Enpro Inc.NPO
Enpro Inc. Income Taxes Disclosure
| 4. | Income Taxes | ||||
Income (loss) from continuing operations before income taxes as shown in the Consolidated Statements of Operations consists of the following:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Domestic | $ | (53.6) | $ | (16.6) | $ | (63.9) | |||||||||||
| Foreign | 111.2 | 111.0 | 101.6 | ||||||||||||||
| Total | $ | 57.6 | $ | 94.4 | $ | 37.7 | |||||||||||
A summary of income tax expense (benefit) from continuing operations in the Consolidated Statements of Operations is as follows:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (2.8) | $ | 7.9 | $ | 12.1 | |||||||||||
| Foreign | 31.8 | 30.5 | 24.8 | ||||||||||||||
| State | 3.1 | 1.5 | 1.6 | ||||||||||||||
| 32.1 | 39.9 | 38.5 | |||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (8.7) | (15.1) | (11.0) | ||||||||||||||
| Foreign | (4.0) | (1.4) | 1.8 | ||||||||||||||
| State | (2.3) | (1.9) | 1.5 | ||||||||||||||
| (15.0) | (18.4) | (7.7) | |||||||||||||||
| Total | $ | 17.1 | $ | 21.5 | $ | 30.8 | |||||||||||
Significant components of deferred income tax assets and liabilities are as follows:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Deferred income tax assets: | |||||||||||
| Net operating losses and tax credits | $ | 6.5 | $ | 6.0 | |||||||
| Environmental reserves | 10.5 | 10.0 | |||||||||
| Accruals and reserves | 2.3 | 2.4 | |||||||||
| Operating leases | 15.2 | 12.6 | |||||||||
| Pension obligations | — | 1.7 | |||||||||
| Cross currency swap | 1.2 | — | |||||||||
| Interest | — | 5.1 | |||||||||
| Compensation and benefits | 10.3 | 8.6 | |||||||||
| Inventories | 7.7 | 4.8 | |||||||||
| Capitalization of research and development expense | 7.9 | 15.0 | |||||||||
| Retained liabilities of previously owned businesses | 0.5 | 0.7 | |||||||||
| Postretirement benefits other than pensions | 0.3 | 0.3 | |||||||||
| Other | 0.6 | 1.5 | |||||||||
| Gross deferred income tax assets | 63.0 | 68.7 | |||||||||
| Valuation allowance | (3.1) | (3.7) | |||||||||
| Total deferred income tax assets | 59.9 | 65.0 | |||||||||
| Deferred income tax liabilities: | |||||||||||
| Depreciation and amortization | (182.8) | (173.7) | |||||||||
| Operating leases | (15.2) | (12.6) | |||||||||
| Cross currency swap | — | (1.9) | |||||||||
| Pension obligations | (0.1) | — | |||||||||
| Other | (0.4) | — | |||||||||
| Total deferred income tax liabilities | (198.5) | (188.2) | |||||||||
| Net deferred income tax liabilities | $ | (138.6) | $ | (123.2) | |||||||
The net deferred income tax liabilities are reflected on a jurisdictional basis as a component of the December 31, 2025 and 2024 Consolidated Balance Sheet line items noted below:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Other assets (non-current) | $ | 4.8 | $ | 3.7 | |||||||
| Deferred income taxes | (143.4) | (126.9) | |||||||||
| Net deferred income tax liabilities | $ | (138.6) | $ | (123.2) | |||||||
At December 31, 2025, we had $2.2 million of foreign net operating loss carryforwards, of which $1.9 million expire at various dates from 2034 through 2041 if unused, and $0.3 million have an indefinite carryforward period. We had U.S. federal tax credit carryforward associated with foreign tax credits of $3.2 million which expires at various dates from 2027 through 2035. We also had state net operating loss carryforwards with a tax effect of $1.8 million which expire at various dates from 2027 through 2045, and state tax credit carryforwards of $1.8 million which expire at various dates from 2027 through 2039. These net operating loss and tax credit carryforwards may be used to offset a portion of future tax liability and thereby reduce or eliminate our federal, state or foreign income taxes otherwise payable.
Because of the transition tax, GILTI, and Subpart F provisions, undistributed earnings of our foreign subsidiaries have been subjected to U.S. income tax or are eligible for the 100 percent dividends-received deduction under Section 245A of the Internal Revenue Code ("IRC"). Whether through the application of the 100 percent dividends received deduction, or distribution of these previously-taxed earnings, we do not intend to distribute foreign earnings that will be subject to any
significant incremental U.S. or foreign tax. During 2025, we repatriated $306.2 million of earnings from our foreign subsidiaries, resulting in $0.4 million of withholding taxes. We have determined that estimating any tax liability on our investment in foreign subsidiaries is not practicable. Therefore, we have not recorded any deferred tax liability on undistributed earnings of foreign subsidiaries.
We determined, based on the available evidence, that it is uncertain whether certain entities in various jurisdictions will generate sufficient future taxable income to recognize certain of these deferred tax assets. As a result, valuation allowances of $3.1 million and $3.7 million have been recorded as of December 31, 2025 and 2024, respectively. Valuation allowances recorded relate to certain foreign net operating losses and other net deferred tax assets in jurisdictions where future taxable income is uncertain. In addition, $2.9 million and $2.8 million of the valuation allowance recorded as of December 31, 2025 and 2024, respectively, relate to foreign tax credit carryforwards, due to uncertainty around the ability to generate the requisite foreign source income to utilize that portion of the foreign tax credits. Valuation allowances may arise associated with deferred tax assets recorded in acquisition accounting. In accordance with applicable accounting guidelines, any reversal of a valuation allowance that was recorded in acquisition accounting reduces income tax expense.
The effective income tax rate from continuing operations varied from the statutory federal income tax rate as follows:
| Year Ended December 31, 2025 | ||||||||||||||
| Amount (in millions) | Percent | |||||||||||||
| U.S. Federal Statutory Tax Rate | $ | 12.1 | 21.0 | % | ||||||||||
| State and Local Taxes, Net of Federal Income Tax Effect | 0.7 | 1.1 | ||||||||||||
| Foreign Tax Effects | ||||||||||||||
| Canada | ||||||||||||||
| Foreign rate differential | 0.6 | 1.1 | ||||||||||||
| Other | 0.1 | 0.2 | ||||||||||||
| France | ||||||||||||||
| Foreign rate differential | 0.9 | 1.6 | ||||||||||||
| Other | 0.5 | 0.8 | ||||||||||||
| Germany | ||||||||||||||
| Foreign rate differential | 2.0 | 3.4 | ||||||||||||
| Mexico | ||||||||||||||
| Foreign rate differential | 0.9 | 1.6 | ||||||||||||
| Other | 0.1 | 0.1 | ||||||||||||
| China | 0.6 | 1.1 | ||||||||||||
| Other foreign jurisdictions | (0.4) | (0.7) | ||||||||||||
| Effect of Changes in Tax Laws or Rates Enacted in the Current Period | — | — | ||||||||||||
| Effect of Cross-Border Tax Laws | ||||||||||||||
| GILTI (net of FTCs) | 1.3 | 2.3 | ||||||||||||
| Other | (0.6) | (1.0) | ||||||||||||
| Tax Credits | ||||||||||||||
| R&D Credit | (1.6) | (2.8) | ||||||||||||
| Changes in Valuation Allowance | 0.2 | 0.3 | ||||||||||||
| Nontaxable or Nondeductible Items | ||||||||||||||
| 162(m) Executive Compensation Limitation | 1.7 | 3.0 | ||||||||||||
| Excess Stock Compensation Tax Deduction | (0.6) | (1.1) | ||||||||||||
| Other | 0.8 | 1.4 | ||||||||||||
| Changes in Unrecognized Tax Benefits | (2.4) | (4.1) | ||||||||||||
| Other Adjustments | 0.2 | 0.3 | ||||||||||||
| Effective Tax Rate | $ | 17.1 | 29.6 | % | ||||||||||
| Percent of Pre-tax Income Years Ended December 31, | ||||||||||||||
| 2024 | 2023 | |||||||||||||
| Statutory federal income tax rate | 21.0 | % | 21.0 | % | ||||||||||
| Research and employment tax credits | (2.1) | (3.6) | ||||||||||||
| State and local taxes | 0.4 | 3.0 | ||||||||||||
| Foreign tax rate differences | 5.5 | 24.9 | ||||||||||||
| Statutory changes in tax rates | (0.5) | (1.1) | ||||||||||||
| Valuation allowance | 1.0 | (1.5) | ||||||||||||
| Changes in uncertain tax positions | (1.0) | 1.8 | ||||||||||||
| Goodwill impairment | — | 33.8 | ||||||||||||
| Nondeductible expenses | 2.2 | 2.3 | ||||||||||||
| GILTI and FDII | (2.9) | 0.2 | ||||||||||||
| Other items, net | (0.8) | 0.8 | ||||||||||||
| Effective income tax rate | 22.8 | % | 81.6 | % | ||||||||||
As of December 31, 2025 and 2024, we had $6.2 million and $6.6 million, respectively, of gross unrecognized tax benefits. Of the gross unrecognized tax benefit balances as of December 31, 2025 and 2024, $4.9 million and $4.4 million, respectively, would have an impact on our effective tax rate if ultimately recognized.
We record interest and penalties related to unrecognized tax benefits in income tax expense. In addition to the gross unrecognized tax benefits above, we had $1.3 million and $1.6 million accrued for interest and penalties at December 31, 2025 and 2024, respectively. Income tax expense for the year ended December 31, 2025 includes a benefit of $(0.4) million for interest and penalties related to unrecognized tax benefits. Income tax expense for interest and penalties related to unrecognized tax benefits was insignificant for the years ended December 31, 2024 and December 31, 2023.
A reconciliation of the beginning and ending amount of the gross unrecognized tax benefits (excluding interest) is as follows:
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at beginning of year | $ | 6.6 | $ | 5.0 | $ | 4.5 | |||||||||||
| Additions based on current period tax positions | — | 0.4 | 0.5 | ||||||||||||||
| Additions based on prior period tax positions | 3.3 | 3.9 | 0.2 | ||||||||||||||
| Reductions as a result of a lapse in the statute of limitations | (2.0) | (2.7) | (0.2) | ||||||||||||||
| Reductions as a result of audit/other settlements | (1.7) | — | — | ||||||||||||||
| Balance at end of year | $ | 6.2 | $ | 6.6 | $ | 5.0 | |||||||||||
U.S. federal income tax returns for tax years 2022 and forward remain open to examination. We and our subsidiaries are also subject to income tax in multiple state, local and foreign jurisdictions. Our top states that make up the majority of our state tax provision are: California, Georgia, Indiana, Pennsylvania, and Wisconsin. Substantially all significant state, local and foreign income tax returns for certain years beginning in 2020 and forward are open to examination. Various state and foreign tax returns are currently under examination. We expect that some of these examinations may conclude within the next twelve months, however, the final outcomes are not yet determinable.
Income taxes paid (net of refunds received) as shown in the Consolidated Statements of Cash Flows consists of the following:
| Year Ended December 31, | |||||
| 2025 | |||||
| (in millions) | |||||
| Federal Income Taxes Paid (net of refunds received) | (0.3) | ||||
| State Income Taxes Paid (net of refunds received) | 3.1 | ||||
| Foreign Income Taxes Paid (net of refunds received) | |||||
| Canada | 4.9 | ||||
| France | 7.9 | ||||
| Germany | 4.0 | ||||
| Mexico | 5.1 | ||||
| Taiwan | 12.3 | ||||
| Other Foreign Jurisdictions | 4.4 | ||||
| Total Income Taxes Paid (net of refunds received) | $ | 41.4 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Mar 11, 2020 | |
| 2018 | Feb 25, 2019 | |
| 2017 | Feb 26, 2018 | |
| 2016 | Feb 22, 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.