MSA Safety IncMSA
MSA Safety Inc Income Taxes Disclosure
Income Taxes
The Company adopted ASU No. 2023-09 (“ASU 2023-09”), Improvements to Income Tax Disclosures, applying it prospectively for the year ended December 31, 2025.
| (In thousands) | 2025 | 2024 | 2023 | ||||||||||||||
| Components of income before income taxes | |||||||||||||||||
| U.S. income | $ | 242,979 | $ | 243,129 | $ | 80,229 | |||||||||||
| Non-U.S. income | 123,419 | 131,877 | 126,459 | ||||||||||||||
| Income before income taxes | $ | 366,398 | $ | 375,006 | $ | 206,688 | |||||||||||
| Provision for income taxes | |||||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 46,980 | $ | 47,060 | $ | 49,642 | |||||||||||
| State | 9,981 | 12,868 | 9,510 | ||||||||||||||
| Non-U.S. | 35,475 | 30,209 | 27,101 | ||||||||||||||
| Total current provision | $ | 92,436 | $ | 90,137 | $ | 86,253 | |||||||||||
| Deferred | |||||||||||||||||
| Federal | $ | 2,666 | $ | (3,141) | $ | 54,272 | |||||||||||
| State | (1,503) | 1,046 | 12,914 | ||||||||||||||
| Non-U.S. | (6,125) | 1,997 | (5,334) | ||||||||||||||
| Total deferred provision (benefit) | (4,962) | (98) | 61,852 | ||||||||||||||
| Provision for income taxes | $ | 87,474 | $ | 90,039 | $ | 148,105 | |||||||||||
Below is a tabular rate reconciliation pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025:
| 2025 | |||||||||||
| (in thousands, except percentages) | Amount | Percent | |||||||||
| U.S. federal statutory income tax | $ | 76,944 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect(1) | 6,652 | 1.8 | % | ||||||||
| Foreign tax effects | 5,700 | 1.6 | % | ||||||||
| Nontaxable or nondeductible items | 2,606 | 0.7 | % | ||||||||
| Effect of cross-border tax laws | (149) | — | % | ||||||||
| Tax credits | (3,891) | (1.1) | % | ||||||||
| Changes in unrecognized tax benefits | (420) | (0.1) | % | ||||||||
| Other | 32 | — | % | ||||||||
| Provision for income taxes | $ | 87,474 | 23.9 | % | |||||||
(1)The states that contribute to the majority (greater than 50%) of the tax effect in this category include California, Illinois, Maryland, Indiana, New Hampshire, Pennsylvania and Wisconsin. | |||||||||||
Below is a reconciliation of the U.S. federal income tax rates to the Company's effective tax rate for the years ended December 21, 2024 and 2023:
| 2024 | 2023 | |||||||||||||
| U.S. federal income tax rate | 21.0 | % | 21.0 | % | ||||||||||
| State income taxes-U.S. | 2.9 | % | 3.7 | % | ||||||||||
| Taxes on non-U.S. income | 1.1 | % | (0.6) | % | ||||||||||
| Nondeductible compensation | 0.5 | % | 1.9 | % | ||||||||||
| Divestiture (Note 21) | — | % | 46.6 | % | ||||||||||
| Valuation allowances | (1.2) | % | (0.2) | % | ||||||||||
| Research and development credit | (0.7) | % | (0.8) | % | ||||||||||
| Employee share-based payments | (0.2) | % | (0.4) | % | ||||||||||
| Taxes on non-U.S. income - U.S., Canadian & European reorganization | (0.1) | % | (0.5) | % | ||||||||||
| Foreign exchange on entity closures | (0.1) | % | — | % | ||||||||||
| Other | 0.8 | % | 0.9 | % | ||||||||||
| Effective income tax rate | 24.0 | % | 71.6 | % | ||||||||||
Disclosed below is a summary of income taxes paid by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025:
| (in thousands) | 2025 | ||||||||||
| United States - Federal | $ | 48,993 | |||||||||
| United States - State and local | 11,798 | ||||||||||
| Brazil | 7,900 | ||||||||||
| Switzerland | 7,372 | ||||||||||
| Germany | 5,375 | ||||||||||
| Other | 20,167 | ||||||||||
| Total | $ | 101,605 | |||||||||
Components of deferred tax assets and liabilities:
| December 31, | |||||||||||
| (In thousands) | 2025 | 2024 | |||||||||
| Deferred tax assets | |||||||||||
| Capitalized research and development | $ | 33,915 | $ | 31,030 | |||||||
| Inventory | 9,184 | 9,434 | |||||||||
| Net operating losses and tax credit carryforwards | 8,078 | 6,715 | |||||||||
| Share-based compensation | 5,039 | 6,149 | |||||||||
| Accrued expenses and other reserves | 6,419 | 5,006 | |||||||||
| Reserve for doubtful accounts | 1,391 | 1,071 | |||||||||
| Other | 5,847 | 2,177 | |||||||||
| Total deferred tax assets | 69,873 | 61,582 | |||||||||
| Valuation allowances | (4,464) | (4,815) | |||||||||
| Net deferred tax assets | $ | 65,409 | $ | 56,767 | |||||||
| Deferred tax liabilities | |||||||||||
| Goodwill and intangibles | $ | (98,104) | $ | (79,917) | |||||||
| Employee benefits | (54,923) | (41,399) | |||||||||
| Property, plant and equipment | (16,992) | (15,461) | |||||||||
| Other | (1,939) | (1,501) | |||||||||
| Total deferred tax liabilities | (171,958) | (138,278) | |||||||||
| Net deferred taxes | $ | (106,549) | $ | (81,511) | |||||||
At December 31, 2025, we had net operating loss carryforwards of approximately $30.0 million. All net operating loss carryforwards without a valuation allowance may be carried forward for a period of at least six years.
A reconciliation of the change in the tax liability for unrecognized tax benefits for the years ended December 31, 2025 and 2024 is as follows:
| (In thousands) | 2025 | 2024 | |||||||||
| Beginning balance | $ | 1,270 | $ | 3,084 | |||||||
| Adjustments for tax positions related to the current year | — | 51 | |||||||||
| Adjustments for tax positions related to prior years | 3,347 | (607) | |||||||||
| Settlements | (194) | (929) | |||||||||
| Statute expiration | (138) | (329) | |||||||||
| Ending balance | $ | 4,285 | $ | 1,270 | |||||||
The total amount of unrecognized tax benefits, if recognized, would reduce our future effective tax rate. We have $1.5 million in recognized tax benefits associated with these liabilities in 2025 and had no recognized tax benefits associated with these liabilities in 2024.
We recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expenses. Our liability for accrued interest and penalties related to uncertain tax positions was $0.5 million at December 31, 2025 and $0.2 million at December 31, 2024.
We are subject to regular review and audit by both foreign and domestic tax authorities. While we believe our tax positions will be sustained, the final outcome of tax audits and related litigation may differ materially from the tax amounts recorded in our consolidated financial statements.
On July 4, 2025, the United States enacted into law the One, Big, Beautiful Bill Act ("the Act"). The Act makes permanent key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation, domestic research cost expensing, and the business interest expense limitation. The Act has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The Act did not have a material impact on the financial statements in 2025.
We file income tax returns in the U.S. federal jurisdiction, and various state and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state, and local, or non-U.S. income tax examinations by tax authorities for years prior to 2021.
The Organization for Economic Co-operation and Development (OECD) framework for a global minimum corporate tax rate of 15% for companies with global revenues above €750.0 million (referred to as Pillar 2), with effective dates beginning in January 2024, has been enacted by a number of foreign jurisdictions. We meet the overall revenue threshold and fall within the scope of Pillar 2. As such, we have complied with the requirements of the legislation and the application of Pillar 2 resulted in additional tax expense of $2.2 million and $1.1 million, for the years ended December 31, 2025 and 2024, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 29, 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.