ITRON, INC.ITRI
ITRON, INC. Income Taxes Disclosure
Income Taxes
A sweeping legislative package formally titled "An act to provide for reconciliation pursuant to title II of H. Con. Res. 14" (the "Act"), and commonly referred to as the One Big Beautiful Bill Act, was signed into law on July 4, 2025. The legislation includes numerous changes to existing tax law that are retroactive to the beginning of 2025, including provisions for the current deductibility of certain property additions and deductibility of current and previously capitalized domestic research and development costs. In our U.S. tax provision, we've elected to deduct 100% of all eligible property additions, and to accelerate all previously capitalized domestic research costs in 2025. These impacts have been incorporated into our provision for income taxes and cash tax forecasts. Additionally, multiple changes are effective beginning in 2026 and we are continuing to evaluate the impacts they will have on our subsequent consolidated financial statements and related disclosures.
The Organization for Economic Cooperation and Development (OECD) guidance under the Base Erosion and Profit Shifting (BEPS) initiative aims to minimize perceived tax abuses and modernize global tax policy, including the implementation of a global minimum effective tax rate of 15%. In December 2022, the Council of the European Union adopted OECD Pillar 2 for implementation by European Union member states by December 31, 2023. The resulting legislation in most countries where Itron has significant operations took effect for calendar year 2024. The OECD released further guidance on January 6, 2026, which included new and revised safe harbor rules, including a new permanent safe harbor, and the framework for a "side-by-side" agreement that would exempt US-based multinational companies from all top-up taxes, other than qualified domestic top-up taxes imposed on subsidiaries in their countries of residence. Enactment through legislation will be required in order for this additional guidance to be effective and is expected to only be effective for years after 2025. These enactments or amendments could adversely affect our tax rate and ultimately result in a negative impact on our operating results and cash flows. Consistent with calculations for calendar year 2024, the Company anticipates it will meet the safe harbors in most jurisdictions in 2025, and any remaining top-up tax should be immaterial.
The following table summarizes the provision (benefit) for U.S. federal, state, and foreign taxes on income from continuing operations:
| Year Ended December 31, | |||||||||||||||||
| In thousands | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (38,833) | $ | 65,461 | $ | 43,101 | |||||||||||
| State and local | 3,967 | 13,427 | 12,039 | ||||||||||||||
| Foreign | 8,853 | 3,310 | 8,573 | ||||||||||||||
| Total current | (26,013) | 82,198 | 63,713 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 61,686 | (28,541) | (29,717) | ||||||||||||||
| State and local | 8,098 | (5,475) | (6,471) | ||||||||||||||
| Foreign | (10,052) | (3,178) | 1,071 | ||||||||||||||
| Total deferred | 59,732 | (37,194) | (35,117) | ||||||||||||||
| Change in valuation allowance | 5,213 | (1,597) | 472 | ||||||||||||||
| Total provision (benefit) for income taxes | $ | 38,932 | $ | 43,407 | $ | 29,068 | |||||||||||
The change in the valuation allowance does not include the impacts of currency translation adjustments, or acquisitions.
We adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures on a retrospective basis beginning with the year ended December 31, 2025. The following table reconciles the U.S. federal statutory tax amount and rate to our actual global effective amount and rate pursuant to ASU 2023-09 for the current and comparative periods ended December 31, 2025, 2024, and 2023:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| In thousands | 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||
| Income before income taxes | |||||||||||||||||||||||||||||||||||
| Domestic | $ | 315,629 | $ | 230,120 | $ | 88,258 | |||||||||||||||||||||||||||||
| Foreign | 26,638 | 54,411 | 39,128 | ||||||||||||||||||||||||||||||||
| Total income before income taxes | $ | 342,267 | $ | 284,531 | $ | 127,386 | |||||||||||||||||||||||||||||
| Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||
| Expected federal income tax provision | $ | 71,876 | 21.0 | % | $ | 59,751 | 21.0 | % | $ | 26,751 | 21.0 | % | |||||||||||||||||||||||
State and local income taxes, net of federal income tax effect(1) | 14,734 | 4.3 | 5,904 | 2.1 | 2,874 | 2.3 | |||||||||||||||||||||||||||||
| Foreign tax effects | |||||||||||||||||||||||||||||||||||
| Luxembourg | |||||||||||||||||||||||||||||||||||
| Local statutory tax deductible adjustments | (10,019) | (2.9) | (18,034) | (6.3) | — | — | |||||||||||||||||||||||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | 13,999 | 4.9 | — | — | |||||||||||||||||||||||||||||
| Changes in valuation allowances | 2,214 | 0.6 | 783 | 0.3 | (4,584) | (3.6) | |||||||||||||||||||||||||||||
| Nondeductible interest | 8,442 | 2.5 | 811 | 0.3 | — | — | |||||||||||||||||||||||||||||
| Other | 879 | 0.3 | (100) | 0.0 | 1,137 | 0.9 | |||||||||||||||||||||||||||||
| France | |||||||||||||||||||||||||||||||||||
| Changes in valuation allowances | 4,184 | 1.2 | (689) | (0.2) | 6,761 | 5.3 | |||||||||||||||||||||||||||||
| Nondeductible interest | 616 | 0.2 | 1,809 | 0.6 | 1,571 | 1.2 | |||||||||||||||||||||||||||||
| Other | 232 | 0.1 | (343) | (0.1) | (386) | (0.3) | |||||||||||||||||||||||||||||
| Other | 2,999 | 0.9 | 755 | 0.3 | 1,648 | 1.3 | |||||||||||||||||||||||||||||
| Effect of cross-border tax laws | (76) | 0.0 | 125 | 0.0 | 340 | 0.3 | |||||||||||||||||||||||||||||
| Tax credits | |||||||||||||||||||||||||||||||||||
| Research and development tax credits | (9,631) | (2.8) | (12,532) | (4.4) | (11,374) | (8.9) | |||||||||||||||||||||||||||||
| Other | — | — | (1,197) | (0.4) | — | — | |||||||||||||||||||||||||||||
| Changes in valuation allowances | (1,521) | (0.4) | — | — | (56) | 0.0 | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | |||||||||||||||||||||||||||||||||||
| Share-based payment awards | (6,286) | (1.8) | (3,322) | (1.2) | 928 | 0.7 | |||||||||||||||||||||||||||||
| Executive compensation | 8,209 | 2.4 | 3,824 | 1.3 | 1,086 | 0.9 | |||||||||||||||||||||||||||||
| Nontaxable interest income | (8,442) | (2.5) | (811) | (0.3) | — | — | |||||||||||||||||||||||||||||
| Other | 1,489 | 0.4 | 1,056 | 0.4 | 306 | 0.2 | |||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | (42,233) | (12.3) | (9,046) | (3.2) | 3,137 | 2.5 | |||||||||||||||||||||||||||||
| Other | 1,266 | 0.4 | 664 | 0.2 | (1,071) | (0.8) | |||||||||||||||||||||||||||||
| Total provision from income taxes | $ | 38,932 | 11.4 | % | $ | 43,407 | 15.3 | % | $ | 29,068 | 22.8 | % | |||||||||||||||||||||||
(1)State taxes in New Jersey, Minnesota, New York, and Colorado made up the majority (greater than 50 percent) of the tax effect in this category in 2025. State taxes in Illinois, Maine, Maryland, and Minnesota made up the majority of the tax effect in this category in 2024. State taxes in Illinois, Michigan, Minnesota, and New York made up the majority of the tax effect in this category in 2023.
Deferred tax assets and liabilities consist of the following:
| December 31, | |||||||||||
| In thousands | 2025 | 2024 | |||||||||
| Deferred tax assets | |||||||||||
Loss carryforwards(1) | $ | 511,724 | $ | 397,686 | |||||||
Tax credits(2) | 33,692 | 24,485 | |||||||||
| Accrued expenses | 21,376 | 28,960 | |||||||||
| Pension plan benefits expense | 9,085 | 9,596 | |||||||||
| Warranty reserves | 7,147 | 7,754 | |||||||||
| Depreciation and amortization | 33,555 | 58,199 | |||||||||
| Equity compensation | 18,728 | 12,619 | |||||||||
| Inventory valuation | 2,039 | 1,762 | |||||||||
| Deferred revenue | 18,198 | 14,850 | |||||||||
| Interest | 18,431 | 30,304 | |||||||||
| Leases | 4,351 | 5,013 | |||||||||
| Capitalized research costs | 70,967 | 151,418 | |||||||||
| Other deferred tax assets, net | 1,482 | 756 | |||||||||
| Total deferred tax assets | 750,775 | 743,402 | |||||||||
| Valuation allowance | (473,906) | (420,655) | |||||||||
| Total deferred tax assets, net of valuation allowance | 276,869 | 322,747 | |||||||||
| Deferred tax liabilities | |||||||||||
| Depreciation and amortization | (4,947) | (7,282) | |||||||||
| Leases | (3,251) | (2,977) | |||||||||
| Other deferred tax liabilities, net | (4,111) | (2,773) | |||||||||
| Total deferred tax liabilities | (12,309) | (13,032) | |||||||||
| Net deferred tax assets | $ | 264,560 | $ | 309,715 | |||||||
(1)For tax return purposes at December 31, 2025, we had U.S. federal loss carryforwards of $275.0 million. A majority of the balance can be carried forward indefinitely. At December 31, 2025, we have net operating loss carryforwards in Luxembourg of $1.5 billion, the majority of which can be carried forward indefinitely, offset by a full valuation allowance. The remaining portion of the loss carryforwards are composed primarily of losses in various other state and foreign jurisdictions. The majority of these losses can be carried forward indefinitely. At December 31, 2025, there was a valuation allowance of $473.9 million primarily associated with foreign loss carryforwards.
(2)For tax return purposes at December 31, 2025, we had: U.S. general business credits of $10.3 million, which begin to expire in 2040; and state tax credits of $45.0 million, which begin to expire in 2026.
Changes in the valuation allowance for deferred tax assets are summarized as follows:
| Year Ended December 31, | |||||||||||||||||
| In thousands | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of period | $ | 420,655 | $ | 445,170 | $ | 427,423 | |||||||||||
| Other adjustments | 48,038 | (22,918) | 17,275 | ||||||||||||||
| Additions charged to costs and expenses | 5,213 | (1,597) | 472 | ||||||||||||||
| Balance at end of period, noncurrent | $ | 473,906 | $ | 420,655 | $ | 445,170 | |||||||||||
We recognize valuation allowances to reduce deferred tax assets to the extent we believe it is more likely than not that a portion of such assets will not be realized. In making such determinations, we consider all available favorable and unfavorable evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and our ability to carry back losses to prior years. We are required to make assumptions and judgments about potential outcomes that lie outside management's control. Our most sensitive and critical factors are the projection, source, and character of future taxable income. Although realization is not assured, management believes it is more likely than not that deferred tax assets, net
of valuation allowance, will be realized. The amount of deferred tax assets considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward periods are reduced.
We do not provide U.S. deferred taxes on temporary differences related to our foreign investments that are considered permanent in duration. Foreign taxes have been provided on these undistributed foreign earnings and any repatriation of these earnings would not result in additional U.S. federal income tax.
We are subject to income tax in the United States and numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve positions and changes to reserves that are considered appropriate.
A reconciliation of the beginning and ending amount of unrecognized tax benefits were as follows:
December 31, | |||||||||||||||||
| In thousands | 2025 | 2024 | 2023 | ||||||||||||||
| Unrecognized tax benefits at beginning of the year | $ | 106,132 | $ | 130,067 | $ | 130,144 | |||||||||||
| Gross increase to positions in prior years | 969 | 630 | 1,182 | ||||||||||||||
| Gross decrease to positions in prior years | (9,696) | (4,320) | (8,666) | ||||||||||||||
| Gross increases to current period tax positions | 3,082 | 4,868 | 10,967 | ||||||||||||||
| Gross decreases to current period tax positions | (389) | (1,056) | — | ||||||||||||||
| Audit settlements | (105) | (19,727) | (3,234) | ||||||||||||||
| Decrease related to lapsing of statute of limitations | (33,004) | (2,752) | (2,000) | ||||||||||||||
| Effect of change in exchange rates | 1,937 | (1,578) | 1,674 | ||||||||||||||
| Unrecognized tax benefits at end of the year | $ | 68,926 | $ | 106,132 | $ | 130,067 | |||||||||||
December 31, | |||||||||||||||||
| In thousands | 2025 | 2024 | 2023 | ||||||||||||||
| The amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate | $ | 68,913 | $ | 106,122 | $ | 129,591 | |||||||||||
If certain unrecognized tax benefits are recognized they would create additional deferred tax assets. These assets would require a full valuation allowance in certain locations based upon present circumstances.
We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. The net interest and penalties expense recognized were as follows:
| Year Ended December 31, | |||||||||||||||||
| In thousands | 2025 | 2024 | 2023 | ||||||||||||||
| Net interest and penalties expense (benefit) | $ | (2,773) | $ | (3,449) | $ | 1,821 | |||||||||||
Accrued interest and penalties recognized were as follows:
December 31, | |||||||||||
| In thousands | 2025 | 2024 | |||||||||
| Accrued interest | $ | 3,909 | $ | 6,418 | |||||||
| Accrued penalties | 137 | 293 | |||||||||
At December 31, 2025, we are under examination by certain tax authorities. We believe we have appropriately accrued for the expected outcome of all tax matters and do not currently anticipate that the ultimate resolution of these examinations will have a material adverse effect on our financial condition, future results of operations, or cash flows.
We file income tax returns in various jurisdictions. We are subject to income tax examination by tax authorities in our major tax jurisdictions as follows:
| Tax Jurisdiction | Years Subject to Audit | |||||||
| U.S. federal | Subsequent to 2021 | |||||||
| France | Subsequent to 2022 | |||||||
| Germany | Subsequent to 2018 | |||||||
| United Kingdom | Subsequent to 2020 | |||||||
| Indonesia | Subsequent to 2017 | |||||||
| Italy | Subsequent to 2019 | |||||||
While the above years are subject to audit based on the local jurisdiction's statute of limitations, tax attributes carrying over into the above years may also be adjusted upon audit.
Income taxes paid, net of refunds received, consisted of the following:
| Year Ended December 31, | |||||||||||
| In thousands | 2025 | 2024 | 2023 | ||||||||
| Federal | $ | 29,000 | $ | 42,224 | $ | 28,440 | |||||
| State and local | 8,595 | 9,250 | 17,519 | ||||||||
| Foreign | |||||||||||
| United Kingdom | 4,858 | * | * | ||||||||
| India | 3,288 | * | * | ||||||||
| Germany | * | 12,753 | * | ||||||||
| Indonesia | * | 4,342 | * | ||||||||
| All other foreign | 10,575 | 11,603 | 8,591 | ||||||||
| Income taxes paid, net of refunds | $ | 56,316 | $ | 80,172 | $ | 54,550 | |||||
*These jurisdictions did not exceed the 5% threshold for disclosure in this year.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Jun 30, 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.