NORTHERN TRUST CORPNTRS
NORTHERN TRUST CORP Income Taxes Disclosure
Income Taxes
The following table reconciles the statutory federal tax rate with the effective tax rate for the periods presented below.
TABLE 87: INCOME TAXES
| FOR THE YEAR ENDED DECEMBER 31, | ||||||||||||||||||||
| ($ In Millions) | 2025 | 2025 | 2024 | 2024 | 2023 | 2023 | ||||||||||||||
| Statutory Federal Tax Rate | $ | 491.3 | 21.0 | % | $ | 558.5 | 21.0 | % | $ | 307.6 | 21.0 | % | ||||||||
| Tax Credits | (7.2) | (0.3) | (8.9) | (0.3) | (4.4) | (0.3) | ||||||||||||||
Tax Credit Investments, Net (1) | (15.5) | (0.7) | (17.9) | (0.7) | (37.5) | (2.6) | ||||||||||||||
| Nontaxable or Nondeductible Tax Benefits | 1.0 | — | (7.0) | (0.3) | (3.0) | (0.2) | ||||||||||||||
| Effects of Cross-Border Tax Laws | 13.6 | 0.6 | 10.1 | 0.4 | 10.9 | 0.7 | ||||||||||||||
| Valuation Allowance | 59.8 | 2.6 | 36.7 | 1.4 | 25.8 | 1.8 | ||||||||||||||
| Other, net | 0.8 | — | (11.5) | (0.4) | (4.5) | (0.3) | ||||||||||||||
Domestic State and Local Income Taxes, net (2) | 38.8 | 1.7 | 65.1 | 2.4 | 34.9 | 2.4 | ||||||||||||||
| Foreign Tax Effects | 21.1 | 0.9 | 5.5 | 0.2 | 7.7 | 0.5 | ||||||||||||||
| Worldwide Changes in Unrecognized Tax Benefits | (1.1) | — | (2.2) | (0.1) | 20.0 | 1.4 | ||||||||||||||
| Effective Tax Rate | $ | 602.6 | 25.8 | % | $ | 628.4 | 23.6 | % | $ | 357.5 | 24.4 | % | ||||||||
(1) Tax Credit Investments, Net includes Low Income Housing Tax Credits and New Market Tax Credits net of proportional amortization starting in 2024. Refer to Note 28, “Variable Interest Entities” for further information.
(2) State and local income taxes in Illinois, New York, and California comprise the majority of the Domestic State and Local Taxes, net category.
Income tax expense for the year ended December 31, 2025, 2024, and 2023 was $602.6 million, $628.4 million, and $357.5 million, representing an effective tax rate of 25.8%, 23.6%, and 24.4% respectively.
For the year ended December 31, 2025, the increase in the effective tax rate was primarily driven by a higher net tax impact from international operations.
The Corporation is no longer subject to income tax examinations by U.S. federal tax authorities before 2015, U.S. state or local tax authorities for years before 2011, or non-U.S. tax authorities for years before 2015.
Included in Other Liabilities on the consolidated balance sheets at December 31, 2025 and 2024 were $57.4 million and $58.5 million of unrecognized tax benefits, respectively. If recognized, the amounts would reduce 2025 and 2024 income tax expense by $49.4 million and $51.9 million, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows.
TABLE 88: UNRECOGNIZED TAX BENEFITS
| (In Millions) | 2025 | 2024 | 2023 | ||||||||
| Balance at January 1 | $ | 58.5 | $ | 60.7 | $ | 40.7 | |||||
| Additions for Tax Positions Taken in the Current Year | 2.5 | 2.0 | 2.1 | ||||||||
| Additions for Tax Positions Taken in Prior Years | 7.1 | 10.8 | 24.0 | ||||||||
| Reductions for Tax Positions Taken in Prior Years | (6.0) | (10.9) | (5.1) | ||||||||
| Reductions Resulting from Settlements with Taxing Authorities | (4.7) | (2.5) | — | ||||||||
| Reductions Resulting from Expiration of Statutes | — | (1.6) | (1.0) | ||||||||
| Balance at December 31 | $ | 57.4 | $ | 58.5 | $ | 60.7 | |||||
A benefit for interest and penalties of $1.7 million, net of tax, was included in the Provision for Income Taxes for the year ended December 31, 2025. This compares to a provision for interest and penalties of $4.7 million, net of tax, and a provision of $0.2 million, net of tax, for the year ended December 31, 2024 and 2023, respectively. As of December 31, 2025 and 2024, the liability for the potential payment of interest and penalties totaled $14.3 million and $16.0 million, net of tax, respectively.
The components of the consolidated Provision for Income Taxes for each of the three years ended December 31 are as follows.
TABLE 89: PROVISION FOR INCOME TAXES (1)
| FOR THE YEAR ENDED DECEMBER 31, | |||||||||||
| (In Millions) | 2025 | 2024 | 2023 | ||||||||
| Current Tax Provision: | |||||||||||
| Federal | $ | 184.6 | $ | 400.2 | $ | 250.5 | |||||
| State | 23.7 | 66.7 | 63.2 | ||||||||
| Non-U.S. | 199.8 | 140.8 | 92.0 | ||||||||
| Total | $ | 408.1 | $ | 607.7 | $ | 405.7 | |||||
| Deferred Tax Provision: | |||||||||||
| Federal | $ | 159.9 | $ | (1.1) | $ | (54.0) | |||||
| State | 34.0 | 17.5 | (1.4) | ||||||||
| Non-U.S. | 0.6 | 4.3 | 7.2 | ||||||||
| Total | $ | 194.5 | $ | 20.7 | $ | (48.2) | |||||
| Provision for Income Taxes | |||||||||||
| Federal | $ | 344.5 | $ | 399.1 | $ | 196.5 | |||||
| State | 57.7 | 84.2 | 61.8 | ||||||||
| Non-U.S. | 200.4 | 145.1 | 99.2 | ||||||||
| Grand Total | $ | 602.6 | $ | 628.4 | $ | 357.5 | |||||
(1) Refer to Note 31, “Reporting Segments and Related Information” for Income Before Income Taxes disaggregation.
In addition to the amounts shown above, tax charges (benefits) have been recorded directly to Stockholders’ Equity for the following. For further detail, refer to Note 14, “Accumulated Other Comprehensive Income (Loss).”
TABLE 90: TAX CHARGES (BENEFITS) RECORDED DIRECTLY TO STOCKHOLDERS’ EQUITY
| FOR THE YEAR ENDED DECEMBER 31, | |||||||||||
| (In Millions) | 2025 | 2024 | 2023 | ||||||||
| Tax Effect of Other Comprehensive Income | $ | 5.0 | $ | 156.5 | $ | 120.2 | |||||
The components of Income Taxes Paid for each of the three years ended December 31 are as follows.
TABLE 91: INCOME TAXES PAID(1)
| FOR THE YEAR ENDED DECEMBER 31, | |||||||||||
| (In Millions) | 2025 | 2024 | 2023 | ||||||||
| US Federal | $ | 169.3 | $ | 97.9 | $ | 173.2 | |||||
| US State and Local | |||||||||||
| Illinois | * | 21.7 | 42.0 | ||||||||
| New Jersey | * | (17.6) | * | ||||||||
| Other | 38.7 | 35.1 | 41.8 | ||||||||
| Total US State and Local | $ | 38.7 | $ | 39.2 | $ | 83.8 | |||||
| Foreign | |||||||||||
| United Kingdom | 122.6 | 43.4 | 43.2 | ||||||||
| Australia | 25.2 | * | * | ||||||||
| Luxembourg | * | 32.3 | * | ||||||||
| India | * | 18.3 | * | ||||||||
| Other | 71.0 | 37.5 | 62.3 | ||||||||
| Total Foreign | $ | 218.8 | $ | 131.5 | $ | 105.5 | |||||
| Total Income Taxes Paid | $ | 426.8 | $ | 268.6 | $ | 362.5 | |||||
(1) Income Taxes Paid (net of refunds received) are based on earnings and current tax liabilities which vary year-over-year by jurisdiction and in total. Payments (net of refunds) in a given year and by jurisdiction may also be impacted by the timing of final settlements with tax authorities and non-recurring items, such as refund claims, that may relate to prior years limiting comparability between years.
* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.
Deferred taxes result from temporary differences between the amounts reported on the consolidated financial statements and the tax bases of assets and liabilities. Deferred tax assets and liabilities have been computed as follows.
TABLE 92: DEFERRED TAX ASSETS AND LIABILITIES
| DECEMBER 31, | ||||||||
| (In Millions) | 2025 | 2024 | ||||||
| Deferred Tax Liabilities: | ||||||||
| Software Development | $ | 423.6 | $ | 419.9 | ||||
| Compensation and Benefits | 61.0 | 9.5 | ||||||
| State Taxes, net | 74.1 | 46.7 | ||||||
| Other Liabilities | 108.9 | 85.2 | ||||||
| Gross Deferred Tax Liabilities | $ | 667.6 | $ | 561.3 | ||||
| Deferred Tax Assets: | ||||||||
| Depreciation and Amortization | 39.7 | 38.4 | ||||||
| Allowance for Credit Losses | 41.5 | 43.2 | ||||||
| Unrealized Losses on Securities, net | 73.7 | 143.3 | ||||||
| Tax Credit and Loss Carryforwards | 217.7 | 157.9 | ||||||
| Other Assets | 94.0 | 117.2 | ||||||
| Gross Deferred Tax Assets | $ | 466.6 | $ | 500.0 | ||||
| Valuation Reserve | (217.7) | (157.9) | ||||||
| Deferred Tax Assets, net of Valuation Reserve | 248.9 | 342.1 | ||||||
| Net Deferred Tax Assets (Liabilities) | $ | (418.7) | $ | (219.2) | ||||
The Corporation generated a foreign tax credit carryforward during the years ended December 31, 2025 and 2024, expiring in 2035 and 2034, respectively. A cumulative valuation allowance related to the credit carryforward of $217.3 million and $157.5 million was recorded at December 31, 2025 and 2024, respectively, as management believes the foreign tax credit carryforwards will not be fully realized.
Northern Trust had various state net operating loss carryforwards as of December 31, 2025 and 2024. The income tax benefits associated with these loss carryforwards were approximately $0.4 million as of both December 31, 2025 and 2024. A valuation allowance related to the loss carryforwards of $0.4 million was recorded at both December 31, 2025 and 2024, as management believes the net operating losses will not be fully realized.Free Sentinel
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Feb 27, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 27, 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.