INTEGRA LIFESCIENCES HOLDINGS CORPIART
INTEGRA LIFESCIENCES HOLDINGS CORP Income Taxes Disclosure
INCOME TAXES
Income before income taxes consisted of the following:
| Years Ended December 31, | |||||||||||||||||
| Dollars in thousands | 2025 | 2024 | 2023 | ||||||||||||||
| United States operations | $ | (469,208) | $ | (172,273) | $ | (31,649) | |||||||||||
| Foreign operations | (94,294) | 154,036 | 112,718 | ||||||||||||||
| Total | $ | (563,502) | $ | (18,237) | $ | 81,069 | |||||||||||
A reconciliation of the U.S. Federal statutory rate to the Company’s effective tax rate is as follows:
| Year Ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| Federal statutory rate | $ | (118,345) | 21.0 | % | |||||||
State income taxes, net of federal tax benefit (1) | $ | (5,571) | 1.0 | % | |||||||
| Foreign tax effects: | |||||||||||
| Switzerland: | |||||||||||
| Swiss IP Transfer | $ | 14,979 | (2.7) | % | |||||||
| Federal statutory tax rate difference | $ | 7,377 | (1.3) | % | |||||||
| Cantonal/communal rate difference | $ | (9,938) | 1.8 | % | |||||||
| Other | $ | 5,492 | (1.0) | % | |||||||
| Other foreign jurisdictions | $ | (2,381) | 0.4 | % | |||||||
| Non-taxable or non-deductible items: | |||||||||||
| Goodwill impairment | $ | 63,660 | (11.3) | % | |||||||
| Other | $ | (2,063) | 0.4 | % | |||||||
| Cross-border tax laws: | |||||||||||
| Global intangible low-taxed income | $ | 2,235 | (0.4) | % | |||||||
| Subpart F income | $ | 4,451 | (0.8) | % | |||||||
| Tax credits: | |||||||||||
| Foreign tax credit | $ | (1,792) | 0.3 | % | |||||||
| Research and development credit | $ | (6,707) | 1.2 | % | |||||||
| Valuation allowance | $ | 662 | (0.1) | % | |||||||
| Worldwide changes in prior year unrecognized tax benefits | $ | 913 | (0.2) | % | |||||||
| Effective Tax Rate | $ | (47,028) | 8.3 | % | |||||||
(1) State Taxes in California, Florida, Illinois, New Jersey, New York, and Tennessee made up the majority (greater than 50 percent) of the tax effect in this category.
| Years Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Federal statutory rate | 21.0 | % | 21.0 | % | ||||||||||
| Increase (decrease) in income taxes resulting from: | ||||||||||||||
| State income taxes, net of federal tax benefit | 15.3 | % | 2.9 | % | ||||||||||
| Benefit derived from foreign operations | 22.4 | % | (17.2) | % | ||||||||||
| Nondeductible meals and entertainment | (5.0) | % | 1.1 | % | ||||||||||
| Intercompany profit in inventory | 4.2 | % | 3.3 | % | ||||||||||
| Research and development credit | 24.1 | % | (5.7) | % | ||||||||||
| Nondeductible executive compensation & stock compensation shortfall | (19.7) | % | 2.3 | % | ||||||||||
Transaction and deal related costs | (4.1) | % | 3.3 | % | ||||||||||
| Changes in valuation allowances | (6.0) | % | 4.9 | % | ||||||||||
| Return to provision | 10.1 | % | (0.8) | % | ||||||||||
| Other | (0.4) | % | 1.3 | % | ||||||||||
| Effective tax rate | 61.9 | % | 16.4 | % | ||||||||||
Our effective tax rate was 8.3% and 61.9% of income before income taxes for the years ended December 31, 2025 and December 31, 2024, respectively.
In 2025, the Company’s effective tax rate was primarily driven by the goodwill impairment charge, as a portion of the charge is non-deductible for tax, the transfer of certain intellectual property, and the inclusion of Global Intangible Low-Taxed Income (“GILTI”) and the global minimum tax in certain foreign jurisdictions; offset by federal, state, and international tax benefits generated from operating losses and favorable prior year tax return positions.
In 2024, the Company’s effective tax rate was driven by federal, state, and international tax benefits generated from operating losses in certain jurisdictions, including a $4.4 million benefit from federal and state research tax credits, offset by the inclusion of GILTI.
In 2023, the Company’s effective tax rate was primarily driven by the inclusion of GILTI, offset by a $5.8 million income tax benefit related to a four-year tax credit received by a Swiss subsidiary, which can be used to offset cantonal and communal income and capital taxes during tax years 2024 through 2027. Any unused balance at the end of the 2027 tax period will be forfeited.
During 2025, the Company’s foreign operations generated a $30.7 million decrease in income tax expense when compared to the same period in 2024 due to geographic and business mix of taxable earnings and losses and the transfer of certain intellectual property, among other factors. The 2025 foreign effective tax rate is 12.6% compared to 12.3% in 2024.
Changes to income tax laws and regulations, in any of the tax jurisdictions in which the Company operates, could impact the effective tax rate. Various governments, both U.S. and non-U.S., are increasingly focused on tax reform and revenue-raising legislation. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes a number of significant provisions, including the permanent extension of certain expiring provisions of the 2017 Tax Cuts and Jobs Act. Additionally, the OBBBA contains changes to the capitalization of research and development expenses, accelerated fixed asset depreciation, and limitations on deductions for interest expense, among other provisions. The Company has evaluated the impact of the OBBBA on its financial statements and estimates the financial impact for the year ended December 31, 2025 to be immaterial.
Further, legislation in foreign jurisdictions may be enacted, in continued response to the ongoing base erosion and profit-sharing (“BEPS”) project led by the Organization for Economic Cooperation and Development (“OECD”). The OECD released model rules related to a new 15% global minimum tax regime (“Pillar 2”). A number of the jurisdictions that the Company operates in have adopted some form of the model rules, which became effective beginning in 2024. The Pillar 2 rules are complex and provide for delays for implementing the tax during the early transition years, if certain conditions are met.
The United States has not adopted Pillar 2, and as of December 31, 2025, the G7 countries announced an agreement to exempt U.S. companies from certain elements of the Pillar 2 framework. If this exemption (the “Pillar Two Side-by-Side Package”) is ultimately enacted into law in relevant jurisdictions, it is expected to be favorable for the Company. However, Pillar 2 remains in effect in other countries, and there is significant uncertainty regarding the implementation of the G7 agreement, the interpretation and consistent application of existing Pillar 2 rules, their interaction with national tax laws, and their consistency with current tax treaty obligations.
The Company is calculating an immaterial expense related to Pillar 2 tax liability for the year ending December 31, 2025. Related changes in U.S. and non-U.S. jurisdictions could have an adverse effect on the Company’s effective tax rate. The Company will continue to monitor legislative activity across its U.S. and non-U.S. jurisdictions.
The provision for income taxes consisted of the following:
| Years Ended December 31, | |||||||||||||||||
| Dollars in thousands | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 6,930 | $ | (257) | $ | 10,973 | |||||||||||
| State | 1,489 | 1,330 | 2,851 | ||||||||||||||
| Foreign | 10,817 | 8,365 | 11,389 | ||||||||||||||
| Total current | $ | 19,236 | $ | 9,438 | $ | 25,213 | |||||||||||
| Deferred: | |||||||||||||||||
| Federal | (36,751) | (27,148) | (19,060) | ||||||||||||||
| State | (6,865) | (4,093) | 93 | ||||||||||||||
| Foreign | (22,648) | 10,510 | 7,082 | ||||||||||||||
| Total deferred | $ | (66,264) | $ | (20,731) | $ | (11,885) | |||||||||||
| Provision for income taxes | $ | (47,028) | $ | (11,293) | $ | 13,328 | |||||||||||
The income tax effects of significant temporary differences that give rise to deferred tax assets and liabilities, shown before jurisdictional netting, are presented below:
| December 31, | |||||||||||
| Dollars in thousands | 2025 | 2024 | |||||||||
| Assets: | |||||||||||
| Doubtful accounts | $ | 3,404 | $ | 3,370 | |||||||
| Inventory related items | 30,718 | 34,731 | |||||||||
| Tax credits | 25,864 | 17,922 | |||||||||
| Accrued vacation | 2,513 | 2,447 | |||||||||
| Accrued bonus | 3,063 | 5,279 | |||||||||
| Stock compensation | 7,320 | 8,343 | |||||||||
| Deferred revenue | 4,919 | 4,206 | |||||||||
| Net operating loss carryforwards | 31,869 | 27,370 | |||||||||
| Capitalization of research and development expenses | 69,277 | 68,311 | |||||||||
| Unrealized foreign exchange loss | 22,818 | 8,655 | |||||||||
| Leases | 35,573 | 35,547 | |||||||||
| Other | 40,796 | 36,802 | |||||||||
| Total deferred tax assets | 278,134 | 252,983 | |||||||||
| Less valuation allowance | (22,603) | (15,504) | |||||||||
| Deferred tax assets after valuation allowance | $ | 255,531 | $ | 237,479 | |||||||
| Liabilities: | |||||||||||
| Intangible and fixed assets | (148,626) | (218,125) | |||||||||
| Unrealized foreign exchange gain | (6,317) | (11,280) | |||||||||
| Leases | (26,945) | (27,345) | |||||||||
| Other | (9,453) | (6,639) | |||||||||
| Total deferred tax liabilities | $ | (191,341) | $ | (263,389) | |||||||
| Total net deferred tax (liabilities) assets | $ | 64,190 | $ | (25,910) | |||||||
The 2017 U.S. Tax Cuts and Jobs Act (the “2017 Tax Act”) contained a provision which requires, for tax purposes, the capitalization and amortization of research and development expenses; effective for years beginning after December 31, 2021. The recently enacted OBBBA allows companies to deduct research and development expenses, reversing the related provision of the 2017 Tax Act. However, the Company continued to capitalize and amortize its research and development expenses in 2025. The Company’s deferred tax assets increased by $5.3 million and $10.4 million at December 31, 2025 and December 31, 2024 respectively within the table above, due to the capitalization of research and development expenses in relation to the 2017 Tax Act.
At December 31, 2025, the Company had net operating loss carryforwards of $46.7 million for federal income tax purposes, $142.8 million for foreign income tax purposes and $85.4 million for state income tax purposes to offset future taxable income. For the federal net operating loss carryforwards, $46.7 million will expire through 2037. For foreign net operating loss carryforwards, $118.9 million will expire through 2028, while the remaining $23.9 million have an indefinite carry forward period. The state net operating loss carryforwards expire through 2045.
The valuation allowance relates to deferred tax assets for certain items that will be deductible for income tax purposes under very limited circumstances and for which the Company believes it will not satisfy the more likely than not threshold for realization of the associated tax benefit. In the event that the Company determines that it would be able to realize more or less than the recorded amount of net deferred tax assets, an adjustment to the deferred tax asset valuation allowance would be recorded in the period such a determination is made.
The valuation allowance at December 31, 2025 increased by $7.1 million, as compared to 2024, primarily driven by a $3.7 million increase related to the Swiss federal and local tax credits and a $3.0 million increase related to U.S. state tax credits. The valuation allowance for 2024 had increased by $3.0 million, as compared to 2023, primarily driven by an increase related to the expiring Swiss federal tax credit.
| Balance at Beginning of Period | Charged to Costs and Expenses | Other | Deductions | Balance at End of Period | |||||||||||||||||||||||||
| Description | |||||||||||||||||||||||||||||
| Dollars in thousands | |||||||||||||||||||||||||||||
Year ended December 31, 2025 | |||||||||||||||||||||||||||||
Deferred tax assets valuation allowance | 22,357 | 7,445 | 22 | 400 | 30,224 | ||||||||||||||||||||||||
Year ended December 31, 2024 | |||||||||||||||||||||||||||||
| Deferred tax assets valuation allowance | 17,823 | 5,330 | (429) | (367) | 22,357 | ||||||||||||||||||||||||
Year ended December 31, 2023 | |||||||||||||||||||||||||||||
| Deferred tax assets valuation allowance | 14,672 | 3,069 | 26 | 56 | 17,823 | ||||||||||||||||||||||||
As of December 31, 2025, the Company has not provided deferred income taxes on unrepatriated earnings from foreign subsidiaries as they are deemed to be indefinitely reinvested unless there is a manner under which to remit the earnings with no material tax cost. The Company will repatriate foreign earnings when there is no need for reinvestment overseas and no material tax cost to bring the earnings back to the United States. Reinvestment considerations would include future acquisitions, transactions, and capital expenditure plans.
A reconciliation of the beginning and ending amount of uncertain tax benefits is as follows:
| Years Ended December 31, | |||||||||||||||||
| Dollars in thousands | 2025 | 2024 | 2023 | ||||||||||||||
| (In thousands) | |||||||||||||||||
| Balance, beginning of year | $ | 826 | $ | 812 | $ | 713 | |||||||||||
| Gross increases: | |||||||||||||||||
| Current year tax positions | — | — | — | ||||||||||||||
| Prior years' tax positions | 1,266 | 35 | 372 | ||||||||||||||
| Lapse of statute | (452) | (21) | (273) | ||||||||||||||
| Balance, end of year | $ | 1,640 | $ | 826 | $ | 812 | |||||||||||
Approximately $1.6 million of the balance at December 31, 2025 relates to uncertain tax positions that, if recognized, would affect the annual effective tax rate. The Company has no uncertain tax positions at December 31, 2025 related to tax positions for which it is reasonably possible that the amounts could be reduced during the twelve months following December 31, 2025.
The Company recognizes interest and penalties relating to uncertain tax positions in income tax expense. The Company recognized a minimal expense for the years ended December 31, 2025, 2024, and 2023. The Company had minimal interest and penalties accrued for the years ended December 31, 2025, 2024, and 2023.
The Company files Federal income tax returns, as well as multiple state, local and foreign jurisdiction tax returns. The Company is no longer subject to examinations of its U.S. consolidated Federal income tax returns by the Internal Revenue Service (“IRS”) through fiscal year 2019. All significant state and local matters have been concluded through fiscal year 2018. All significant foreign matters have been settled through fiscal 2018.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 26, 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.