ICU MEDICAL INC/DEICUI
ICU MEDICAL INC/DE Income Taxes Disclosure
INCOME TAXES
Income from continuing operations before taxes consisted of the following (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| United States | $ | (31,495) | $ | (116,024) | $ | (136,980) | ||||||||||||||
| Foreign | 35,853 | 50,012 | 58,681 | |||||||||||||||||
| $ | 4,358 | $ | (66,012) | $ | (78,299) | |||||||||||||||
The provision (benefit) for income taxes consisted of the following (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | (10,147) | $ | 16,589 | $ | (8,235) | ||||||||||||||
| State | 1,627 | 4,256 | 5,035 | |||||||||||||||||
| Foreign | 24,731 | 25,164 | 24,500 | |||||||||||||||||
| $ | 16,211 | $ | 46,009 | $ | 21,300 | |||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | $ | (1,947) | $ | 1,294 | $ | (43,042) | ||||||||||||||
| State | (2,288) | 14,850 | (14,657) | |||||||||||||||||
| Foreign | (9,539) | (10,477) | (12,245) | |||||||||||||||||
| (13,774) | 5,667 | (69,944) | ||||||||||||||||||
| $ | 2,437 | $ | 51,676 | $ | (48,644) | |||||||||||||||
We have accrued for tax contingencies for potential tax assessments, and in 2025 we recognized a $1.0 million net decrease, most of which related to federal, state, and foreign tax reserves net of the release of various federal and foreign tax reserves.
During 2025, on a prospective basis, we adopted ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes Disclosures. The following table is a reconciliation of the provision for income taxes at the U.S. federal statutory rate of 21% to our effective tax rate for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023-09:
| Year Ended December 31, | ||||||||||||||
| 2025 | ||||||||||||||
| (In thousands, except percentages) | Amount | Percent | ||||||||||||
| U.S. federal statutory tax rate | $ | 915 | 21.0 | % | ||||||||||
| State and local income taxes, net of federal income tax effect* | 479 | 11.0 | % | |||||||||||
| Foreign tax effects: | ||||||||||||||
| Costa Rica | ||||||||||||||
| Statutory tax rate differences between Costa Rica and United Sates | (8,645) | (198.4) | % | |||||||||||
| Other foreign jurisdictions | 6,703 | 153.8 | % | |||||||||||
| Effect of cross-border tax laws | 810 | 18.6 | % | |||||||||||
| Tax credits: | ||||||||||||||
| Research and development tax credits | (3,606) | (82.8) | % | |||||||||||
| Changes in valuation allowances | 6,193 | 142.1 | % | |||||||||||
| Nontaxable or nondeductible items: | ||||||||||||||
| Section 162(m) | 6,353 | 145.8 | % | |||||||||||
| Other | 936 | 21.5 | % | |||||||||||
| Changes in unrecognized tax benefits | (6,508) | (149.4) | % | |||||||||||
| Other adjustments | (1,193) | (27.4) | % | |||||||||||
| Total provision for income taxes | $ | 2,437 | 55.8 | % | ||||||||||
___________________________
*For the year ended December 31, 2025, state and local income taxes in Minnesota made up the majority (greater than 50 percent) of the tax effect in this category.
The following table is a reconciliation of the provision for income taxes at the U.S. federal statutory rate of 21% to our effective tax rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU No. 2023-09:
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| (In thousands, except percentages) | Amount | Percent | Amount | Percent | ||||||||||||||||||||||
| U.S. federal statutory tax rate | $ | (13,862) | 21.0 | % | $ | (16,443) | 21.0 | % | ||||||||||||||||||
| State income taxes, net of federal income tax effect | 701 | (1.1) | % | (6,057) | 7.7 | % | ||||||||||||||||||||
| Tax credits | (10,985) | 16.6 | % | (9,824) | 12.5 | % | ||||||||||||||||||||
| Global intangible low-taxed income | 2,977 | (4.5)% | (2,658) | 3.4% | ||||||||||||||||||||||
| Foreign income tax differential | (4,231) | 6.4 | % | (2,506) | 3.2 | % | ||||||||||||||||||||
| Stock-based compensation | 2,824 | (4.3) | % | (289) | 0.4 | % | ||||||||||||||||||||
| Foreign-derived intangible income | (3,756) | 5.7 | % | (3,299) | 4.2 | % | ||||||||||||||||||||
| Contingent consideration | (838) | 1.3 | % | (3,407) | 4.4 | % | ||||||||||||||||||||
| Section 162(m) | 1,880 | (2.8) | % | 3,268 | (4.2) | % | ||||||||||||||||||||
| Tax reserve releases | (2,216) | 3.3 | % | (6,884) | 8.8 | % | ||||||||||||||||||||
| Legal settlement | (2,100) | 3.2 | % | — | — | % | ||||||||||||||||||||
| Valuation allowance | 81,713 | (123.8) | % | — | — | % | ||||||||||||||||||||
| Other | (431) | 0.7 | % | (545) | 0.7 | % | ||||||||||||||||||||
| Total provision (benefit) for income taxes | $ | 51,676 | (78.3) | % | $ | (48,644) | 62.1 | % | ||||||||||||||||||
Tax credits in 2024 and 2023 consist principally of research and developmental tax credits.
The components of our deferred income tax assets (liabilities) are as follows (in thousands):
| As of December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred tax asset: | ||||||||||||||
| Accruals/other | $ | 45,020 | $ | 41,947 | ||||||||||
| Acquired future tax deductions | 7,606 | 7,869 | ||||||||||||
| Stock-based compensation | 4,650 | 3,940 | ||||||||||||
| Tax credits | 22,477 | 17,068 | ||||||||||||
| Inventory reserves | 20,100 | 25,015 | ||||||||||||
| Section 163(j) - interest expense limitation | 25,153 | 27,078 | ||||||||||||
| Chargebacks, discounts, customer concessions | 32,759 | 52,709 | ||||||||||||
| Capitalized research and development | 66,396 | 56,975 | ||||||||||||
| Valuation allowance | (102,706) | (90,950) | ||||||||||||
| $ | 121,455 | $ | 141,651 | |||||||||||
| Deferred tax liability: | ||||||||||||||
| State income taxes | $ | 5,525 | $ | 5,886 | ||||||||||
| Depreciation and amortization | 127,795 | 160,368 | ||||||||||||
| $ | 133,320 | $ | 166,254 | |||||||||||
| Deferred tax (liability) asset, net | $ | (11,865) | $ | (24,603) | ||||||||||
The Company regularly assesses the realizability of deferred tax assets and records a valuation allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. In assessing the realizability of our deferred tax assets, we weigh all available positive and negative evidence. This evidence includes, but is not limited to, historical earnings, scheduled reversal of taxable temporary differences, tax planning strategies and projected future taxable income. Due to the weight of objectively verifiable negative evidence, the Company recorded a change to the valuation allowance against certain U.S. federal and state deferred tax assets, resulting in a $8.7 million tax expense and $2.8 million foreign currency translation and derivative instrument adjustments, for the tax years ending December 31, 2025. The significant piece of objectively verifiable negative evidence evaluated was the recent U.S. cumulative losses. Our ability to use our deferred tax assets depends on the amount of taxable income in future periods.
Tax Holidays and Carryforwards
The Company has income tax net operating loss ("NOL") carryforwards related to our foreign operations of approximately $106.8 million which will expire at various dates from 2026 to indefinite carryforward periods. We have recorded a net deferred tax asset of $7.3 million, $27.7 million gross deferred tax asset net of tax reserves of $20.4 million, related to our foreign NOL carryforwards. The deferred tax assets recognized for these foreign NOLs are presented net of tax reserves. We believe that it is more likely than not that the benefit from certain foreign NOL carryforwards will not be realized. In recognition of this risk, we have provided a valuation allowance of $6.3 million on the $7.3 million net deferred tax assets related to these foreign NOL carryforwards.
Other carryforwards include state research and development (“R&D”) tax credit carryforwards. We have recorded a net deferred tax asset of $21.5 million, $31.5 million gross deferred tax asset net of tax reserves of $10.0 million. We believe that it is more likely than not that the benefit from certain state R&D tax credit carryforwards will not be realized. A valuation allowance of $18.1 million has been provided on the $21.5 million of state R&D credit carryforwards. The majority of the state R&D credit carryforwards have an indefinite carryforward period.
A substantial portion of our manufacturing operations in Costa Rica operate under various tax holiday and tax incentive programs due to expire in whole or in part in 2029. Certain of the holidays may be extended if specific conditions are met. The net impact of these tax holiday and tax incentives was an increase to our net earnings by $12.5 million or $0.51 per diluted share in 2025 and by $11.1 million or $0.45 per diluted share in 2024.
Foreign currency translation and derivative instrument adjustments, and related tax effects, are an element of “other comprehensive income” and are not included in net income.
As of December 31, 2025, we have estimated $349 million of undistributed foreign earnings and profits. Such earnings were previously subject to U.S. tax as a result of the Tax Act and much of any future remittances would generally be subject to no U.S. tax as a result of dividends received deductions and/or foreign tax credit relief. We intend to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S. in those jurisdictions in which we incur significant additional costs upon repatriation of such amounts.
We are subject to taxation in the U.S. and various states and foreign jurisdictions. Our U.S. federal income tax returns for tax years 2022 and forward are subject to examination by the Internal Revenue Service. Our principal state income tax returns for tax years 2012 and forward are subject to examination by the state tax authorities. The total gross amount of unrecognized tax benefits as of December 31, 2025 was $71.8 million which, if recognized, would impact the effective tax rate. We believe that adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax examinations cannot be predicted with certainty. We recognize accrued interest and penalties related to unrecognized tax benefits as a component of income tax expense. We recognized $0.6 million of interest expense and $0.1 million of penalties in income tax benefit during 2025 and released $0.8 million of interest expense and $0.6 million of penalties in 2025. In total, we have accrued for interest and penalties of $2.4 million and $1.0 million, respectively as of December 31, 2025, and $2.6 million and $1.6 million, respectively, as of December 31, 2024.
The following table summarizes our cumulative gross unrecognized tax benefits (in thousands):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Beginning balance | $ | 72,819 | $ | 78,558 | $ | 54,053 | ||||||||||||||
| Increases to prior year tax positions | 2,373 | 1,945 | 2,347 | |||||||||||||||||
| Increases due to acquisitions | — | |||||||||||||||||||
| Increases to current year tax positions | 4,778 | 4,441 | 34,607 | |||||||||||||||||
| Decreases to prior year tax positions | (851) | (406) | (2,455) | |||||||||||||||||
| Decrease related to lapse of statute of limitations | (7,080) | (10,062) | (9,591) | |||||||||||||||||
| Decrease related to settlements with tax authorities | (78) | (1,133) | (403) | |||||||||||||||||
| Decrease related to exchange rate fluctuations | (146) | (524) | — | |||||||||||||||||
| Ending balance | $ | 71,815 | $ | 72,819 | $ | 78,558 | ||||||||||||||
In December 2022, the European Union (EU) agreed to implement Pillar Two, the OECD’s global minimum tax rate of 15% for multinationals that meet a global revenue threshold. All of the EU countries and some of the non-EU countries in which we operate have enacted or have announced plans to enact legislation to adopt Pillar Two. The Pillar Two legislation has been effective since our fiscal year beginning January 1, 2024. For fiscal year 2025, we considered the impact of Pillar Two in our tax provision and effective tax rate. However, the Pillar Two rules continue to evolve and their application may alter our tax obligations in certain countries where we operate for fiscal periods beyond 2025 as we continue to assess the impact of tax legislation in these jurisdictions.
On July 4, 2025, the U.S. enacted H.R. 1 "A bill to provide for reconciliation pursuant to Title II of H. Con. Res. 14", commonly referred to as the One Big Beautiful Bill Act (“OBBBA”). The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We will assess its future impact on our consolidated financial statements as additional guidance becomes available as uncertainty remains regarding the timing and interpretation by tax authorities in affected jurisdictions. To the extent known, the impact is included in our tax provision and effective tax rate for the year ended December 31, 2025.
Cash Taxes Paid
We adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025 and have included the following table as a result of our adoption, which presents income taxes paid (net of refunds received) for the year ended December 31, 2025:
| Year Ended December 31, 2025 | ||||||||
| Federal | $ | 8,949 | ||||||
| State | 4,245 | |||||||
| Foreign: | ||||||||
| Italy | 7,230 | |||||||
| Japan | 2,158 | |||||||
| Netherlands | 1,989 | |||||||
| Other | 4,305 | |||||||
| Ending Balance | 28,876 | |||||||
Below is a summary of income taxes paid for the years ended December 31, 2024 and December 31, 2023:
| As of December 31, | |||||||||||||||||
| 2024 | 2023 | ||||||||||||||||
| Cash paid during the year for: | |||||||||||||||||
| Income taxes, net of refunds | $ | 25,253 | $ | 35,809 | |||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 25, 2022 | |
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.