MSCI Inc.MSCI
MSCI Inc. Income Taxes Disclosure
INCOME TAXES
The following table presents the components of income before provision for income taxes by domestic and foreign operations for the periods indicated:
| Years Ended | ||||||||||||||||||||
| (in thousands) | December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||||
| Domestic | $ | 818,443 | $ | 859,706 | $ | 643,492 | ||||||||||||||
Foreign(1) | 675,813 | 496,462 | 725,569 | |||||||||||||||||
| Total income before provision for income taxes | $ | 1,494,256 | $ | 1,356,168 | $ | 1,369,061 | ||||||||||||||
______________________________
(1)Foreign income before provision for income taxes is defined as income generated from operations located outside the U.S., which includes income from foreign branches of U.S. companies.
The components of provision for (benefit from) income taxes consisted of:
| Years Ended | ||||||||||||||||||||
| (in thousands) | December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||||
| Current | ||||||||||||||||||||
| U.S. federal | $ | 95,326 | $ | 115,012 | $ | 93,475 | ||||||||||||||
| U.S. state and local | 14,758 | 17,534 | 40,567 | |||||||||||||||||
| Non U.S. | 135,193 | 98,581 | 101,685 | |||||||||||||||||
Total current tax provision/(benefit) | 245,277 | 231,127 | 235,727 | |||||||||||||||||
| Deferred | ||||||||||||||||||||
| U.S. federal | 42,268 | 14,002 | (1,985) | |||||||||||||||||
| U.S. state and local | 8,942 | 3,504 | (558) | |||||||||||||||||
| Non U.S. | (4,536) | (1,593) | (12,715) | |||||||||||||||||
Total deferred tax provision/(benefit) | 46,674 | 15,913 | (15,258) | |||||||||||||||||
| Provision for income taxes | $ | 291,951 | $ | 247,040 | $ | 220,469 | ||||||||||||||
The following table reconciles the U.S. federal statutory income tax rate to the effective income tax rate:
| Years Ended | ||||||||||||||||||||||||||||||||||||||
December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||||||||||||||||||||
| (in thousands) | $ Amount | % | $ Amount | % | $ Amount | % | ||||||||||||||||||||||||||||||||
| U.S. federal statutory income tax rate | $ | 313,794 | 21.0 | % | $ | 284,795 | 21.0 | % | $ | 287,503 | 21.0 | % | ||||||||||||||||||||||||||
State and local income taxes, net of federal income tax effect(1) | (3,708) | (0.3 | %) | 16,638 | 1.2 | % | 31,643 | 2.3 | % | |||||||||||||||||||||||||||||
| Foreign tax effects | ||||||||||||||||||||||||||||||||||||||
| Switzerland | ||||||||||||||||||||||||||||||||||||||
| Statutory tax rate differential | (29,465) | (2.0 | %) | (17,433) | (1.3 | %) | (32,999) | (2.4 | %) | |||||||||||||||||||||||||||||
| Recognition of tax basis intangibles | — | — | % | — | — | % | (14,979) | (1.1 | %) | |||||||||||||||||||||||||||||
| Other | 4,177 | 0.3 | % | 3,908 | 0.3 | % | (2,268) | (0.2 | %) | |||||||||||||||||||||||||||||
| Cayman Islands | ||||||||||||||||||||||||||||||||||||||
| Statutory tax rate differential | — | — | % | — | — | % | (18,433) | (1.3 | %) | |||||||||||||||||||||||||||||
| Other foreign jurisdictions | 15,717 | 1.0 | % | 15,890 | 1.1 | % | 3,969 | 0.3 | % | |||||||||||||||||||||||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
| Effects of cross-border tax laws | ||||||||||||||||||||||||||||||||||||||
| Foreign-derived intangible income | (33,522) | (2.2 | %) | (36,966) | (2.7 | %) | (12,245) | (0.9 | %) | |||||||||||||||||||||||||||||
| General basket foreign tax credits | (27,472) | (1.8 | %) | (21,488) | (1.6 | %) | — | — | % | |||||||||||||||||||||||||||||
| Other | 1,952 | 0.1 | % | 6,321 | 0.3 | % | 7,857 | 0.6 | % | |||||||||||||||||||||||||||||
| Tax credits | ||||||||||||||||||||||||||||||||||||||
| Research and development credits | (7,912) | (0.5 | %) | (3,195) | (0.2 | %) | (7,276) | (0.5 | %) | |||||||||||||||||||||||||||||
| Changes in valuation allowances | (3,496) | (0.2 | %) | 3,496 | 0.3 | % | — | — | % | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | 6,447 | 0.4 | % | 6,469 | 0.5 | % | 1,109 | 0.1 | % | |||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | 25,274 | 1.7 | % | (545) | — | % | 4,483 | 0.3 | % | |||||||||||||||||||||||||||||
| Other adjustments | ||||||||||||||||||||||||||||||||||||||
| Impact of internal legal entity restructuring | 33,359 | 2.2 | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
Impact of Burgiss step acquisition(2) | — | — | % | (1,132) | — | % | (21,631) | (1.6 | %) | |||||||||||||||||||||||||||||
| Excess share-based compensation | (3,194) | (0.2 | %) | (9,718) | (0.7 | %) | (6,264) | (0.5 | %) | |||||||||||||||||||||||||||||
| Effective income tax rate | $ | 291,951 | 19.5 | % | $ | 247,040 | 18.2 | % | $ | 220,469 | 16.1 | % | ||||||||||||||||||||||||||
_____________________________
(1)State taxes in New York, New York City, California and Illinois make up the majority (greater than 50 percent) of the tax effect in this category. In 2025, the Company recognized the benefit of prior year refund claims.
(2)On October 2, 2023, the Company acquired the remaining 66.4% interest in Burgiss (the “step acquisition”).
The amount of income taxes paid by the Company consisted of:
| Years Ended | ||||||||||||||||||||
| (in thousands) | December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||||
| Federal | $ | 101,122 | $ | 97,857 | $ | 116,720 | ||||||||||||||
State and local | ||||||||||||||||||||
| New York City | 3,070 | 10,622 | 11,654 | |||||||||||||||||
| Other | 18,685 | 19,301 | 29,215 | |||||||||||||||||
Foreign | ||||||||||||||||||||
| Switzerland | 36,328 | 30,235 | 49,846 | |||||||||||||||||
| United Kingdom | 32,952 | 19,105 | 19,105 | |||||||||||||||||
| Other | 30,111 | 23,908 | 13,939 | |||||||||||||||||
| Total | $ | 222,268 | $ | 201,028 | $ | 240,479 | ||||||||||||||
Deferred income taxes reflect the net tax effects of temporary differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when such differences are expected to reverse. Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2025 and 2024, were as follows:
| As of | ||||||||||||||
| (in thousands) | December 31, 2025 | December 31, 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Employee compensation and benefit plans | $ | 48,305 | $ | 37,351 | ||||||||||
| Tax credit carryforwards | 41,770 | 28,075 | ||||||||||||
| Capitalized expenses | 30,331 | 70,920 | ||||||||||||
| Lease liabilities | 29,881 | 32,330 | ||||||||||||
| Loss carryforwards | 8,176 | 7,059 | ||||||||||||
| Other | 32,682 | 11,856 | ||||||||||||
| Gross deferred tax assets | 191,145 | 187,591 | ||||||||||||
| Less: valuation allowance | (1,382) | (4,880) | ||||||||||||
| Total deferred tax assets | $ | 189,763 | $ | 182,711 | ||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Intangible assets | $ | (116,164) | $ | (115,877) | ||||||||||
| Property, equipment and leasehold improvements, net | (44,848) | (37,542) | ||||||||||||
| Deferred gain | (38,124) | — | ||||||||||||
| Right of use assets | (23,596) | (25,247) | ||||||||||||
| Other | (14,074) | (5,147) | ||||||||||||
| Unremitted foreign earnings | (8,724) | (5,895) | ||||||||||||
| Total deferred tax liabilities | $ | (245,530) | $ | (189,708) | ||||||||||
| Net deferred tax assets/(liabilities) | $ | (55,767) | $ | (6,997) | ||||||||||
The Company believes the majority of the deferred tax assets at December 31, 2025 are more likely than not to be realized based on expectations as to future taxable income in the jurisdictions in which it operates. Valuation allowances have been provided where tax attributes do not meet recognition criteria.
The Company has tax credit carryforwards, primarily comprised of U.S. Corporate Alternative Minimum Tax (CAMT) and foreign tax credits. Net operating loss carryforwards were $29.8 million with a tax value of $8.2 million and $28.4 million with a tax value of $7.1 million as of December 31, 2025 and 2024, respectively. The majority of tax attributes may be utilized over an indefinite life.
As of December 31, 2025, the Company has provided for applicable state income and foreign withholding taxes on all undistributed earnings of its foreign subsidiaries.
The Company regularly assesses the likelihood of additional assessments in each of the taxing jurisdictions in which it files income tax returns. The Company has established unrecognized tax benefits that the Company believes are adequate in relation to the potential for additional assessments.
The following table presents a reconciliation of the beginning and ending amount of the gross unrecognized tax benefits, excluding interest and penalties, for the years ended December 31, 2025, 2024 and 2023:
| Years Ended | ||||||||||||||||||||
| Gross unrecognized tax benefits (in thousands) | December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||||
| Beginning balance | $ | 32,313 | $ | 33,801 | $ | 32,523 | ||||||||||||||
| Increases based on tax positions related to the current period | 4,601 | 3,068 | 5,028 | |||||||||||||||||
| Increases based on tax positions related to prior periods | 23,400 | 5,363 | 1,961 | |||||||||||||||||
| Decreases based on tax positions related to prior periods | (34) | (427) | — | |||||||||||||||||
| Decreases related to settlements with taxing authorities | (310) | (8,940) | (5,711) | |||||||||||||||||
| Decreases related to a lapse of applicable statute of limitations | (466) | (552) | — | |||||||||||||||||
| Ending balance | $ | 59,504 | $ | 32,313 | $ | 33,801 | ||||||||||||||
The Company recognized $3.7 million, $0.0 million and $3.4 million of net interest and penalties in the Consolidated Statement of Income with respect to unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023, respectively. The amount of accrued interest and penalties, which includes interest and penalties related to uncertain tax positions and accrued income tax expense, recorded on the Consolidated Statement of Financial Condition was $7.3 million, $3.6 million and $3.8 million for the years ended December 31, 2025, 2024 and 2023, respectively.
The Company is under or open to examination by the IRS and other tax authorities in certain jurisdictions, including U.S. federal, states in which the Company has significant operations (such as New York and California), and foreign jurisdictions (such as Switzerland and India). The tax years currently under or open to examination vary by jurisdiction but include years ranging from 2008 onwards.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 6, 2026 | Showing above |
| 2024 | Feb 7, 2025 | |
| 2023 | Feb 9, 2024 | |
| 2022 | Feb 10, 2023 | |
| 2021 | Feb 11, 2022 | |
| 2020 | Feb 12, 2021 | |
| 2019 | Feb 18, 2020 | |
| 2018 | Feb 22, 2019 | |
| 2017 | Feb 26, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 26, 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.