MASIMO CORPMASI
MASIMO CORP Income Taxes Disclosure
23. Income Taxes
The components of income before (benefit) provision for income taxes are as follows:
(in millions) | Year Ended January 3, 2026 | Year Ended December 28, 2024 | Year Ended December 30, 2023 | ||||||||||||||
| United States | $ | 133.9 | $ | (17.8) | $ | 56.3 | |||||||||||
| Foreign | 138.7 | 39.6 | 56.7 | ||||||||||||||
Total | $ | 272.6 | $ | 21.8 | $ | 113.0 | |||||||||||
The following table presents the current and deferred (benefit) provision for income taxes:
| (in millions) | Year Ended January 3, 2026 | Year Ended December 28, 2024 | Year Ended December 30, 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 23.5 | $ | 17.3 | $ | 12.6 | |||||||||||
| State | 4.1 | 3.0 | 3.4 | ||||||||||||||
| Foreign | 25.5 | 8.6 | 9.1 | ||||||||||||||
| Subtotal | $ | 53.1 | $ | 28.9 | $ | 25.1 | |||||||||||
| Deferred: | |||||||||||||||||
| Federal | $ | 6.1 | $ | (19.0) | $ | (5.4) | |||||||||||
| State | 6.4 | (5.6) | (6.3) | ||||||||||||||
| Foreign | (0.7) | 1.3 | (8.1) | ||||||||||||||
| Subtotal | 11.8 | (23.3) | (19.8) | ||||||||||||||
Total | $ | 64.9 | $ | 5.6 | $ | 5.3 | |||||||||||
Included in the fiscal year 2025, 2024 and 2023 tax (benefit) provisions are increases of $2.8 million, $3.2 million and $5.7 million, respectively, for tax and accrued interest related to uncertain tax positions for each fiscal year.
The reconciliation of the U.S. federal statutory tax rate to the Company’s effective tax rate after the adoption of ASU 2023-09 is as follows:
| Year Ended January 3, 2026 | |||||||||||
| (in millions) | Percent | ||||||||||
Statutory regular federal income tax rate | $ | 57.1 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect (a) | 8.3 | 3.1 | |||||||||
Foreign tax effects: | |||||||||||
Switzerland | |||||||||||
Statutory tax rate differential | (17.6) | (6.5) | |||||||||
Cantonal taxes | 5.0 | 1.8 | |||||||||
Impairment | (4.3) | (1.6) | |||||||||
Cross-border tax laws | 4.7 | 1.7 | |||||||||
Other | 2.3 | 0.8 | |||||||||
Other foreign jurisdictions | 5.7 | 2.1 | |||||||||
Effects of cross-board tax laws | |||||||||||
Foreign GILTI, net with FTC | 2.4 | 0.9 | |||||||||
Other | 0.8 | 0.3 | |||||||||
Tax credits | |||||||||||
R&D credits | (4.8) | (1.8) | |||||||||
Nontaxable and nondeductible items | |||||||||||
Excess stock-based compensation | (5.0) | (1.8) | |||||||||
Other | 7.5 | 2.8 | |||||||||
Changes in unrecognized tax benefit | 2.8 | 1.0 | |||||||||
Effective tax rate | $ | 64.9 | 23.8 | % | |||||||
____________
(a) The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California, Illinois, Massachusetts, New York, and Texas.
A reconciliation of the provision for income taxes to the amount computed by applying the 21% statutory U.S. federal income tax rate to income before income taxes for years prior to the adoption of ASU 2023-09 is as follows:
| Year Ended December 28, 2024 | Year Ended December 30, 2023 | ||||||||||
| Statutory regular federal income tax rate | 21.0 | % | 21.0 | % | |||||||
| State provision, net of federal benefit | (12.1) | (2.0) | |||||||||
| U.S. tax on foreign income, net | 42.5 | 5.3 | |||||||||
| Foreign income taxed at different rates | 8.0 | (2.4) | |||||||||
| Research and development tax credits | (16.7) | (3.4) | |||||||||
| Tax credit | — | (7.3) | |||||||||
| Excess stock-based compensation | (26.3) | (2.3) | |||||||||
| Nondeductible executive compensation | 16.9 | (1.7) | |||||||||
| Derecognition of uncertain tax position | (15.5) | (1.6) | |||||||||
| Other | 7.9 | (0.9) | |||||||||
Total | 25.7 | % | 4.7 | % | |||||||
As of January 3, 2026, the Company has accumulated undistributed earnings generated by its foreign subsidiaries of approximately $613.7 million. Because such earnings have previously been subject to U.S. tax or are eligible for a dividends received deduction when repatriated, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of its foreign investments would generally be limited to foreign withholding and state taxes. The Company considers $86.5 million of these accumulated undistributed earnings as no longer permanently reinvested and has accrued foreign withholding and state taxes, net of estimated foreign tax credits, of $2.3 million. The Company intends, however, to indefinitely reinvest the remaining $527.2 million of earnings. If the Company decides to distribute such permanently reinvested earnings, the Company would accrue estimated additional income tax expense of up to approximately $25.0 million.
The components of the deferred tax assets are as follows:
| (in millions) | January 3, 2026 | December 28, 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Capital loss | $ | 134.2 | $ | — | |||||||
| Accrued liabilities | 35.7 | 28.6 | |||||||||
| Capitalized R&D | 29.5 | 41.2 | |||||||||
| Tax credits | 30.6 | 31.5 | |||||||||
| Deferred revenue | 24.8 | 27.5 | |||||||||
| Net operating losses | 16.8 | 10.9 | |||||||||
| Operating lease liabilities | 7.4 | 5.6 | |||||||||
| Stock-based compensation | 5.6 | 8.4 | |||||||||
| Intangible assets | 1.6 | 6.4 | |||||||||
| Other | 6.2 | 5.8 | |||||||||
| Total | 292.4 | 165.9 | |||||||||
| Valuation allowance | (145.1) | (15.2) | |||||||||
| Total deferred tax assets | $ | 147.3 | $ | 150.7 | |||||||
| Deferred tax liabilities: | |||||||||||
| Property and equipment | $ | (8.4) | $ | (12.2) | |||||||
| Withholding taxes on undistributed foreign earnings | (3.5) | (3.1) | |||||||||
| ROU assets | (7.3) | (5.2) | |||||||||
| State taxes and other | (14.1) | (12.0) | |||||||||
| Total deferred tax liabilities | (33.3) | (32.5) | |||||||||
| Net deferred tax assets | $ | 114.0 | $ | 118.2 | |||||||
As of January 3, 2026, the Company has $0.8 million and $2.7 million of net operating losses from federal and various state jurisdictions, which will begin to expire in 2037 and 2038, respectively. Additionally, the Company has $68.7 million of net operating losses from foreign jurisdictions that will begin to expire in 2032. The Company also has state research and development tax credits of $38.7 million that will carryforward indefinitely, $0.2 million of foreign tax credits on research and development expenditures that will begin to expire in 2044 and $3.6 million of Swiss tax credits that will begin to expire in 2026. In assessing the realizability of deferred tax assets, the Company considers whether it is more-likely-than-not that all or some portion of the deferred tax assets will not be realized. In making this determination, the Company considered all available positive and negative evidence, including scheduled reversals of liabilities, projected future taxable income, tax planning strategies and recent financial performance.
During the year ended December 30, 2023, the Company established a valuation allowance to reduce the deferred tax assets relating to certain acquired operating losses in certain foreign jurisdictions that the Company believes are not likely to be realized. During the year ended January 3, 2026, there was an increase in the valuation allowance of $129.9 million, primarily due to capital losses and the losses of certain foreign operations and certain state jurisdictions that the Company believes are not likely to be realized.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:
| (in millions) | Year Ended January 3, 2026 | Year Ended December 28, 2024 | |||||||||
| Unrecognized tax benefits (gross), beginning of period | $ | 33.4 | $ | 30.2 | |||||||
| Increase from tax positions in prior period | 0.5 | 1.8 | |||||||||
| Increase from tax positions in current period | 7.3 | 4.9 | |||||||||
| Lapse of statute of limitations | (5.3) | (3.5) | |||||||||
| Unrecognized tax benefits (gross), end of period | $ | 35.9 | $ | 33.4 | |||||||
The amount of unrecognized benefits which, if ultimately recognized, could favorably affect the tax rate in a future period was $33.3 million and $30.8 million as of January 3, 2026 and December 28, 2024, respectively.
For the year ended January 3, 2026 the Company recorded an expense of $0.4 million for interest and penalties related to unrecognized tax benefits as part of income tax expense. For the year ended December 28, 2024, the Company recorded a benefit of $0.6 million for interest and penalties related to unrecognized tax benefits as part of income tax expense. For the year ended December 30, 2023, the Company recorded a benefit of $1.0 million for interest and penalties related to unrecognized tax benefits as part of income tax expense.
Total accrued interest and penalties related to unrecognized tax benefits as of January 3, 2026 and December 28, 2024 were $3.1 million and $2.7 million, respectively.
The Company conducts business in multiple jurisdictions and, as a result, one or more of the Company’s subsidiaries files income tax returns in U.S. federal, various state, local and foreign jurisdictions. The Company has concluded all U.S. federal income tax matters through fiscal year 2021. All material state, local and foreign income tax matters have been concluded through fiscal year 2017.
The Company does not believe that the results of any tax authority examination would have a significant impact on its consolidated financial statements.
The amounts of cash income tax paid by the Company were as follows:
| (in millions) | Year Ended January 3, 2026 | ||||
Federal | $ | 13.4 | |||
Foreign | |||||
Switzerland | 6.9 | ||||
Mexico | 2.0 | ||||
All other foreign | 4.2 | ||||
State and local | 2.0 | ||||
Income taxes, net of amounts refunded | $ | 28.5 | |||
The amount of cash income taxes paid by the Company during the years ended December 28, 2024 and December 30, 2023 was $35.9 million and $20.4 million, respectively.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA did not have a material impact on the consolidated financial statements for the year ended January 3, 2026, and the Company will continue to monitor its impacts on future years.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Feb 27, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 16, 2022 | |
| 2021 | Feb 23, 2021 | |
| 2019 | Feb 19, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 15, 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.