Polaris Inc.PII
Polaris Inc. Income Taxes Disclosure
Income Taxes
The Company’s (loss) income before income taxes consisted of the following (in millions):
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
United States | $ | (538.1) | $ | 1.3 | $ | 480.7 | |||||||||||
Foreign | 5.4 | 139.5 | 139.7 | ||||||||||||||
(Loss) income before income taxes | $ | (532.7) | $ | 140.8 | $ | 620.4 | |||||||||||
The (benefit) provision for income taxes consisted of the following (in millions):
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
Federal | $ | 20.0 | $ | 59.5 | $ | 139.8 | |||||||||||
State | 4.8 | 13.0 | 21.7 | ||||||||||||||
Foreign | 47.7 | 40.8 | 44.7 | ||||||||||||||
Deferred | (140.4) | (83.7) | (88.5) | ||||||||||||||
Total (benefit) provision for income taxes | $ | (67.9) | $ | 29.6 | $ | 117.7 | |||||||||||
Income taxes paid consisted of the following (in millions):
| For the Year Ended December 31, 2025 | |||||
| Federal | $ | 0.2 | |||
State | 5.8 | ||||
Foreign: | |||||
France | 22.8 | ||||
| Mexico | 7.7 | ||||
| Canada | 3.5 | ||||
| Other | 7.2 | ||||
Total foreign | 41.2 | ||||
Total income taxes paid | $ | 47.2 | |||
Reconciliations of the (benefit) provision for income taxes and the federal statutory income tax rate to the Company’s effective tax rate were as follows:
| For the Year Ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
U.S. federal statutory tax rate | $ | (111.9) | 21.0 | % | |||||||
State and local taxes, net of federal benefit | (12.7) | 2.4 | |||||||||
Foreign tax effects: | |||||||||||
France | |||||||||||
Non-deductible goodwill impairment | 9.0 | (1.7) | |||||||||
Other | 2.2 | (0.4) | |||||||||
Switzerland | 7.2 | (1.3) | |||||||||
Other foreign jurisdictions | 15.4 | (2.9) | |||||||||
Effect of cross-border tax laws | (3.2) | 0.6 | |||||||||
Nontaxable or nondeductible items: | |||||||||||
Stock based compensation | 5.7 | (1.1) | |||||||||
Other | 4.3 | (0.8) | |||||||||
Tax credits: | |||||||||||
Research and development tax credit | (16.4) | 3.1 | |||||||||
Other | (0.4) | 0.1 | |||||||||
Changes in valuation allowances | 26.0 | (4.9) | |||||||||
Changes in unrecognized tax benefits | 6.9 | (1.3) | |||||||||
Effective income tax rate | $ | (67.9) | 12.8 | % | |||||||
For the year ended December 31, 2025, the net state income tax benefit included deferred tax effects from temporary differences primarily in Alabama, Minnesota, and Wisconsin, offset by current state income tax expense in Texas, Ohio, Oregon, Washington, Tennessee, North Carolina, Pennsylvania, and Louisiana. These jurisdictions collectively represent more than 50% of the net state and local income tax effect.
| For the Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Federal statutory rate | 21.0 | % | 21.0 | % | |||||||
State income taxes, net of federal benefit | (1.9) | 1.7 | |||||||||
Employee stock ownership plan | (1.2) | (0.3) | |||||||||
Domestic international provisions | 2.5 | (0.3) | |||||||||
Research and development tax credit | (11.4) | (4.0) | |||||||||
Stock based compensation | 3.0 | (0.1) | |||||||||
Valuation allowance | 3.9 | — | |||||||||
Foreign tax rate differential | 6.2 | 1.2 | |||||||||
Foreign-derived intangible income | (2.7) | (0.5) | |||||||||
Other permanent differences | 1.6 | 0.3 | |||||||||
Effective income tax rate | 21.0 | % | 19.0 | % | |||||||
Undistributed earnings relating to certain non-U.S. subsidiaries are considered to be permanently reinvested. While these earnings would no longer be subject to incremental U.S. tax, if the Company were to actually distribute these earnings, they could be subject to additional foreign income taxes and/or withholding taxes payable to non-U.S. countries. Determination of the unrecognized deferred foreign income tax liability related to these undistributed earnings is not practicable due to the complexities associated with this hypothetical calculation.
The Company utilizes the liability method of accounting for income taxes whereby deferred taxes are determined based on the estimated future tax effects of differences between the financial statement and tax bases of assets and liabilities given the provisions of enacted tax laws. The net deferred income taxes consisted of the following (in millions):
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred income taxes: | |||||||||||
Inventories | $ | 125.4 | $ | 119.1 | |||||||
Accrued expenses and other | 187.4 | 167.1 | |||||||||
Intangible assets | (56.1) | (64.5) | |||||||||
Capitalized research expenditures | 201.1 | 172.7 | |||||||||
Property and equipment | (20.1) | (69.9) | |||||||||
Operating lease assets | (33.2) | (35.0) | |||||||||
Operating lease liabilities | 33.9 | 35.0 | |||||||||
Employee compensation and benefits | 44.5 | 45.8 | |||||||||
Net operating loss and other loss carryforwards | 90.7 | 29.5 | |||||||||
Valuation allowance | (55.4) | (21.4) | |||||||||
Total net deferred income tax asset | $ | 518.2 | $ | 378.4 | |||||||
As of December 31, 2025, the Company had available unused international net operating loss carryforwards of $112.5 million. The net operating loss carryforwards will expire at various dates from 2026 to 2032, with certain jurisdictions having indefinite carryforward terms.
The Company classifies liabilities related to unrecognized tax benefits as long-term income taxes payable within other long-term liabilities in the consolidated balance sheets. The Company recognizes potential interest and penalties related to income tax positions as a component of the provision for income taxes in the consolidated statements of (loss) income. Reserves related to potential interest are recorded as a component of long-term income taxes payable. The federal benefit of state taxes and interest related to the reserves is recorded as a component of deferred taxes. The entire balance of unrecognized tax benefits as of December 31, 2025, if recognized, would affect the Company’s effective tax rate. Tax years 2017 through 2025 remain open to examination by certain tax jurisdictions to which the Company is subject.
Reconciliations of the beginning and ending unrecognized tax benefits were as follows (in millions):
| For the Years Ended December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
Balance as of January 1, | $ | 11.4 | $ | 11.2 | |||||||
Gross increases for tax positions of prior years | 5.7 | 0.2 | |||||||||
Gross increases for tax positions of current year | 3.4 | 2.7 | |||||||||
Decreases due to settlements and other prior year tax positions | (0.1) | — | |||||||||
Decreases for lapse of statute of limitations | (2.0) | (2.7) | |||||||||
Balance as of December 31, | 18.4 | 11.4 | |||||||||
Reserves related to potential interest and penalties as of December 31, | 1.5 | 1.1 | |||||||||
Unrecognized tax benefits as of December 31, | $ | 19.9 | $ | 12.5 | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 17, 2023 | |
| 2021 | Feb 15, 2022 | |
| 2020 | Feb 16, 2021 | |
| 2019 | Feb 14, 2020 | |
| 2018 | Feb 14, 2019 | |
| 2017 | Feb 15, 2018 | |
| 2016 | Feb 16, 2017 | |
| 2015 | Feb 19, 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.