LivaNova PLCLIVN

LivaNova PLC Income Taxes Disclosure

10-KFiled Feb 25, 20267 min read
Note 15. Income Taxes
Effective for the year ended December 31, 2025, LivaNova adopted ASU 2023-09 on a prospective basis, which resulted in certain additional disclosures presented below for 2025.
(Loss) Income Before Income Tax and Income Tax Expense (Benefit)
The following table presents the domestic and foreign components of (loss) income before income tax and income tax expense (benefit) (in thousands):
2025
(Loss) income before income tax:
UK domestic$40,823 
Foreign(261,604)
 $(220,781)
Income tax expense (benefit):
Current:
UK domestic (national)$2,142 
Foreign
19,042 
 21,184 
Deferred:
UK domestic (national)$5,089 
Foreign(4,634)
 455 
$21,639 
The following table presents the U.S. and non-U.S. components of income (loss) before income tax and LivaNova’s income tax expense (benefit) (in thousands):
20242023
Income (loss) before income tax:
UK and non-U.S.
$86,886 $60,799 
U.S.1,424 (142,025)
 $88,310 $(81,226)
Income tax expense (benefit):
Current:
UK and non-U.S.
$13,851 $10,954 
U.S.4,412 4,598 
 18,263 15,552 
Deferred:
UK and non-U.S.
5,987 (114,428)
U.S.808 — 
 6,795 (114,428)
$25,058 $(98,876)
Effective Income Tax Rate Reconciliation
LivaNova PLC is resident in the UK for tax purposes. LivaNova’s subsidiaries conduct operations and earn income in numerous countries and are subject to the laws of taxing jurisdictions within those countries, and the income tax rates imposed in the tax jurisdictions in which LivaNova’s subsidiaries conduct operations vary. As a result of the changes in the overall level of the Company’s income, the earnings mix in various jurisdictions, and the changes in tax laws, LivaNova’s consolidated effective income tax rate may vary from one reporting period to another.
LivaNova is subject to income taxes as well as non-income-based taxes in the U.S., the UK, the EU, and various other jurisdictions. LivaNova continues to monitor the adoption of Pillar Two by the taxing jurisdictions in which it operates. The UK has enacted legislation providing for a minimum effective tax rate of 15% through a multinational top-up tax and a domestic top-up tax for accounting periods beginning on or after December 31, 2023. Since LivaNova does not have significant operations in jurisdictions with tax rates below 15%, the multinational top-up tax and domestic top-up taxes under Pillar Two do not have a material impact on the effective rate for 2025. LivaNova will continue to monitor legislative developments and related guidance in the UK and other jurisdictions that may impact LivaNova’s operations.
LivaNova’s effective income tax rate was (9.8%) and 28.4% for the years ended December 31, 2025 and 2024, respectively. Compared with the year ended December 31, 2024, the change in the effective tax rate for 2025 was primarily attributable to year-over-year changes in income before income tax in countries with varying statutory tax rates; certain discrete tax items, including the SNIA environmental liability; and changes in valuation allowances.
The following tables present a reconciliation of the statutory income tax rate to LivaNova’s effective income tax rate expressed as a percentage of income (loss) before income tax (in thousands, except for percentages):
2025
UK domestic statutory tax rate$(55,195)25.00 %
Foreign tax effect
Italy
SNIA Environmental Liability
89,825 (40.69)%
Interest limitations3,125 (1.42)%
Other1,718 (0.78)%
U.S.
Changes in valuation allowance(26,036)11.79 %
Foreign tax credit
14,310 (6.48)%
Foreign tax rate differential(2,922)1.32 %
Other922 (0.42)%
Brazil
Changes in valuation allowance(3,709)1.68 %
Other870 (0.39)%
Other foreign(1,251)0.57 %
Nontaxable or nondeductible items(1,966)0.89 %
Changes in valuation allowance(1,584)0.72 %
Changes in unrecognized tax benefits(537)0.24 %
Other items
Compensation related
3,539 (1.60)%
Other530 (0.24)%
Effective tax rate$21,639 (9.80)%
20242023
Statutory tax rate at UK Rate25.0 %23.5 %
Interest9.5 — 
Deferred tax valuation allowance (7.7)100.5 
Research and development tax credits(4.1)0.3 
Subsidiary investments and impairments1.9 (3.1)
Foreign tax withholding and credits1.2 — 
Foreign tax rate differential1.1 5.2 
U.S. state and local tax expense, net of federal benefit0.9 (3.5)
Reserve for uncertain tax positions0.7 — 
Disallowable professional fees0.6 (2.6)
Compensation related items(0.4)1.4 
Effect of changes in tax rate— 1.2 
Other, net(0.3)(1.2)
Effective tax rate28.4 %121.7 %
Income Taxes Paid
The following table presents the domestic and foreign components of cash paid for income taxes, net (in thousands):
2025
UK domestic (national)$4,387 
Foreign24,981 
U.S. (federal $3,941, state $2,223)
6,164 
Germany
4,657 
Italy3,262 
Belgium1,584 
China
1,508 
Other7,806 
$29,368 
Deferred Income Tax Assets and Liabilities
The following table presents the significant components of LivaNova’s deferred tax assets and liabilities (in thousands):
December 31,
20252024
Deferred tax assets:
Net operating loss carryforwards$115,511 $114,678 
Interest expense carryforward84,759 93,072 
Accruals and reserves34,295 31,284 
Capitalized/Deferred R&D17,411 30,819 
Tax credit carryforwards10,960 27,801 
Deferred compensation15,918 15,428 
Inventories7,702 10,698 
Other1,904 1,012 
Gross deferred tax assets288,460 324,792 
Valuation allowance(127,594)(158,823)
Net deferred tax assets160,866 165,969 
Deferred tax liabilities:
Property, equipment, and intangible assets(57,479)(58,350)
Other(1,994)(6,679)
Gross deferred tax liabilities:(59,473)(65,029)
Net deferred tax assets$101,393 $100,940 
Net deferred tax assets and liabilities, as reported on the consolidated balance sheets as:
Net deferred tax assets$110,983 $111,855 
Net deferred tax liabilities(9,590)(10,915)
Net deferred tax assets$101,393 $100,940 
The Company operates in multiple jurisdictions worldwide and assesses the recoverability of its deferred tax assets for each period and jurisdiction by considering whether it is more likely than not that all or a portion of the deferred tax assets will not be realized. The Company considers all available evidence (both positive and negative) in determining whether a valuation allowance is required. Depending on operating results in the future, a release of the valuation allowance could occur within the next 12 months. The timing and amount of the valuation allowance release could vary based on the Company’s assessment of all available evidence. Any changes to the realizability of the deferred tax assets due to transactions and other events in 2026 will be accounted for during the quarter in which they occur. As of December 31, 2025 and 2024, LivaNova had valuation allowances against deferred tax assets of $127.6 million and $158.8 million, respectively. The decrease in valuation allowance primarily relates to the release of valuation allowances for expired tax credits and utilization of previously valued deferred tax assets.
The following table presents a reconciliation of the beginning and ending balances of LivaNova’s deferred tax asset valuation allowances (in thousands):
202520242023
Balance at beginning of year$158,823 $182,464 $264,754 
Additions89 99 38,278 
Deductions(31,318)(23,740)(120,568)
Balance at end of year$127,594 $158,823 $182,464 
The following table presents NOL and tax credit carryforwards as of December 31, 2025, which can be used to reduce LivaNova’s income tax payable in future years (in thousands):
RegionGross AmountTax BenefitAmount
with No Expiration		Amount with ExpirationCarryforward Period
UK NOL$369,432 $92,358 $92,358 $— Unlimited
U.S. State NOL307,195 14,495 648 13,847 
2026
-
2045
U.S. Federal NOL15,363 3,226 — 3,226 
2028
-
2034
Other regions NOL18,716 5,432 5,353 79 
2030
-
2040
U.S. State research & development tax credits— 7,473 1,565 5,908 
2030
-
2044
U.S. tax credits— 2,322 — 2,322 
2026
-
2044
Other non-U.S. tax credits
— 1,164 208 956 
2026
-
2034
$710,706 $126,470 $100,132 $26,338 
No provision has been made for income taxes on undistributed earnings of foreign subsidiaries as of December 31, 2025 because it is LivaNova’s intention to indefinitely reinvest undistributed earnings of its foreign subsidiaries. In the event of the distribution of those earnings in the form of dividends, a sale of the subsidiaries, or certain other transactions, LivaNova may be liable for income taxes and withholding taxes. As of December 31, 2025, it was not practicable to determine the exact amount of the deferred tax liability related to those investments.
Uncertain Income Tax Positions
LivaNova operates in multiple jurisdictions with complex legal and tax regulatory environments, and the Company’s tax returns are periodically audited or subjected to review by tax authorities. LivaNova monitors tax law changes and the potential impact on its results of operations. Tax authorities may disagree with certain positions LivaNova has taken and assess additional taxes. LivaNova regularly assesses the likely outcomes of the Company’s tax positions in order to determine the appropriateness of its reserves for uncertain tax positions. However, there can be no assurance that LivaNova will accurately predict the outcome of these audits, and the actual outcome of an audit could have a material impact on LivaNova’s consolidated results of operations, cash flows, and financial position.
The following table presents a reconciliation of LivaNova’s total gross unrecognized tax benefit (in thousands):
202520242023
Gross Balance at beginning of year$15,221 $5,406 $1,640 
Tax positions related to prior years for settlement with tax authorities(3,488)(143)5,406 
Additions for tax positions related to current year819 915 — 
Impact of foreign currency exchange rates685 (417)58 
Additions for tax positions related to prior years143 9,460 — 
Tax positions related to prior years for lapses of statute of limitations— — (1,698)
Gross Balance at end of year $13,380 $15,221 $5,406 
The following table presents the components of LivaNova’s total gross unrecognized tax benefit (in thousands):
December 31,
20252024
Recorded as liability$3,164 $1,073 
Reduction to deferred tax assets - impacting effective tax rate— 4,786 
Reduction to deferred tax assets with valuation allowance10,216 9,362 
$13,380 $15,221 
Accrued interest and penalties totaled $0.4 million, $0.1 million, and $0.7 million, as of December 31, 2025, 2024, and 2023, respectively, and were included in other long-term liabilities in LivaNova’s consolidated balance sheets. LivaNova records accrued interest and penalties related to unrecognized tax benefits in interest expense and foreign exchange and other income/(expense), respectively, in LivaNova’s consolidated statements of income (loss).
The major jurisdictions where LivaNova is subject to income tax examinations as of December 31, 2025 were as follows:
JurisdictionEarliest Year Open
Italy2020
Germany2020
Canada2020
England and Wales2021
U.S. - federal and state2022

Historical Timeline

Fiscal YearFiled
2025Feb 25, 2026Showing above
2024Feb 25, 2025
2023Feb 29, 2024
2022Feb 27, 2023
2021Mar 1, 2022
2020Mar 1, 2021
2019Mar 2, 2020
2018Mar 18, 2019
2017Feb 28, 2018
2016Mar 1, 2017

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.

Other Available Disclosures

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