James Hardie Industries plcJHX
James Hardie Industries plc Income Taxes Disclosure
Income Taxes
Income tax expense includes income taxes currently payable and those deferred because of temporary differences between the financial statement and tax bases of assets and liabilities. Income tax expense consists of the following components:
Years Ended March 31 | ||||||||||||||||||||
| (Millions of US dollars) | 2026 | 2025 | 2024 | |||||||||||||||||
| Income before income taxes: | ||||||||||||||||||||
| Domestic | $ | 273.1 | $ | 175.8 | $ | 239.1 | ||||||||||||||
| Foreign | (66.4) | 469.6 | 515.7 | |||||||||||||||||
| Income before income taxes | $ | 206.7 | $ | 645.4 | $ | 754.8 | ||||||||||||||
| Income tax expense: | ||||||||||||||||||||
| Current: | ||||||||||||||||||||
| Domestic | $ | 41.7 | $ | 30.0 | $ | 38.7 | ||||||||||||||
| Foreign | 36.5 | 90.0 | 133.0 | |||||||||||||||||
| Current income tax expense | 78.2 | 120.0 | 171.7 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Domestic | (5.3) | 16.3 | 17.3 | |||||||||||||||||
| Foreign | 29.8 | 85.1 | 55.6 | |||||||||||||||||
| Deferred income tax expense | 24.5 | 101.4 | 72.9 | |||||||||||||||||
| Total income tax expense | $ | 102.7 | $ | 221.4 | $ | 244.6 | ||||||||||||||
In accordance with the adoption of ASU 2023-09 (detailed in Note 1, “Organization and Significant Accounting Policies – Accounting Pronouncements – Adopted in Fiscal Year 2026”), the table below provides a reconciliation of the Irish statutory rate to the effective tax rate for the year ended March 31, 2026. The Company has adopted ASU 2023-09 on a prospective basis.
Year ended March 31 | ||||||||||||||
| (Millions of US dollars) | 2026 | |||||||||||||
| Irish Statutory Tax Rate | $ | 25.8 | 12.5 | % | ||||||||||
| Foreign Tax Effects | ||||||||||||||
| United States | ||||||||||||||
| Foreign tax on domestic income | 35.3 | 17.1 | % | |||||||||||
| State income taxes, net of federal income tax benefit | 2.5 | 1.2 | % | |||||||||||
| Statutory tax rate difference between United States and Ireland | (16.8) | (8.1) | % | |||||||||||
| Share-based payment awards | 6.5 | 3.1 | % | |||||||||||
| Nondeductible acquisition costs | 10.9 | 5.3 | % | |||||||||||
| Unremitted earnings benefit | (4.8) | (2.3) | % | |||||||||||
| Other | (1.6) | (0.8) | % | |||||||||||
| Australia | ||||||||||||||
| Statutory tax rate difference between Australia and Ireland | 17.6 | 8.5 | % | |||||||||||
| Other | 1.0 | 0.5 | % | |||||||||||
| Germany | ||||||||||||||
| Statutory tax rate difference between Germany and Ireland | 1.4 | 0.7 | % | |||||||||||
| Effect of changes in tax law or rates enacted in the current period | (7.9) | (3.8) | % | |||||||||||
| Other foreign jurisdictions | 6.3 | 3.0 | % | |||||||||||
| Nontaxable or nondeductible items | 4.3 | 2.1 | % | |||||||||||
| Changes in unrecognized tax benefits | 19.4 | 9.3 | % | |||||||||||
| Other | 2.8 | 1.4 | % | |||||||||||
| Total income tax expense | $ | 102.7 | 49.7 | % | ||||||||||
The following table is a reconciliation of the Company’s blended statutory tax rate to the total effective tax rates for the years ended March 31, 2025 and 2024 in accordance with the guidance prior to the adoption of ASU 2023-09.
Years Ended March 31 | ||||||||||||||
| (Millions of US dollars) | 2025 | 2024 | ||||||||||||
| Income tax expense computed at the statutory tax rates | $ | 117.9 | $ | 135.1 | ||||||||||
| US state income taxes, net of the federal benefit | 15.2 | 14.0 | ||||||||||||
| Asbestos - effect of foreign exchange | — | (3.2) | ||||||||||||
| Expenses not deductible | 14.2 | 3.6 | ||||||||||||
| Stock and executive compensation | 2.4 | 7.6 | ||||||||||||
| Foreign taxes on domestic income | 50.8 | 60.2 | ||||||||||||
| Taxes on foreign income | 17.2 | 17.7 | ||||||||||||
| Net deferred tax remeasurement | (1.1) | 7.3 | ||||||||||||
| Other items | 4.8 | 2.3 | ||||||||||||
| Total income tax expense | $ | 221.4 | $ | 244.6 | ||||||||||
| Effective tax rate | 34.3 | % | 32.4 | % | ||||||||||
The tax effects of significant temporary differences creating deferred tax assets and liabilities were:
| March 31 | ||||||||||||||
| (Millions of US dollars) | 2026 | 2025 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Intangible assets | $ | 700.0 | $ | 756.7 | ||||||||||
| Asbestos liability | 282.5 | 284.5 | ||||||||||||
| Tax credit carryforwards | 123.1 | 111.8 | ||||||||||||
| Net operating loss carryforwards | 64.1 | 77.4 | ||||||||||||
| Operating lease liabilities | 62.3 | 23.3 | ||||||||||||
| Other deferred tax assets | 154.7 | 75.8 | ||||||||||||
| Total deferred tax assets | 1,386.7 | 1,329.5 | ||||||||||||
| Valuation allowance | (273.9) | (256.9) | ||||||||||||
| Total deferred tax assets net of valuation allowance | 1,112.8 | 1,072.6 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Intangible assets | (744.1) | (40.3) | ||||||||||||
| Depreciable and amortizable assets | (277.9) | (170.7) | ||||||||||||
| Deferred tax on unremitted earnings | (58.1) | (63.0) | ||||||||||||
| Operating lease assets | (57.3) | (18.7) | ||||||||||||
| Other deferred tax liabilities | (19.3) | (16.1) | ||||||||||||
| Total deferred tax liabilities | (1,156.7) | (308.8) | ||||||||||||
| Total deferred taxes, net | $ | (43.9) | $ | 763.8 | ||||||||||
As of March 31, 2026, the Company has tax loss carry-forwards in Australia, New Zealand, Europe and the US of $64.1 million, that are available to offset future taxable income in the respective jurisdiction, and against which there is a partial valuation allowance of $2.2 million. Carry-forwards in Australia, New Zealand and Europe are not subject to expiration.
The Australian net operating loss carry-forwards primarily result from current and prior year tax deductions for contributions to AICF. James Hardie 117 Pty Limited, the Performing Subsidiary under the AFFA, is able to claim a tax deduction for its contributions to AICF over a five-year period commencing in the year the contribution is incurred. As of March 31, 2026, the Company recognized a tax deduction of $128.0 million (A$193.5 million) for the current year relating to total contributions to AICF of $674.5 million (A$967.5 million) incurred in tax years 2022 through 2026.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, including reinstatement of federal bonus depreciation, deductions for domestic research and development expenditures, and modifications to the international tax framework. The enactment of OBBBA did not have a material impact on the Company’s consolidated financial statements.
The Company establishes a valuation allowance against a deferred tax asset if it is more likely than not that some portion or all of the deferred tax asset will not be realized.
As of March 31, 2026, the Company has foreign tax credit carry-forwards of $114.4 million that are available to offset future taxes payable and against which there is a 100% valuation allowance. The Company also had US tax credit carry-forwards of $8.3 million that are available to offset future taxes payable which expire between tax years 2026 through 2031, and against which there is a partial valuation allowance of $5.2 million.
In determining the need for and the amount of a valuation allowance in respect of the Company’s asbestos related deferred tax asset, management reviewed the relevant empirical evidence, including the
current and past core earnings of the Australian business and forecast earnings of the Australian business considering current trends. Although realization of the deferred tax asset will occur over the life of the AFFA, which extends beyond the forecast period for the Australian business, Australia provides an unlimited carry-forward period for tax losses. Based upon managements’ review, the Company believes that it is more likely than not that the Company will realize its asbestos related deferred tax asset and that no valuation allowance is necessary as of March 31, 2026. In the future, based on review of the empirical evidence by management at that time, if management determines that realization of its asbestos related deferred tax asset is not more likely than not, the Company may need to provide a valuation allowance to reduce the carrying value of the asbestos related deferred tax asset to its realizable value.
In accordance with ASU 2023-09 disclosure requirements, the table below summarizes income taxes paid (net of refunds) by jurisdiction for the fiscal year ended March 31, 2026.
| (Millions of US dollars) | March 31, 2026 | |||||||
| Ireland | $ | 31.8 | ||||||
| Foreign: | ||||||||
| United States | 48.5 | |||||||
| Other | 4.8 | |||||||
| Income Taxes Paid | $ | 85.1 | ||||||
The Company paid income taxes, net of refunds of $85.1 million, $128.1 million and $183.1 million during the fiscal years ended March 31, 2026, 2025 and 2024, respectively.
The US Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in March 2020 providing wide ranging economic relief for individuals and businesses. One component of the CARES Act provides the Company with an opportunity to carryback US net operating losses arising during the years ended March 31, 2021 and 2020 to the prior five tax years. The Company utilized these carryback provisions and has a remaining current taxes receivable of $37.7 million at March 31, 2026.
Commencing April 1, 2024, the Company adopted the Pillar Two rules in accordance with the Minimum Tax Directive of the European Union for implementation of Pillar Two of the Organization for Economic Cooperation and Development’s (OECD’s) Two Pillar solution. The Pillar Two rules provide that income of large groups is taxed at a minimum effective tax rate of 15% on a jurisdictional basis. The Pillar Two rules include an Income Inclusion Rule top-up tax and a domestic top-up tax, which applies to fiscal years commencing on or after December 31, 2023, and an Undertaxed Profits Rule which applies to fiscal years commencing on or after December 31, 2024. For the year ended March 31, 2026, the Company did not recognize a material amount of current tax expense related to the Pillar Two rules.
The Company or its subsidiaries files income tax returns in various jurisdictions including Ireland, the United States, Australia and various jurisdictions in Europe and Asia Pacific. Due to the size and nature of its business, the Company is subject to ongoing audits and reviews by taxing jurisdictions on various tax matters. The Company is no longer subject to general tax examinations in Ireland for the tax years prior to tax year 2021, Australia for tax years prior to tax year 2022 and in the US for tax years prior to tax year 2017. Refer to Note 15, “Commitments and Contingencies” for further information related to the completed Australian Tax Office (“ATO”) audit.
Unrecognized Tax Benefits
For the fiscal years ended March 31, 2026, 2025, and 2024, the total amount of penalties and interest recorded in Income tax expense related to unrecognized tax benefits were immaterial. The liabilities associated with uncertain tax benefits are included in Other liabilities or Income Taxes Payable, depending on the expected timing of payments, on the Company’s consolidated balance sheets. As of March 31, 2026, the total amount of unrecognized tax benefits and the total amount of interest and penalties accrued by the Company that, if recognized, would affect the effective tax rate were $4.9 million.
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.