HARLEY-DAVIDSON, INC.HOG
HARLEY-DAVIDSON, INC. Income Taxes Disclosure
Income Taxes
Income tax provision (benefit) for the years ended December 31, consists of the following (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 12,205 | $ | 66,505 | $ | 125,875 | |||||||||||
| State | 9,849 | 8,368 | 22,340 | ||||||||||||||
| Foreign | 23,380 | 23,366 | 53,674 | ||||||||||||||
| 45,434 | 98,239 | 201,889 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 38,947 | (27,938) | (18,781) | ||||||||||||||
| State | 37,665 | 7,511 | (6,209) | ||||||||||||||
| Foreign | 7,531 | (5,849) | (5,069) | ||||||||||||||
| 84,143 | (26,276) | (30,059) | |||||||||||||||
| $ | 129,577 | $ | 71,963 | $ | 171,830 | ||||||||||||
The components of Income before income taxes for the years ended December 31, were as follows (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 281,923 | $ | 369,870 | $ | 614,713 | |||||||||||
| Foreign | 176,808 | 147,268 | 252,163 | ||||||||||||||
| $ | 458,731 | $ | 517,138 | $ | 866,876 | ||||||||||||
The table below provides the updated requirements of ASU 2023-09 for 2025 related to the Company's effective tax rate. See Note 1 Summary of Significant Accounting Policies — Accounting Standards Recently Adopted section for additional details on the adoption of ASU 2023-09.
Income tax provision differs from the amount that would be provided by applying the statutory U.S. corporate income tax rate for the years ended December 31, due to the following items (in thousands):
| 2025 | |||||||||||
United states statutory tax rate | $ | 96,334 | 21.0% | ||||||||
State and local income taxes, net of federal income tax effect(a) | 29,913 | 6.5 | |||||||||
Foreign tax effects | |||||||||||
China | |||||||||||
Valuation allowance adjustments | 5,421 | 1.2 | |||||||||
Other | (184) | — | |||||||||
Thailand | |||||||||||
BOI | (15,120) | (3.3) | |||||||||
Global minimum tax | 8,838 | 1.9 | |||||||||
Other | (2,658) | (0.6) | |||||||||
Other foreign jurisdictions | 147 | — | |||||||||
Effect of changes in tax laws or rates enacted in the current period | — | — | |||||||||
Effect of cross-border tax laws | |||||||||||
Global intangible low-taxed income | 6,679 | 1.5 | |||||||||
Other | 761 | 0.2 | |||||||||
Tax credits | |||||||||||
Foreign tax credit | (10,952) | (2.4) | |||||||||
Research and development credit | (9,597) | (2.1) | |||||||||
Changes in valuation allowances | 15,956 | 3.5 | |||||||||
Nontaxable or nondeductible items | |||||||||||
Nontaxable dividends | (12,285) | (2.7) | |||||||||
Other | 4,392 | 1.0 | |||||||||
Changes in unrecognized tax benefits | 4,978 | 1.1 | |||||||||
Other adjustments | |||||||||||
Intercompany profit in inventory | 7,243 | 1.6 | |||||||||
Other | (289) | (0.2) | |||||||||
Effective tax rate | $ | 129,577 | 28.2% | ||||||||
(a)State taxes in Wisconsin made up the majority (greater than 50%) of the tax effect in this category.
The Company's effective tax rate of 28.2% for the year ended December 31, 2025 was primarily driven by an increase in federal, state and foreign valuation allowances and a global minimum tax provision, partially offset by tax benefits related to federal tax credits and Thailand tax holidays.
On July 4, 2025, H.R. 1, the One Big Beautiful Bill Act (the OBBB Act), was enacted in the United States. The Act introduced several tax law changes relevant to the manufacturing industry. Key provisions include the restoration of 100% bonus depreciation for qualified property, expanded interest deductibility under Internal Revenue Code (IRC) Section 163(j) and other international tax reforms affecting global supply chains and cross‑border operations. The OBBB Act also reinstates immediate expensing for domestic research and development expenditures for tax years beginning after December 31, 2024, reversing prior rules that required capitalization and amortization of such costs. These provisions do not have a material impact on the Company's effective tax rate for the periods presented.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
| 2024 | 2023 | ||||||||||
Provision at statutory rate | $ | 108,599 | $ | 182,044 | |||||||
| State taxes, net of federal benefit | 10,003 | 21,659 | |||||||||
| Foreign rate differential | 2,196 | 7,887 | |||||||||
| Foreign derived intangible income | (1,744) | (8,669) | |||||||||
| Research and development credit | (20,706) | (23,130) | |||||||||
| Unrecognized tax benefits including interest and penalties | (2,026) | (9,210) | |||||||||
| Valuation allowance adjustments | 10,797 | 7,345 | |||||||||
| State credits | (4,526) | (8,035) | |||||||||
| Global intangible low-taxed income | 2,605 | 474 | |||||||||
Return to provision adjustments | (5,421) | 1,057 | |||||||||
| Executive compensation limitation | 5,404 | 8,712 | |||||||||
| Other foreign inclusions | (13,601) | 1,563 | |||||||||
Tax incentives | (16,476) | (12,996) | |||||||||
| Other | (3,141) | 3,129 | |||||||||
Income tax provision | $ | 71,963 | $ | 171,830 | |||||||
The Company's effective tax rates of 13.9% and 19.8% for the years ended December 31, 2024 and December 31, 2023, respectively, reflect tax benefits related to federal research and development tax credits and Thailand tax holidays.
The 2017 Tax Cuts and Jobs Act subjects U.S. shareholders to current tax on global intangible low-taxed income (GILTI) earned by certain foreign subsidiaries for which a company can elect to either recognize deferred taxes or to provide tax expense in the year incurred. The Company has elected to account for GILTI in the year the tax is incurred.
The Company qualifies for certain tax holidays in Thailand if certain employment and manufacturing criteria are met. The impact of the tax holiday decreased foreign taxes by $15.1 million, $16.6 million and $13.0 million in 2025, 2024 and 2023, respectively, and the tax holidays have expected expiration periods between 2026 and 2027. The benefit of the tax holiday on net income per share (diluted) was $0.12, $0.12 and $0.09 in 2025, 2024 and 2023, respectively.
The Company continues to monitor the implementation of the global minimum tax provision pursuant to OECD Pillar Two GloBE rules (Pillar Two) in jurisdictions in which it operates. The Company has included a provision of $8.8 million related to the global minimum tax for Thailand in its consolidated financial statements.
The principal components of the Company’s deferred income tax assets and liabilities as of December 31, include the following (in thousands):
| 2025 | 2024 | ||||||||||
| Deferred income tax assets: | |||||||||||
| Accruals not yet tax deductible | $ | 79,630 | $ | 144,331 | |||||||
| Stock compensation | 9,949 | 11,779 | |||||||||
Net operating loss and tax credit carryforwards | 94,910 | 82,027 | |||||||||
| Amortization of research and experimental costs | 100,635 | 100,880 | |||||||||
| Other | 62,299 | 62,889 | |||||||||
| 347,423 | 401,906 | ||||||||||
| Valuation allowance | (94,580) | (59,313) | |||||||||
| 252,843 | 342,593 | ||||||||||
| Deferred income tax liabilities: | |||||||||||
| Depreciation, tax in excess of book | (25,879) | (51,107) | |||||||||
| Pension and postretirement healthcare plan obligations | (121,258) | (90,589) | |||||||||
| Withholding tax | (5,246) | (15,915) | |||||||||
| Other | (32,174) | (26,045) | |||||||||
| (184,557) | (183,656) | ||||||||||
| $ | 68,286 | $ | 158,937 | ||||||||
The Company reviews its deferred income tax asset valuation allowances on a quarterly basis, or whenever events or changes in circumstances indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred income tax asset is considered, along with any positive or negative evidence, including tax law changes. Since future financial results and tax law may differ from previous estimates, periodic adjustments to the Company’s valuation allowances may be necessary.
The Company's gross state net operating loss carryforwards were as follows at December 31 (in thousands):
| Year of Expiration | 2025 | 2024 | ||||||||||||
| 2031 | $ | 238,682 | $ | 238,682 | ||||||||||
| 2032 | 12 | 12 | ||||||||||||
| 2033 | 46 | 46 | ||||||||||||
| 2034 | 107 | 108 | ||||||||||||
| 2035 | 1,085 | 1,085 | ||||||||||||
| 2036 | 60 | 60 | ||||||||||||
| 2037 | 188 | 187 | ||||||||||||
| 2038 | 824 | 824 | ||||||||||||
| 2039 | 11,285 | 11,285 | ||||||||||||
| 2040 | 37,679 | 34,354 | ||||||||||||
| 2041 | 2,135 | 2,135 | ||||||||||||
| 2042 | 347 | 347 | ||||||||||||
| 2043 | 480 | — | ||||||||||||
| 2044 | 17,462 | — | ||||||||||||
| 2045 | 4,277 | — | ||||||||||||
| Indefinite | 7,280 | 7,280 | ||||||||||||
| $ | 321,949 | $ | 296,405 | |||||||||||
The Company also had Wisconsin research and development credit carryforwards of $59.1 million at December 31, 2025, expiring in 2026-2040.
At December 31, 2025, the Company had a deferred tax asset of $61.5 million related to its state net operating loss and Wisconsin research and development credit carryforwards and a deferred tax asset of $17.4 million related to foreign net operating losses.
The Company's valuation allowance was $94.6 million at December 31, 2025 and included $60.9 million related to state net operating loss and Wisconsin research and development credit carryforwards, $17.7 million related to foreign net operating loss carryforwards and other foreign deferred tax assets and $16.0 million related to other deferred tax assets. The change in the valuation allowance from prior year included an increase of $17.4 million related to state net operating loss and Wisconsin research and development credit carryforwards, an increase of $16.0 million related to foreign tax credits, and a $1.9 million increase related to foreign operations.
The Company recognizes interest and penalties related to unrecognized tax benefits in Income tax provision (benefit). Changes in the Company’s gross liability for unrecognized tax benefits, excluding interest and penalties, were as follows (in thousands):
| 2025 | 2024 | ||||||||||
| Unrecognized tax benefits, beginning of period | $ | 16,179 | $ | 18,214 | |||||||
| Increase in unrecognized tax benefits for tax positions taken in a prior period | 1,822 | 3,818 | |||||||||
| Decrease in unrecognized tax benefits for tax positions taken in a prior period | — | (3,773) | |||||||||
| Increase in unrecognized tax benefits for tax positions taken in the current period | 1,148 | 2,473 | |||||||||
| Statute lapses | (21) | (3,800) | |||||||||
| Settlements with taxing authorities | (971) | (753) | |||||||||
| Unrecognized tax benefits, end of period | $ | 18,157 | $ | 16,179 | |||||||
The amount of unrecognized tax benefits as of December 31, 2025 and 2024 that, if recognized, would affect the effective tax rate was $14.1 million and $10.3 million, respectively.
The total gross amount of benefit related to interest and penalties associated with unrecognized tax benefits recognized in the Consolidated statements of operations was a net expense of $1.0 million and $0.7 million during 2025 and 2024, respectively, and a net benefit of $8.7 million during 2023.
The total gross amount of interest and penalties associated with unrecognized tax benefits recognized at December 31, 2025 and 2024 in the Consolidated balance sheets was $8.9 million and $7.1 million, respectively.
The Company does not expect a significant increase or decrease to the total amounts of unrecognized tax benefits related to continuing operations during the fiscal year ending December 31, 2026. However, the Company is under regular audit by tax authorities. The Company believes that it has appropriate support for the positions taken on its tax returns and that its annual tax provision includes amounts sufficient to pay any assessments. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.
The Company or one of its subsidiaries files income tax returns in the U.S. federal and Wisconsin state jurisdictions and various other state and foreign jurisdictions. The Company is no longer subject to income tax examinations for Wisconsin state income taxes before 2020 or for U.S. federal income taxes before 2019. In all other jurisdictions, tax periods prior to 2018 are closed.
The following is a schedule of cash paid for income taxes (in thousands):
| 2025 | 2024 | 2023 | |||||||||||||||
Jurisdiction | |||||||||||||||||
U.S. Federal | $ | 9,686 | $ | — | $ | — | |||||||||||
State: | |||||||||||||||||
Pennsylvania | 2,168 | — | — | ||||||||||||||
State - Other | 10,622 | — | — | ||||||||||||||
Foreign: | |||||||||||||||||
Germany | 2,641 | — | — | ||||||||||||||
Singapore | 2,485 | — | — | ||||||||||||||
Thailand | 7,815 | — | — | ||||||||||||||
Foreign - Other | 3,941 | — | — | ||||||||||||||
Total cash paid for income taxes (net of refunds) | $ | 39,358 | $ | — | $ | — | |||||||||||
Total cash paid for income taxes (prior to ASU 2023-09) | $ | — | $ | 111,117 | $ | 237,658 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 19, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 21, 2018 | |
| 2016 | Feb 21, 2017 | |
| 2015 | Feb 18, 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.