Ingevity CorpNGVT
Ingevity Corp Income Taxes Disclosure
Income Taxes
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Domestic and foreign components of Income (loss) on continuing operations before income taxes are shown below:
| Years Ended December 31, | |||||||||||||||||
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| Domestic | $ | 9.3 | $ | (92.3) | $ | 82.8 | |||||||||||
| Foreign | (151.4) | (48.2) | 47.2 | ||||||||||||||
| Income (loss) before income taxes on continuing operations | $ | (142.1) | $ | (140.5) | $ | 130.0 | |||||||||||
The provision (benefit) for income taxes on continuing operations consisted of:
| Years Ended December 31, | |||||||||||||||||
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 2.2 | $ | 28.3 | $ | 25.4 | |||||||||||
| State and local | 0.7 | 4.5 | 2.7 | ||||||||||||||
| Foreign | 10.2 | 14.3 | 11.7 | ||||||||||||||
| Total current | $ | 13.1 | $ | 47.1 | $ | 39.8 | |||||||||||
| Deferred | |||||||||||||||||
| Federal | $ | (0.4) | $ | (53.8) | $ | (10.0) | |||||||||||
| State and local | (0.1) | (8.7) | (5.1) | ||||||||||||||
| Foreign | (4.4) | (3.7) | (0.5) | ||||||||||||||
| Total deferred | $ | (4.9) | $ | (66.2) | $ | (15.6) | |||||||||||
| Provision (benefit) for income taxes on continuing operations | $ | 8.2 | $ | (19.1) | $ | 24.2 | |||||||||||
We recorded $(0.3) million, $1.3 million, and zero of deferred tax provision (benefit) expense within components of other comprehensive income during the years ended December 31, 2025, 2024, and 2023, respectively.
For the year ended December 31, 2025, we have elected to retrospectively adopt the guidance in ASU 2023-09, Income Taxes: Improvements to Income Tax Disclosures. The following table summarizes the major differences between taxes computed at the U.S. federal statutory rate and the actual income tax provision attributable to continuing operations in accordance with ASU 2023-09:
| Years Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| In millions, except percentage data | Amount | Percent | Amount | Percent | Amount | Percent | |||||||||||||||||||||||||||||
| Federal Statutory Tax Rate | $ | (29.9) | 21.0 | % | $ | (29.5) | 21.0 | % | $ | 27.4 | 21.0 | % | |||||||||||||||||||||||
| Domestic Federal | |||||||||||||||||||||||||||||||||||
| Tax Credits | |||||||||||||||||||||||||||||||||||
| R&D Credits | (0.9) | 0.6 | (7.3) | 5.2 | (2.1) | (1.6) | |||||||||||||||||||||||||||||
| Cross-Border Tax Laws | |||||||||||||||||||||||||||||||||||
| Foreign derived Intangible Income | (1.6) | 1.1 | (4.8) | 3.4 | (2.9) | (2.2) | |||||||||||||||||||||||||||||
| Others | (0.1) | 0.1 | — | — | (0.9) | (0.7) | |||||||||||||||||||||||||||||
| Nontaxable and Non-deductible items | |||||||||||||||||||||||||||||||||||
| Goodwill Impairment | — | — | 1.0 | (0.7) | — | — | |||||||||||||||||||||||||||||
| Officers Compensation | 1.8 | (1.3) | 0.6 | (0.5) | 1.1 | 0.9 | |||||||||||||||||||||||||||||
| Other | 0.5 | (0.4) | 0.8 | (0.6) | 0.4 | 0.3 | |||||||||||||||||||||||||||||
| Excess Share-based Compensation | 0.1 | (0.1) | 0.9 | (0.6) | (1.0) | (0.8) | |||||||||||||||||||||||||||||
| Other reconciling items | (0.1) | 0.1 | — | — | — | — | |||||||||||||||||||||||||||||
Domestic state & local income taxes, net of federal effect (1) | 0.4 | (0.3) | (3.3) | 2.4 | (1.9) | (1.5) | |||||||||||||||||||||||||||||
| Foreign Tax Effects | |||||||||||||||||||||||||||||||||||
| United Kingdom | |||||||||||||||||||||||||||||||||||
| Goodwill Impairment | 40.8 | (28.7) | 22.0 | (15.7) | — | — | |||||||||||||||||||||||||||||
| Foreign Rate Differential | (7.5) | 5.3 | (3.3) | 2.4 | 0.6 | 0.4 | |||||||||||||||||||||||||||||
| Other | (0.2) | 0.2 | (0.3) | 0.2 | 0.6 | 0.4 | |||||||||||||||||||||||||||||
| China | |||||||||||||||||||||||||||||||||||
| Withholding Tax | 2.1 | (1.4) | 1.8 | (1.3) | 1.5 | 1.2 | |||||||||||||||||||||||||||||
| Foreign Rate Differential | 1.3 | (0.9) | 1.2 | (0.8) | 0.8 | 0.6 | |||||||||||||||||||||||||||||
| Sustainably sourced feedstock benefit | (0.8) | 0.5 | (0.8) | 0.6 | (0.7) | (0.5) | |||||||||||||||||||||||||||||
| Other | 0.1 | (0.1) | 0.2 | (0.1) | — | — | |||||||||||||||||||||||||||||
| Belgium | |||||||||||||||||||||||||||||||||||
| Withholding Tax | 1.3 | (0.9) | — | — | — | — | |||||||||||||||||||||||||||||
| Other | 0.5 | (0.3) | 0.1 | (0.1) | 0.3 | 0.2 | |||||||||||||||||||||||||||||
| Other Foreign Jurisdictions | 0.6 | (0.4) | 0.6 | (0.5) | 0.5 | 0.4 | |||||||||||||||||||||||||||||
| Global Changes in Unrecognized Tax Benefit | (0.2) | 0.2 | 1.0 | (0.7) | 0.5 | 0.4 | |||||||||||||||||||||||||||||
| Effective Tax Rate | $ | 8.2 | (5.7) | % | $ | (19.1) | 13.6 | % | $ | 24.2 | 18.5 | % | |||||||||||||||||||||||
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(1) The states comprising the majority of the state and local income taxes, net of federal effect per year are as follows:
| Years Ended December 31, | State | |||||||
| 2025 | Texas | |||||||
| 2024 | Georgia, Louisiana | |||||||
| 2023 | Georgia, Illinois, Louisiana | |||||||
The decrease in our effective tax rate from 2024 to 2025 was mainly driven by the mix of earnings, with U.K. losses, due to the APT goodwill impairment (see Note 8), driving an overall global loss with net tax expense creating a negative effective tax rate in 2025. Additionally, the foreign-derived intangible income deduction decreased in 2025 compared to 2024 as a result of the One Big Beautiful Bill Act ("OBBB") signed into law on July 4, 2025, which allowed immediate deductibility of previously amortizable expenses. Additionally, a significant decrease in the Federal Research and Development credit in 2025, further increased total tax expense as compared to 2024.
The decrease in our effective tax rate from 2023 to 2024 was mainly driven by the mix of earnings, with extensive U.S. losses, primarily due to the Performance Chemicals goodwill impairment (see Note 8), driving an overall global loss and tax benefit for 2024. Approximately 31% of the goodwill impaired had an impact to the tax rate, offsetting the overall tax benefit. Significant increases in federal and state tax credits further increased the overall tax benefit as compared to prior years.
The significant components of deferred tax assets and liabilities are as follows:
| December 31, | |||||||||||
| In millions | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Employee benefits | $ | 16.9 | $ | 15.4 | |||||||
| Intangibles (including goodwill) | 49.3 | 30.5 | |||||||||
| Net operating losses | 37.1 | 18.6 | |||||||||
| Inventory | — | 11.2 | |||||||||
| Leases | 12.7 | 15.8 | |||||||||
| Litigation verdict accrual | 22.3 | 21.4 | |||||||||
| Research and experimental expenses | — | 29.9 | |||||||||
| Interest limitation | 25.5 | 24.5 | |||||||||
| Other | 24.3 | 21.8 | |||||||||
| Total deferred tax assets | $ | 188.1 | $ | 189.1 | |||||||
| Valuation allowance | (11.8) | (11.0) | |||||||||
| Total deferred tax assets, net of valuation allowance | $ | 176.3 | $ | 178.1 | |||||||
| Deferred tax liabilities: | |||||||||||
| Fixed assets | $ | 93.3 | $ | 96.9 | |||||||
| Inventory | 3.5 | — | |||||||||
| Leases | 11.3 | 14.6 | |||||||||
| Other | 6.3 | 4.9 | |||||||||
| Total deferred tax liabilities | $ | 114.4 | $ | 116.4 | |||||||
Net deferred tax asset (liability) (1) | $ | 61.9 | $ | 61.7 | |||||||
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(1) Presentation in the table above is on a gross basis, however, due to jurisdictional netting, our net deferred tax asset and liability recorded on the consolidated balance sheets were $117.0 million and $55.1 million, respectively, as of December 31, 2025, and $117.9 million and $56.2 million, respectively, as of December 31, 2024.
Our overall net deferred tax asset in 2025 increased by $0.2 million compared to 2024. As part of the OBBB under Internal Revenue Code (IRC) Section 174, we are no longer required to capitalize and amortize domestic research and experimental expenditures. Furthermore, accelerated expensing of previously capitalized domestic research and experimental expenditures can be elected for tax year 2025, nearly eliminating the deferred tax asset (below rounding). This decrease in the
deferred tax asset is partially offset by an increase in net operating losses within the US. Additionally, there is an increase in the deferred tax asset associated with intangibles as a result of the long lived asset impairments as well as the APT goodwill impairment. Lastly, the deferred tax asset associated with Inventory in 2024, has flipped to a deferred tax liability in 2025, most notably due to differences associated with LIFO.
We have deferred tax assets, including net operating loss and tax credit carryforwards, which are available to offset future taxable income. A valuation allowance has been provided where management has determined that it is more likely than not that the deferred tax assets will not be realized. In 2025, we recognized tax expenses of $0.1 million due to an our expected inability to recognize the benefit associated with state tax credits prior to their expiration.
At December 31, 2025, net operating loss carryforwards totaled $139.0 million of which we have recorded deferred tax assets of $37.1 million. Of this total, $0.4 million will expire in 10 years, $0.7 million will expire in 15 years, $2.0 million will expire in 20 years, and $34.0 million will never expire.
As further required under ASU 2023-09, the following table represents the major cash taxes paid, net of refunds, by jurisdiction:
| Year Ended December 31, | |||||
| In millions | 2025 | ||||
| US Federal | $ | — | |||
| Domestic State and Local | $ | — | |||
| Foreign | |||||
| China | $ | 6.1 | |||
| United Kingdom | 3.7 | ||||
| Brazil | 0.9 | ||||
| Other | 0.2 | ||||
| Subtotal | 10.9 | ||||
Total (1) | $ | 10.9 | |||
(1) The total cash taxes paid includes $2.2 million of withholding tax payments considered a "tax in lieu of an income tax" under section 903 of the IRC, which are not reflected in our consolidated statement of cash flows, reporting $8.7 million cash paid for income taxes as of December 31, 2025.
Based on the analysis performed by the Company, the OBBB will have an impact on cash taxes as a result of the ability to accelerate deductions. Additionally, as noted above, the increased one-time deductibility of the previously amortizable expenses is driving our benefit from the foreign-derived intangible income deduction down significantly, which is negatively impacting the effective tax rate.
Due to the global nature of our operations, a portion of our cash is held outside the U.S. The cash and cash equivalent balance at December 31, 2025 included $74.2 million held by our foreign subsidiaries. As of December 31, 2025, we determined that the earnings of some of our subsidiaries are no longer permanently reinvested due to global trade volatility. As a result of this change, we recorded $1.3 million of deferred taxes associated with our unremitted China earnings. The remainder of our subsidiaries remain permanently reinvested. The determination of the amount of taxes that may be due if earnings are remitted is not practicable because such liability, if any, is dependent on circumstances that exist if and when remittance occurs. The circumstances that would affect the calculations include the source location and amount of the distribution, the underlying tax rate already paid on the earnings, foreign withholding taxes, the opportunity to use foreign tax credits, and the potential impact of future tax reform. Positive undistributed earnings at December 31, 2025 totaled $18.8 million, of which $0.9 million are considered to be indefinitely reinvested.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
| Years ended December 31, | |||||||||||||||||
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of year | $ | 2.1 | $ | 1.2 | $ | 0.8 | |||||||||||
| Additions for tax positions related to prior years | 0.2 | 1.2 | 0.4 | ||||||||||||||
| Reduction for lapse of statute of limitation | (0.5) | (0.3) | — | ||||||||||||||
Balance at end of year (1) | $ | 1.8 | $ | 2.1 | $ | 1.2 | |||||||||||
(1) Included in "Other liabilities" on the consolidated balance sheets.
As of December 31, 2025, 2024, and 2023, $2.2 million, $2.4 million, and $1.4 million, respectively, of unrecognized tax benefit, including penalties and interest, would, if recognized, impact our effective tax rate. We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense.
Pillar Two, released by the Organisation for Economic Cooperation and Development ("OECD"), went into effect on January 1, 2024. Pillar Two's intent is to create a 15% global minimum tax for all jurisdictions in which multinational enterprises operate. To date, fourteen of our reporting jurisdictions have enacted final legislation adopting Pillar Two. While we do not anticipate that this legislation will have a material impact on our tax provision or effective tax rate, we continue to monitor evolving tax legislation in the jurisdictions in which we operate. No tax impacts of Pillar Two were recorded for the year ended December 31, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 19, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 20, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 2, 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.