IDEXX LABORATORIES INC /DEIDXX
IDEXX LABORATORIES INC /DE Income Taxes Disclosure
INCOME TAXES
The provision for income taxes is determined using the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the estimated future tax effects of temporary differences between book and tax treatment of assets and liabilities and carryforwards to the extent they are realizable. We record a valuation allowance to reduce our deferred tax assets to the amount that is more-likely-than-not to be realized. In assessing the need for a valuation allowance, we consider future taxable income and ongoing prudent and feasible tax planning strategies. In the event that we determine that we would be able to realize our deferred tax assets in the future in excess of the net recorded amount, a reduction of the valuation allowance would increase income in the period such determination was made. Likewise, should we determine that we would not be able to realize all or part of our net deferred tax asset in the future, a reduction to the deferred tax asset would be charged to income in the period such determination was made.
We record a liability for uncertain tax positions that do not meet the more-likely-than-not standard as prescribed by U.S. GAAP for income tax accounting. We record tax benefits for only those positions that we believe will more-likely-than-not be sustained. Unrecognized tax benefits are the differences between tax positions taken, or expected to be taken, in tax returns, and the benefits recognized for accounting purposes. We classify uncertain tax positions as long-term liabilities.
Significant judgment is required in determining our worldwide provision for income taxes and our income tax filings are regularly under audit by tax authorities. Any audit result differing from amounts recorded would increase or decrease income in the period that we determine such adjustment is likely. Interest expense and penalties associated with the underpayment of income taxes are included in income tax expense.
Earnings before income taxes were as follows:
| (in thousands) | For the Years Ended December 31, | |||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Domestic | $ | 1,057,551 | $ | 897,336 | $ | 889,133 | ||||||||||||||
| International | 266,638 | 212,495 | 172,043 | |||||||||||||||||
Total earnings before income tax | $ | 1,324,189 | $ | 1,109,831 | $ | 1,061,176 | ||||||||||||||
The provision (benefit) for income taxes comprised the following:
| (in thousands) | For the Years Ended December 31, | |||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current | ||||||||||||||||||||
| Federal | $ | 61,678 | $ | 168,042 | $ | 191,274 | ||||||||||||||
| State | 29,253 | 37,112 | 40,369 | |||||||||||||||||
| International | 42,590 | 41,004 | 32,797 | |||||||||||||||||
Total current tax provision | 133,521 | 246,158 | 264,440 | |||||||||||||||||
| Deferred | ||||||||||||||||||||
| Federal | 116,893 | (24,642) | (36,501) | |||||||||||||||||
| State | 9,276 | (4,709) | (6,462) | |||||||||||||||||
| International | 5,035 | 5,157 | (5,343) | |||||||||||||||||
Total deferred tax provision | 131,204 | (24,194) | (48,306) | |||||||||||||||||
Total income tax provision | $ | 264,725 | $ | 221,964 | $ | 216,134 | ||||||||||||||
The following table is a reconciliation of the U.S. federal statutory rate of 21% to our effective rate for the year ended December 31, 2025:
| in thousands, except percentages | |||||||||||
For the Year Ended December 31, 2025 | |||||||||||
| U.S. federal statutory rate | $ | 278,080 | 21.0 | % | |||||||
| Federal: | |||||||||||
| Effects of cross-border tax laws | (8,316) | (0.6) | |||||||||
| Tax credits | (13,752) | (1.1) | |||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Tax benefits from share-based compensation | (24,370) | (1.8) | |||||||||
| Other | 7,366 | 0.5 | |||||||||
| Changes in unrecognized tax benefits | (8,287) | (0.6) | |||||||||
| Other adjustments, net | (1,657) | (0.1) | |||||||||
State and local income tax, net of federal income tax effects (1) | 33,149 | 2.5 | |||||||||
| Foreign tax effect | 2,512 | 0.2 | |||||||||
| Effective tax rate | $ | 264,725 | 20.0 | % | |||||||
(1) The jurisdictions that comprise the majority (greater than 50%) of the total state and local income tax effects are California, Florida, Illinois, New Jersey, New York, and Pennsylvania
.
The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the years ended December 31, 2024 and 2023:
For the Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal statutory rate | 21.0 | % | 21.0 | % | |||||||
State and local income tax, net of federal income tax effects | 2.4 | 2.7 | |||||||||
| Taxation on international earnings | (0.2) | (0.1) | |||||||||
| Foreign-Derived Intangible Income | (1.3) | (1.4) | |||||||||
Tax benefits from share-based compensation | (1.8) | (1.3) | |||||||||
Tax credits | (1.0) | (1.2) | |||||||||
Other adjustments, net | 0.9 | 0.7 | |||||||||
| Effective tax rate | 20.0 | % | 20.4 | % | |||||||
Our effective income tax rates were 20.0%, 20.0%, and 20.4% for the years ended December 31, 2025, 2024, and 2023, respectively. Our effective tax rate for the year ended December 31, 2025, was consistent with the prior year; the impact from an increase in tax benefits related to share-based compensation was largely offset by a reduction in our U.S. tax benefit associated with Foreign-Derived Intangible Income resulting from the acceleration of research and development deductions as allowed by recent U.S. tax law changes.
The following table presents income taxes paid, net of refunds received, for the year ended December 31, 2025:
For the Year Ended December 31, 2025 | |||||
U.S. federal | $ | 94,266 | |||
U.S. state and local | 34,517 | ||||
Foreign: | |||||
Netherlands | 9,675 | ||||
Switzerland | 10,047 | ||||
Other | 18,993 | ||||
Total income taxes paid | $ | 167,498 | |||
Income taxes paid, net of refunds received, for the periods ended December 31, 2024 and 2023, were $307.2 million and $192.5 million, respectively.
We have determined that unremitted earnings are not indefinitely reinvested to the extent they can be distributed without incurring a significant tax liability. As such, we have recorded a deferred tax liability for foreign withholding tax that will be incurred with respect to the unremitted earnings upon repatriation. We consider all other outside basis differences to be indefinitely reinvested to the extent reversal would incur a significant tax liability. It is not practicable to calculate a deferred tax liability related to such outside basis differences.
The components of the net deferred tax assets (liabilities) included in the accompanying consolidated balance sheets were as follows:
| (in thousands) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Assets | ||||||||||||||
| Accrued expenses | $ | 40,831 | $ | 56,325 | ||||||||||
Allowances for credit losses for potentially uncollectable receivables | 3,516 | 3,444 | ||||||||||||
| Deferred revenue | 9,955 | 5,743 | ||||||||||||
| Inventory basis differences | 28,246 | 24,040 | ||||||||||||
| Property-based differences | 11,510 | 16,802 | ||||||||||||
| Intangible asset basis differences | 45,384 | 41,628 | ||||||||||||
| Share-based compensation | 14,787 | 14,335 | ||||||||||||
| Other | 3,803 | 1,878 | ||||||||||||
| Net operating loss carryforwards | 5,314 | 6,647 | ||||||||||||
| Tax credit carryforwards | 16,163 | 13,382 | ||||||||||||
| Unrealized losses on foreign currency exchange contracts and investments | 4,393 | 1,357 | ||||||||||||
| Research and development expenditure differences | 2,022 | 92,856 | ||||||||||||
| Total assets | 185,924 | 278,437 | ||||||||||||
| Valuation allowance | (36,164) | (31,927) | ||||||||||||
| Total assets, net of valuation allowance | 149,760 | 246,510 | ||||||||||||
| Liabilities | ||||||||||||||
| Customer acquisition costs | (62,642) | (46,892) | ||||||||||||
| Property-based differences | (61,622) | (53,332) | ||||||||||||
| Intangible asset basis differences | (15,325) | (10,443) | ||||||||||||
| Other | (13,097) | (14,867) | ||||||||||||
| Unrealized gains on foreign currency exchange contracts and investments | (1,068) | (6,658) | ||||||||||||
| Total liabilities | (153,754) | (132,192) | ||||||||||||
| Net deferred tax assets (liabilities) | $ | (3,994) | $ | 114,318 | ||||||||||
As of December 31, 2025, we recorded valuation allowances against certain deferred tax assets related to temporary differences, including intangible asset basis differences, and net operating loss (“NOL”) and tax credit carryforwards, because we believe it is more-likely-than-not that they will not be realized or utilized within the carryforward period.
The following table summarizes the changes in valuation allowances for deferred tax assets:
| (in thousands) | For the Years Ended December 31, | |||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Balance at beginning of year | $ | 31,927 | $ | 34,793 | $ | 39,726 | ||||||||||||||
Increases due to current activities and changes in estimates | 135 | 698 | 21 | |||||||||||||||||
Decreases due to expirations and changes in estimates | — | (1,289) | (7,846) | |||||||||||||||||
| Foreign currency translation | 4,102 | (2,275) | 2,892 | |||||||||||||||||
| Balance at the end of the year | $ | 36,164 | $ | 31,927 | $ | 34,793 | ||||||||||||||
As of December 31, 2025, we have NOLs in certain state and international jurisdictions of approximately $22.5 million available to offset future taxable income. The majority of our NOL carryforwards have indefinite lives. As of December 31, 2025, we also have state tax credit carryforwards of $20.2 million that will expire between 2028 and 2044.
The following table summarizes the changes in unrecognized tax positions:
| (in thousands) | For the Years Ended December 31, | |||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Total amounts of unrecognized tax benefits, beginning of period | $ | 18,146 | $ | 22,320 | $ | 22,547 | ||||||||||||||
Gross increases in unrecognized tax positions as a result of tax positions taken during a prior period | 891 | 41 | 6,366 | |||||||||||||||||
| Gross increases in unrecognized tax positions as a result of tax positions taken in the current period | 5,231 | 3,034 | 3,987 | |||||||||||||||||
Decreases in unrecognized tax positions related to settlements with taxing authorities | (9,008) | (678) | (7,535) | |||||||||||||||||
| Decreases in unrecognized tax positions as a result of a lapse of the applicable statutes of limitations | (2,606) | (6,571) | (3,045) | |||||||||||||||||
| Total amounts of unrecognized tax benefits, end of period | $ | 12,654 | $ | 18,146 | $ | 22,320 | ||||||||||||||
Of the total unrecognized tax benefits as of December 31, 2025, 2024, and 2023, $12.7 million, $17.4 million, and $21.2 million, respectively, comprise unrecognized tax positions that would, if recognized, affect our effective tax rate.
During the years ended December 31, 2025, 2024, and 2023, we recorded interest expense and penalties related to income taxes of $0.2 million, $1.7 million, and $2.9 million, respectively, as income tax expense in our consolidated statements of income. As of December 31, 2025, 2024, and 2023, we had $0.3 million, $2.9 million, and $3.8 million, respectively, of estimated interest expense and penalties accrued in our consolidated balance sheets.
In the ordinary course of our business, our income tax filings are regularly under audit by tax authorities. While we believe we have appropriately provided for all uncertain tax positions, amounts asserted by taxing authorities could be greater or less than our accrued position. Accordingly, additional provisions on income tax matters, or reductions of previously accrued provisions, could be recorded in the future if we revise our estimates due to changing facts and circumstances or the underlying matters are settled or otherwise resolved. We are currently under tax examinations in various jurisdictions, none of which are material to the consolidated financial statements. We generally are no longer subject to income tax examinations for years before 2020 in any jurisdiction in which we conduct significant taxable activities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 16, 2022 | |
| 2020 | Feb 12, 2021 | |
| 2019 | Feb 14, 2020 | |
| 2018 | Feb 15, 2019 | |
| 2017 | Feb 16, 2018 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 17, 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.