||||||||
| Long-term net deferred tax liabilities | (180.9) | (71.6) | |||||||||
| Total net deferred tax liabilities | $ | (143.2) | $ | (70.6) | |||||||
The valuation allowance, which primarily relates to acquired deferred tax assets, is as follows:
| Balance at beginning of period | Expenses (benefits) | Impact of business combination | Balance at end of period | |||||||||||||||||||||||
| Year ended January 3, 2026 | $ | 7.9 | $ | (2.3) | $ | 13.6 | $ | 19.1 | ||||||||||||||||||
| Year ended December 28, 2024 | $ | 9.8 | $ | 0.3 | $ | (2.2) | $ | 7.9 | ||||||||||||||||||
| Year ended December 30, 2023 | $ | 4.2 | $ | (0.9) | $ | 6.5 | $ | 9.8 | ||||||||||||||||||
The current year net increase in the valuation allowance of $11.3 million primarily relates to the acquisition of Steelcase foreign tax losses and credits. The prior year net decrease in the valuation allowance of $1.9 million primarily relates to the adjustment to the amount of Kimball International, Inc capital loss carryforward.
As of January 3, 2026, the Corporation had $33.4 million, $3.7 million and $32.2 million of federal, state, and foreign net operating losses, respectively. The Corporation also had $15.2 million, $3.5 million and $2.0 million of federal, state, and foreign tax credit carryforwards, respectively. Additional carryforwards for capital losses and other U.S. tax items totaled $2.0 million. These tax carryforwards expire over the next twenty years.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| 2025 | 2024 | ||||||||||
| Balance at beginning of period | $ | 3.3 | $ | 3.0 | |||||||
| New positions taken in a current period | 0.6 | 0.9 | |||||||||
| Impact of business combinations | 4.1 | — | |||||||||
| Decrease due to lapse of statute of limitations | (0.6) | (0.6) | |||||||||
| Balance at end of period | $ | 7.4 | $ | 3.3 | |||||||
These increases or decreases in the unrecognized tax benefits would be due to new positions that may be taken on income tax returns, settlement of tax positions, and the closing of statutes of limitation. It is not expected any of the changes will be material individually, or in total, to the results or financial position of the Corporation.
The Corporation recognizes interest related to unrecognized tax benefits in interest expense, and penalties in operating expenses, consistent with the recognition of these items in prior reporting periods. The expenses and liabilities recorded for interest and penalties as of and for the years ended January 3, 2026 and December 28, 2024 are immaterial.
Tax years 2022 through 2024 remain open for examination by the Internal Revenue Service. Tax years 2021 through 2024 remain open for examination in various state and foreign jurisdictions, respectively. The Corporation is currently under federal examination for tax year 2023 and a state examination for open tax years but does not expect any adjustments.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law. The OBBBA includes significant provisions, including permanent extensions of certain expiring provisions of the Tax Cuts and Jobs Act, modification to the international tax framework and restoration of favorable tax treatment for certain business provisions. These changes include allowing accelerated tax deductions for qualified business property and immediate expensing of research and development expenditures. The legislation has multiple effective dates, with some provisions effective in 2025 and other provisions scheduled to become effective on various dates through 2027. For 2025, the Corporation plans to elect the accelerated tax deductions for qualified business property and expensing of research and development expenditures which are expected to decrease cash payments for U.S. federal income taxes. The Corporation has evaluated the impact of the OBBBA on deferred tax assets and liabilities, including adjustments to valuation allowances, and has reflected these effects in the consolidated financial statements for 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Mar 3, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Mar 1, 2022 | |
| 2021 | Mar 2, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 23, 2018 | |
| 2016 | Feb 29, 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.