IMAX CORPIMAX
IMAX CORP Income Taxes Disclosure
11. Income Taxes
Income Before Taxes by Jurisdiction
Income before taxes by tax jurisdiction for the years ended December 31, 2025, 2024, and 2023 consisted of the following:
| Years Ended December 31, | |||||||||||||||||
(In thousands of U.S. Dollars) | 2025 | 2024 | 2023 | ||||||||||||||
| Canada | $ | (2,032) | $ | (14,240) | $ | (13,366) | |||||||||||
Foreign(1) | 65,325 | 51,938 | 59,483 | ||||||||||||||
| Total | $ | 63,293 | $ | 37,698 | $ | 46,117 | |||||||||||
 (1)Prior year amounts have been revised to conform to the current presentation with one category for Foreign income. No amounts have been reclassified between Canada and Foreign. | |||||||||||||||||
Income Tax Expense
Income tax expense for the years ended December 31, 2025, 2024, and 2023 consisted of the following:
| Years Ended December 31, | |||||||||||||||||
(In thousands of U.S. Dollars) | 2025 | 2024 | 2023 | ||||||||||||||
Income tax expense – current(1): | |||||||||||||||||
Federal | $ | (609) | $ | 700 | $ | 58 | |||||||||||
Provincial | (467) | 537 | 45 | ||||||||||||||
Foreign | (15,919) | (11,864) | (14,601) | ||||||||||||||
Sub-total | (16,995) | (10,627) | (14,498) | ||||||||||||||
Income tax (expense) benefit – deferred(1): | |||||||||||||||||
Federal(2) | 697 | (1,920) | 1,390 | ||||||||||||||
Provincial | 535 | (1,472) | 1,066 | ||||||||||||||
Foreign | (2,004) | 9,023 | (1,009) | ||||||||||||||
Sub-total | (772) | 5,631 | 1,447 | ||||||||||||||
Total(3) | $ | (17,767) | $ | (4,996) | $ | (13,051) | |||||||||||
(1)Prior year amounts have been revised to conform to the current presentation to present the information into Federal, Provincial, and Foreign Categories. (2)A valuation allowance is recorded in jurisdictions where management has determined, based on the weight of all available evidence, both positive and negative, that a valuation allowance for deferred tax assets is required. For the year ended December 31, 2025, the Company recorded a $5.7 million net decrease (2024 — net increase of $3.5 million, 2023 — net decrease of $0.7 million) in the valuation allowance against its deferred tax assets in Canada. Of the $5.7 million net decrease in the valuation allowance recorded in 2025, a $6.0 million decrease is reflected within Income Tax Expense in the Company’s Consolidated Statements of Operations, and a $0.3 million increase is reflected directly on the Consolidated Balance Sheets. (3)For the year ended December 31, 2025, Income Tax Expense excludes a tax expense of $1.2 million included in Other Comprehensive Income (2024 — benefit of $0.9 million; 2023 — expense of $0.2 million). | |||||||||||||||||
Reconciliation of Income Tax Expense to Statutory Rate
For the years ended December 31, 2025, 2024, and 2023, the Company’s effective tax rate and income tax expense differs from the Canadian federal statutory income tax rates due to the following factors:
Year Ended December 31, | |||||||||||
2025 | |||||||||||
(In thousands of U.S. Dollars, except rates) | Amount | Percent | |||||||||
Income tax expense at Canadian federal statutory tax rate(1) | (9,494) | 15.0 | % | ||||||||
Adjustments resulting from: | |||||||||||
Ontario provincial tax expense | 234 | (0.4 | %) | ||||||||
Foreign tax effects | |||||||||||
| Withholding taxes | (3,031) | 4.8 | % | ||||||||
Other statutory tax rate differences | (553) | 0.9 | % | ||||||||
Changes to tax liabilities resulting from tax return adjustments | 417 | (0.7 | %) | ||||||||
Ireland | |||||||||||
Statutory tax rate difference | 288 | (0.5 | %) | ||||||||
Increase in valuation allowance | (683) | 1.1 | % | ||||||||
| Changes to tax liabilities resulting from tax return adjustments | (554) | 0.9 | % | ||||||||
Other | 140 | (0.2 | %) | ||||||||
China | |||||||||||
Statutory tax rate difference | (4,647) | 7.3 | % | ||||||||
Tax subsidy | 973 | (1.5 | %) | ||||||||
Withholding taxes | (986) | 1.6 | % | ||||||||
United States | |||||||||||
Statutory tax rate difference | (275) | 0.4 | % | ||||||||
| Changes to tax liabilities resulting from tax return adjustments | 537 | (0.8 | %) | ||||||||
Increase in valuation allowance | (230) | 0.4 | % | ||||||||
State and local income taxes | (606) | 1.0 | % | ||||||||
Decrease in valuation allowance | 6,896 | (10.9 | %) | ||||||||
Stock based compensation | 1,706 | (2.7 | %) | ||||||||
Non-deductible goodwill impairment | (1,841) | 2.9 | % | ||||||||
Non-deductible premium paid on refinancing | (4,014) | 6.3 | % | ||||||||
Tax gain on settlement of capped call | (1,536) | 2.4 | % | ||||||||
Changes to tax reserves | (769) | 1.2 | % | ||||||||
Tax credits | 1,180 | (1.9 | %) | ||||||||
Changes to deferred tax liabilities resulting from prior year tax return adjustments | (963) | 1.5 | % | ||||||||
Other items included in tax benefit | 44 | (0.1 | %) | ||||||||
Income tax expense | $ | (17,767) | 28.1 | % | |||||||
(1)The Company’s Canadian federal statutory tax rate of 15% is comprised of the basic Part I federal tax rate of 38%, netting to 15% after the federal tax abatement and general tax reduction. | |||||||||||
The reconciliation of taxes at the federal statutory rate to the income tax expense for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09 was as follows:
| Years Ended December 31, | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
(In thousands of U.S. Dollars, except rates) | Amount | Rate | Amount | Rate | ||||||||||||||||||||||
Income tax expense at combined statutory rates(1) | $ | (9,990) | 26.5 | % | $ | (12,221) | 26.5 | % | ||||||||||||||||||
Adjustments resulting from: | ||||||||||||||||||||||||||
Decrease (increase) in valuation allowance | (3,481) | 9.2 | % | 732 | (1.6 | %) | ||||||||||||||||||||
Changes to tax reserves | 1,374 | (3.6 | %) | 387 | (0.8 | %) | ||||||||||||||||||||
| U.S. federal and state taxes | (362) | 1.0 | % | (250) | 0.5 | % | ||||||||||||||||||||
| Withholding taxes | (3,938) | 10.5 | % | (5,206) | 11.3 | % | ||||||||||||||||||||
| Income tax at different rates in foreign and other provincial jurisdictions | 2,324 | (6.2 | %) | 3,144 | (6.8 | %) | ||||||||||||||||||||
Investment and other tax credits | 1,169 | (3.1 | %) | 379 | (0.8 | %) | ||||||||||||||||||||
Changes to deferred tax assets and liabilities resulting from tax return and other adjustments | 3,604 | (9.6 | %) | (273) | 0.6 | % | ||||||||||||||||||||
Internal asset sale | 4,037 | (10.7) | % | — | — | % | ||||||||||||||||||||
Other items included in tax benefit | 267 | (0.7 | %) | 257 | (0.6 | %) | ||||||||||||||||||||
Income tax expense | $ | (4,996) | 13.3 | % | $ | (13,051) | 28.3 | % | ||||||||||||||||||
(1)The Company’s Canadian corporate tax rate of 26.5% is comprised of the basic Part I federal tax rate of 38%, netting to 15% after the federal tax abatement and general tax reduction, plus the additional Ontario provincial tax rate of 11.5%. | ||||||||||||||||||||||||||
During 2024, the Company completed an internal asset sale to more closely align intellectual property rights with its operations. The tax expense on the capital gains was offset by deferred tax benefits resulting in a net tax benefit of $4.0 million. The valuation allowance also includes a $2.3 million net tax benefit related to the internal asset sale, resulting in a total net tax benefit of $6.3 million recognized in Income Tax Expense of the Consolidated Statements of Operations.
Cash Paid for Income Taxes, Net of Refunds
Cash paid for income taxes, net of refunds, for the years ended December 31, 2024 and 2023 was $14.6 million and $17.8 million, respectively. During 2025, the Company made the following cash tax payments:
Year Ended December 31, | |||||
(In thousands of U.S. Dollars) | 2025 | ||||
Federal | $ | 87 | |||
Provincial | 66 | ||||
United States | 1,922 | ||||
Ireland | 409 | ||||
China | 10,114 | ||||
Other(1) | 3,255 | ||||
Net Cash Paid | $ | 15,853 | |||
(1)Includes payments to other jurisdictions that are individually insignificant. | |||||
Deferred Tax Assets and Deferred Tax Liability
As of December 31, 2025 and 2024, the Company’s deferred tax assets and deferred tax liability consisted of the following:
| As of December 31, | |||||||||||
(In thousands of U.S. Dollars) | 2025 | 2024 | |||||||||
Net operating loss carryforwards | $ | 4,648 | $ | 17,523 | |||||||
Investment tax credit and other tax credit carryforwards | 7,755 | 6,418 | |||||||||
Write-downs of other assets | 1,317 | 1,632 | |||||||||
Excess of tax accounting basis in various assets | 40,767 | 35,948 | |||||||||
Accrued pension liability | 4,607 | 5,823 | |||||||||
Accrued share-based compensation | 9,046 | 9,028 | |||||||||
Income recognition on net investment in leases | (5,626) | (4,119) | |||||||||
Other accrued reserves | 10,004 | 7,859 | |||||||||
Total deferred income tax assets | 72,518 | 80,112 | |||||||||
Less: Valuation allowance | (59,941) | (65,613) | |||||||||
Net deferred income tax asset | 12,577 | 14,499 | |||||||||
Deferred tax liability | (12,521) | (12,521) | |||||||||
Net deferred tax asset(1) | $ | 56 | $ | 1,978 | |||||||
(1)The Company’s deferred tax liability of $12.5 million as of December 31, 2025 (2024 — $12.5 million) relates to the estimated applicable foreign withholding taxes associated with historical earnings that were not indefinitely reinvested which will become payable upon the repatriation of any such earnings. During the year ended December 31, 2025, $nil (2024 — $nil) of historical earnings from a subsidiary in China were distributed and as a result, $nil (2024 — $nil) of foreign withholding taxes were paid to the relevant tax authorities. | |||||||||||
As of December 31, 2025, net deferred tax assets included a liability of $1.6 million (December 31, 2024 — liability of $0.4 million) associated with amounts recognized within Accumulated Other Comprehensive Loss, including unrealized actuarial gains and losses related to the Company’s pension and other postretirement benefit plans and unrealized net gains and losses on cash flow hedging instruments.
Net Operating Loss Carryforwards
Estimated Canadian net operating loss carryforwards of $40.0 million can be used to reduce taxable income through 2044 and $1.4 million of Ireland net operating losses can be carried forward indefinitely. Investment tax credits and other tax credits of $7.8 million can be carried forward to reduce income taxes payable through to 2045.
Indefinitely Reinvested Assertion
Income taxes are accrued for the earnings of non-Canadian affiliates and associated companies unless management determines that such earnings will be indefinitely reinvested outside of Canada.
In 2020, management completed a reassessment of its strategy with respect to the most efficient means of deploying the Company’s capital resources globally. Based on the results of this reassessment, management concluded that the historical earnings of certain foreign subsidiaries in excess of amounts required to sustain business operations would no longer be indefinitely reinvested. During the year ended December 31, 2025, $nil (2024 — $nil) of historical earnings from a subsidiary in China were distributed and, as a result, $nil (2024 — $nil) of foreign withholding taxes were paid to the relevant tax authorities. The Company had a deferred tax liability of $12.5 million as of December 31, 2025 (2024 — $12.5 million) related to the estimated applicable foreign withholding taxes associated with these historical earnings.
Valuation Allowance
As of December 31, 2025, the Company’s Consolidated Balance Sheets include net deferred income tax assets of $12.6 million, which is net of a valuation allowance of $59.9 million (December 31, 2024 — $14.5 million, which is net of a valuation allowance of $65.6 million). For the year ended December 31, 2025, the Company recorded a net decrease in valuation allowance of $5.7 million (2024 — net increase of $3.5 million). The net decrease includes $4.7 million in reporting entities where it was concluded that it is more likely than not that the benefit from deferred tax assets will not be realized, $1.2 million related to deferred assets recorded in Other Comprehensive Income, and $1.3 million related to tax return and other tax adjustments. This was partially offset by an increase of $1.2 million related deferred assets on investment tax credits and $0.4 million for items recorded through Shareholders’ Equity. The net decrease in the valuation allowance is reflected within Income Tax Expense in the Company’s Consolidated Statements of Operations and a portion in Other Equity in the Consolidated Balance Sheets. The valuation allowance is expected to reverse at the point in time when management determines it is more likely than not that the Company will incur sufficient tax liabilities to allow it to utilize the deferred tax assets against which the valuation allowance is recorded.
Uncertain Tax Positions
As of December 31, 2025, the Company had total tax reserves (including interest and penalties) of $11.3 million (2024 — $10.6 million) for various uncertain tax positions. While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could differ from the Company’s accrued liability. Accordingly, additional provisions on federal, provincial, state and foreign tax-related matters may be required in the future as revised estimates are made or the underlying matters are settled or otherwise resolved.
For the year ended December 31, 2025, the Company recorded a net increase of $nil (2024 — decrease of $1.6 million, 2023 — decrease of $0.8 million) related to tax reserves (excluding interest and penalties).
The Company has elected to classify interest and penalties related to income tax liabilities, when applicable, as part of the Income Tax Expense in its Consolidated Statements of Operations rather than Interest Expense. The Company recorded a net increase of $0.8 million in potential interest and penalties associated with its provision for uncertain tax positions for the years ended December 31, 2025 (2024 — $0.1 million; 2023 — $0.6 million).
The following table presents a reconciliation of the beginning and ending amount of tax reserves (excluding interest and penalties) for the years ended December 31, 2025, 2024, and 2023:
| Years Ended December 31, | |||||||||||||||||
(In thousands of U.S. Dollars) | 2025 | 2024 | 2023 | ||||||||||||||
Balance at beginning of the year | $ | 7,349 | $ | 8,954 | $ | 9,733 | |||||||||||
Additions based on tax positions related to the current year | — | — | — | ||||||||||||||
Additions for tax positions of prior years | — | 109 | 1,552 | ||||||||||||||
Reductions resulting from lapse of applicable statute of limitations and administrative practices | — | (1,714) | (2,331) | ||||||||||||||
Balance at the end of the year | $ | 7,349 | $ | 7,349 | $ | 8,954 | |||||||||||
The number of years with open tax audits varies depending on the tax jurisdiction. The Company’s material taxing jurisdictions include Canada, the United States, Ireland, and China. The Company’s 2022 through 2025 tax years remain subject to examination by the IRS for United States federal tax purposes, and the 2017 through 2025 tax years remain subject to examination by the appropriate governmental agencies for Canadian federal tax purposes. There are other ongoing audits in various other jurisdictions that are not material to the Consolidated Financial Statements.
The Company is subject to audit by tax authorities in the various jurisdictions in which it operates in the ordinary course of its business and believes that it has adequately reserved for the expected exposures in its accounts. During the fourth quarter of 2022, the Company received a Notice of Reassessment (the “Reassessment”) in the amount of $13.2 million (inclusive of interest). A revised Reassessment was issued by the Canada Revenue Agency in June 2024 to reduce the amount previously reassessed to $3.0 million (inclusive of interest). The Company has filed a Notice of Objection with respect to this Reassessment and believes that the matter will be resolved on a basis that is consistent with its filing position.
Share Buyback Tax
Legislation to introduce a 2% tax on the value of certain share buybacks net of share issuances by publicly traded Canadian-resident corporations was enacted during the second quarter of 2024. The tax applies to net share repurchases on or after January 1, 2024, with certain exceptions. The tax is imposed on the repurchasing corporation itself and will be included in the cost basis of the repurchased treasury stock. During the year ended December 31, 2025, the Company has recorded $nil share buyback tax as the Company did not have any share buybacks during the year.
One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was enacted into law. Key provisions of the Act include revisions to Interest Deductibility (IRC §163(j)), Bonus Depreciation, and Section §179. The Act did not have a material impact on the Company’s consolidated financial statements, including its effective tax rate. The Company will continue to monitor interpretive guidance and assess any future impact, if applicable.
Pillar Two Legislation
On October 8, 2021, the Organization for Economic Co-Operation and Development (“OECD”) announced the OECD/G20 Inclusive Framework on Base Erosion and Profit Shifting which agreed to a two-pillar solution to address tax challenges arising from digitalization of the economy. On December 20, 2021, the OECD released Pillar Two Model Rules (“Pillar Two”) defining the global minimum tax rules, which contemplate a 15% minimum tax rate. The OECD continues to release additional guidance, including administrative guidance on how the Pillar Two rules should be interpreted and applied, and many countries are passing legislation to comply with Pillar Two. Canada enacted its Pillar Two rules on June 20, 2024. The Company is under the revenue threshold where Pillar Two would apply and is not currently subject to tax under these rules.
Income Tax Effect on Other Comprehensive Income
For the years ended December 31, 2025, 2024, and 2023, income tax (expense) benefit related to the components of Other Comprehensive Income was as follows:
| Years Ended December 31, | |||||||||||||||||
(In thousands of U.S. Dollars) | 2025 | 2024 | 2023 | ||||||||||||||
Unrealized defined benefit plan actuarial loss | $ | (615) | $ | 7 | $ | 20 | |||||||||||
Unrealized postretirement benefit plan actuarial loss | 64 | 6 | 9 | ||||||||||||||
| Amortization of defined benefit and postretirement benefit plans | 182 | 204 | 175 | ||||||||||||||
Unrealized change in cash flow hedging instruments | (524) | 892 | (151) | ||||||||||||||
Realized change in cash flow hedging instruments | (341) | (160) | (234) | ||||||||||||||
Total | $ | (1,234) | $ | 949 | $ | (181) | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 22, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Mar 4, 2021 | |
| 2019 | Feb 19, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 24, 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.