Indivior Pharmaceuticals, Inc.INDV
Indivior Pharmaceuticals, Inc. Income Taxes Disclosure
4. Income Tax
Income (loss) before income tax expense (benefit) by geographical area consisted of the following:
| (in millions) | Twelve Months Ended December 31, | ||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 255 | $ | 34 | $ | 6 | |||||||||||
| Foreign | |||||||||||||||||
| United States | (23) | $ | (31) | (158) | |||||||||||||
Rest of World excluding United Kingdom | 7 | $ | 17 | $ | 7 | ||||||||||||
| Total income (loss) before tax | $ | 239 | $ | 20 | $ | (145) | |||||||||||
Income tax expense (benefit) consisted of the following:
| Twelve Months Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Current | |||||||||||||||||
| Domestic | $ | 76 | $ | (5) | $ | 48 | |||||||||||
| Foreign | |||||||||||||||||
| United States | (2) | 8 | (4) | ||||||||||||||
Rest of World excluding United Kingdom | 1 | 3 | 1 | ||||||||||||||
Total current income tax expense | $ | 75 | $ | 6 | $ | 45 | |||||||||||
| Deferred | |||||||||||||||||
| Domestic | $ | 28 | $ | 26 | $ | (64) | |||||||||||
| Foreign | |||||||||||||||||
| United States | (76) | (18) | — | ||||||||||||||
Rest of World excluding United Kingdom | 2 | (1) | — | ||||||||||||||
Total deferred income tax (benefit) expense | $ | (46) | $ | 7 | $ | (64) | |||||||||||
| Total income tax expense (benefit) | $ | 29 | $ | 13 | $ | (19) | |||||||||||
In 2023, Finance (No. 2) Act 2023 (Pillar Two) was enacted in the U.K., introducing a global minimum effective tax rate of 15%. The legislation was also enacted in other jurisdictions in which the Company operates. The Pillar Two legislation was effective for the Company’s financial year beginning January 1, 2024. The Company performed an assessment exposure to Pillar Two income taxes and qualifies for one of the transitional safe harbors provided in territories with material pretax income in which it operates.
The following is a reconciliation of income tax expense with income taxes at the U.K. statutory rate:
| Twelve Months Ended December 31, | |||||||||||||||||||||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
U.K. Federal Statutory Tax Rate1 | $ | 60 | 25.0 | % | $ | 5 | 25.0 | % | $ | (34) | 23.5 | % | |||||||||||||||||||||||
| Nontaxable or Nondeductible Items | |||||||||||||||||||||||||||||||||||
| Imputed Expense | (10) | (4.1) | % | (13) | (64.2) | % | (12) | 8.3 | % | ||||||||||||||||||||||||||
Innovation Incentives | (73) | (30.7) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
Royalty Income | 79 | 33.0 | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Other Permanent Differences | 8 | 3.4 | % | 2 | 10.1 | % | (5) | 3.4 | % | ||||||||||||||||||||||||||
| Effect of Changes in Tax Laws or Rates Enacted in the Current Period | (1) | (0.5) | % | — | — | % | (3) | 2.1 | % | ||||||||||||||||||||||||||
| Effect of Cross-Border Tax Laws | — | — | % | 3 | 15.1 | % | 3 | (2.1) | % | ||||||||||||||||||||||||||
| Changes in Valuation Allowances | 6 | 2.5 | % | 15 | 76.7 | % | 1 | (0.7) | % | ||||||||||||||||||||||||||
| Other Adjustments | |||||||||||||||||||||||||||||||||||
| Statutory Adjustments | — | — | % | 2 | 10.1 | % | (2) | 1.4 | % | ||||||||||||||||||||||||||
| Changes in Unrecognized Tax Benefits | 33 | 14.0 | % | (2) | (10.1) | % | 1 | (0.7) | % | ||||||||||||||||||||||||||
| Foreign Tax Effects | |||||||||||||||||||||||||||||||||||
| United States | |||||||||||||||||||||||||||||||||||
| Statutory Tax Rate Difference Between United States and United Kingdom | — | — | % | 1 | 5.0 | % | 4 | (2.8) | % | ||||||||||||||||||||||||||
| Nontaxable or Nondeductible Items | |||||||||||||||||||||||||||||||||||
| Imputed Income | 9 | 3.9 | % | 12 | 61.3 | % | 12 | (8.3) | % | ||||||||||||||||||||||||||
| Non-deductible Intangible Amortization | — | — | % | — | — | % | 26 | (17.9) | % | ||||||||||||||||||||||||||
Royalty Payment | (77) | (32.1) | % | — | — | % | — | — | % | ||||||||||||||||||||||||||
| Other Permanent Differences | 7 | 2.8 | % | — | — | % | 4 | (2.8) | % | ||||||||||||||||||||||||||
| Tax Credits | |||||||||||||||||||||||||||||||||||
| Research and Development Tax Credit | (4) | (1.7) | % | (2) | (10.1) | % | (2) | 1.4 | % | ||||||||||||||||||||||||||
| Foreign Tax Credits | (10) | (4.4) | % | (16) | (79.0) | % | (16) | 11.0 | % | ||||||||||||||||||||||||||
Changes in Valuation Allowance | 2 | 0.7 | % | 4 | 20.1 | % | 4 | (2.8) | % | ||||||||||||||||||||||||||
| Other Foreign Jurisdictions | 1 | 0.4 | % | 1 | 5.0 | % | — | — | % | ||||||||||||||||||||||||||
| Total Effective Tax Rate | $ | 29 | 12.2 | % | $ | 13 | 65.0 | % | $ | (19) | 13.1 | % | |||||||||||||||||||||||
1The enacted U.K. Statutory Corporation Tax rate increased to 25.0% as of April 1, 2023, providing a blended rate of 23.5% for the year ended December 31, 2023.
Deferred Taxes
Significant components of the Company’s deferred tax assets and liabilities are as follows:
| Twelve Months Ended December 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Property, plant and equipment | $ | 2 | $ | — | |||||||
| Intangibles | 15 | 15 | |||||||||
| State income taxes | 1 | — | |||||||||
| Share-based compensation | 6 | 7 | |||||||||
| Lease liabilities | 4 | 5 | |||||||||
| Accruals and general expenses | 33 | 22 | |||||||||
| Capitalized research and development | 2 | 7 | |||||||||
| Inventory reserves | 156 | 70 | |||||||||
| Litigation | 3 | 24 | |||||||||
| Foreign tax credit carryforwards | 12 | 10 | |||||||||
| Interest expense carryforwards | 18 | 14 | |||||||||
| Outside basis in Investments | 2 | 3 | |||||||||
| Tax loss carryforwards | 128 | 153 | |||||||||
| Total deferred tax assets | 381 | 330 | |||||||||
| Valuation allowance | (55) | (47) | |||||||||
| Total deferred tax assets, net of valuation allowance | 326 | 283 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property, plant and equipment | (1) | ||||||||||
| Right of use assets | (3) | (5) | |||||||||
| Total deferred tax liabilities | (3) | (6) | |||||||||
Total net deferred tax assets | $ | 323 | $ | 277 | |||||||
As of December 31, 2025, the Company had foreign tax credit carryforwards of $12 million, which if not used, will expire in 2031 through 2035, and R&D Credit carryforward of $5 million, which if not used, will expire in 2042 through 2045.
Valuation Allowances
As of December 31, 2025, 2024 and 2023, the Company had valuation allowances of $55 million, $47 million and $28 million, respectively.
A reconciliation of the beginning and ending valuation allowance was as follows:
| Twelve Months Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of year | $ | 47 | $ | 28 | $ | 23 | |||||||||||
| Additions to valuation allowance charged to income tax expense | 8 | 19 | 5 | ||||||||||||||
| Balance at end of year | $ | 55 | $ | 47 | $ | 28 | |||||||||||
Additions to valuation allowances of $8 million, $19 million, and $5 million for 2025, 2024 and 2023, respectively, were due to deferred tax assets recorded in connection with corporate interest expense restriction, impairments, net operating and capital losses in the U.K. and foreign tax credits in the U.S.
Unrecognized Tax Benefit
We are subject to income taxation in many jurisdictions. Unrecognized tax benefits reflect the differences between tax positions we have taken or expect to take on income tax returns and the amounts recognized in our financial statements. Resolution of the related tax positions with the relevant tax authorities may take many years to complete, and such timing is not entirely within our control.
The following table reconciles the beginning and ending amount of our gross unrecognized tax benefits that, if recognized, would impact the effective tax rate:
| Twelve Months Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of year | $ | 4 | $ | 9 | $ | 7 | |||||||||||
| Additions for tax positions of prior years | 34 | — | 5 | ||||||||||||||
| Reductions for tax positions due to lapse of statutes of limitations | — | (2) | — | ||||||||||||||
| Tax settlements | (32) | (3) | (3) | ||||||||||||||
| Balance at end of year | $ | 5 | $ | 4 | $ | 9 | |||||||||||
As of December 31, 2025, the Company accrued interest of $1 million, $1 million and $2 million for 2025, 2024 and 2023, respectively relating to its tax positions. For the years ended December 31, 2025, 2024 and 2023, interest expense relating to tax positions was $6 million, nil, and $1 million, respectively. As of December 31, 2025, the Company had accrued income tax penalties of $1 million, $1 million and $1 million for 2025, 2024 and 2023, respectively. For the years ended December 31, 2025, 2024 and 2023, expense related to income tax penalties was nil, nil, and $1 million, respectively.
The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlement of ongoing tax audits and assessments and the expiration of applicable statutes of limitations.
Income Taxes Paid
Income taxes paid, net of (refunds) received, consisted of the following:
| Twelve Months Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
Domestic | $ | 32 | $ | 40 | $ | 33 | |||||||||||
| Foreign | |||||||||||||||||
| US Federal | (1) | 2 | (9) | ||||||||||||||
| US State and Local | 2 | 2 | 5 | ||||||||||||||
| New York state | * | * | 3 | ||||||||||||||
Rest of World | 4 | 2 | — | ||||||||||||||
| Total Taxes Paid | $ | 38 | $ | 46 | $ | 32 | |||||||||||
* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.
Reinvestment of Unremitted Earnings
We consider foreign earnings of specific subsidiaries to be indefinitely reinvested. There is no deferred tax liability, recorded, if any on such amounts. If at some future date, the Company ceases to be permanently reinvested in these specific foreign subsidiaries, the Company may be subject to foreign withholding and other taxes on these undistributed earnings and may need to record a deferred tax liability for any outside basis difference on these specific foreign subsidiaries. At December 31, 2025, 2024 and 2023, we estimate the unrecorded, deferred tax liability to be $2 million for each of the respective years.
The withholding and other tax impact from the Company's decision to exit certain Rest of World markets in 2025 was not material.
Tax Return Examination Status
The Company files income tax returns in the U.K., U.S. and in various foreign, state and local jurisdictions. We are subject to tax audits in the various jurisdictions until the respective statutes of limitation expire. The Company is no longer subject to U.K. examinations by tax authorities for fiscal years before 2020 and U.S. federal income tax examinations by tax authorities for fiscal years before 2022. The current U.S. federal income tax examination covers 2023. U.K. and U.S. state and local audits are ongoing covering 2018-2023. Reasonably possible additional tax liabilities and interest that could arise on resolution of these examinations, is estimated to be in the range of nil to $12 million.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
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.