PENTAIR plcPNR
PENTAIR plc Income Taxes Disclosure
Income Taxes
Income from continuing operations before income taxes consisted of the following:
| Years ended December 31 | |||||||||||
| In millions | 2025 | 2024 | 2023 | ||||||||
Federal (1) | $ | 1.5 | $ | 1.9 | $ | (9.9) | |||||
International (2) | 755.0 | 717.0 | 628.8 | ||||||||
Income from continuing operations before income taxes | $ | 756.5 | $ | 718.9 | $ | 618.9 | |||||
(1) “Federal” reflects United Kingdom (“U.K.”) income (loss) from continuing operations before income taxes, given U.K. tax residency.
(2) “International” reflects non-U.K. income from continuing operations before income taxes.
The provision (benefit) for income taxes consisted of the following:
| Years ended December 31 | |||||||||||
| In millions | 2025 | 2024 | 2023 | ||||||||
| Currently payable (receivable) | |||||||||||
Federal (1) | $ | 2.1 | $ | 3.0 | $ | — | |||||
International (2) | 109.2 | 101.7 | 88.5 | ||||||||
| Total current taxes | 111.3 | 104.7 | 88.5 | ||||||||
| Deferred | |||||||||||
International (2) | (4.3) | (11.4) | (92.5) | ||||||||
| Total deferred taxes | (4.3) | (11.4) | (92.5) | ||||||||
Total provision (benefit) for income taxes | $ | 107.0 | $ | 93.3 | $ | (4.0) | |||||
(1) “Federal” represents U.K. taxes.
(2) “International” represents non-U.K. taxes.
Reconciliations of the federal statutory income tax rate to our effective tax rate by amount (in millions) and percent for the year ended December 31, 2025 were as follows:
Year ended December 31, 2025 | ||||||||
Amounts | Percentages | |||||||
Tax at U.K. federal statutory rate | $ | 189.1 | 25.0 | % | ||||
Foreign tax effects | ||||||||
Switzerland | ||||||||
Statutory tax rate difference between Switzerland and U.K. | (73.1) | (9.7) | ||||||
Partnership impacts | (23.7) | (3.1) | ||||||
Cantonal income taxes | 9.9 | 1.3 | ||||||
| Other | 3.5 | 0.5 | ||||||
United States | ||||||||
Statutory tax rate difference between U.S. and U.K. | (8.7) | (1.2) | ||||||
Excess tax benefits on stock-based compensation | (7.8) | (1.0) | ||||||
State taxes | 7.2 | 0.9 | ||||||
Other | 6.2 | 0.8 | ||||||
Other foreign jurisdictions | 2.2 | 0.3 | ||||||
Other | 1.7 | 0.2 | ||||||
Worldwide changes in prior year unrecognized tax benefits | 0.5 | 0.1 | ||||||
Total | $ | 107.0 | 14.1 | % | ||||
Reconciliations of the federal statutory income tax rate to our effective tax rate for the years ended December 31, 2024 and 2023 were as follows:
| Years ended December 31 | ||||||||
| Percentages | 2024 | 2023 | ||||||
U.K. federal statutory income tax rate (1) | 25.0 | % | 23.5 | % | ||||
Tax effect of international operations (2) | (11.5) | (13.2) | ||||||
| Change in valuation allowances | 2.0 | 2.2 | ||||||
| Withholding taxes | 1.5 | — | ||||||
| Excess tax benefits on stock-based compensation | (1.5) | (0.1) | ||||||
| Unrecognized tax benefits | (2.7) | — | ||||||
| Worthless stock deduction | — | (5.0) | ||||||
Change in tax basis in foreign assets (3) | 0.2 | (8.0) | ||||||
| Effective tax rate | 13.0 | % | (0.6) | % | ||||
(1) The U.K. Finance Act of 2021 increased the statutory tax rate from 19.0% to 25.0%, effective April 1, 2023. Given this change, a prorated U.K. federal statutory income tax rate was utilized for 2023.
(2) The tax effect of international operations consists of non-U.K. jurisdictions.
(3) The 2023 impact primarily represents the initial recognition of tax basis in intangible assets in foreign jurisdictions and the related valuation allowance.
Income taxes paid (net of refunds received) for the year ended December 31, 2025 were as follows:
In millions | Year ended December 31, 2025 | ||||
Foreign | |||||
Australia | $ | 5.8 | |||
China | 8.1 | ||||
Germany | 13.2 | ||||
India | 13.6 | ||||
Switzerland | 11.0 | ||||
United States | 21.2 | ||||
Other foreign jurisdictions | 14.0 | ||||
Total | $ | 86.9 | |||
Reconciliations of the beginning and ending gross unrecognized tax benefits were as follows:
| Years ended December 31 | |||||||||||
| In millions | 2025 | 2024 | 2023 | ||||||||
| Beginning balance | $ | 6.0 | $ | 38.6 | $ | 39.6 | |||||
| Gross increases for tax positions in prior periods | 1.9 | — | 0.6 | ||||||||
| Gross decreases for tax positions in prior periods | (0.2) | (31.5) | (0.2) | ||||||||
| Gross increases based on tax positions related to the current year | 0.2 | 0.2 | 1.6 | ||||||||
| Gross decreases related to settlements with taxing authorities | (1.2) | (1.3) | (3.0) | ||||||||
| Ending balance | $ | 6.7 | $ | 6.0 | $ | 38.6 | |||||
We record gross unrecognized tax benefits in Other current liabilities and Other non-current liabilities in the Consolidated Balance Sheets. Included in the $6.7 million of total gross unrecognized tax benefits as of December 31, 2025 was $5.4 million of tax benefits that, if recognized, would impact the effective tax rate.
Based on the outcome of these examinations, or as a result of the expiration of statutes of limitations for specific jurisdictions, it is reasonably possible that certain unrecognized tax benefits for tax positions taken on previously filed tax returns will materially change from those recorded as liabilities in our financial statements. A number of tax periods from 2009 to present are under audit by tax authorities in various jurisdictions, including Germany, India, Singapore, the U.S. and various U.S. states. We anticipate that several of these audits may be concluded in the foreseeable future.
We record penalties and interest related to unrecognized tax benefits in Provision (benefit) for income taxes and Net interest expense, respectively, in the Consolidated Statements of Operations and Comprehensive Income. At December 31, 2025 and 2024, we had no liabilities for the possible payment of penalties. At December 31, 2025 and 2024, we had $3.5 million and $3.9 million, respectively, for the possible payment of interest expense, which are recorded in Other current liabilities in the Consolidated Balance Sheets.
Deferred taxes arise because of different treatment between financial statement accounting and tax accounting, known as “temporary differences.” We record the tax effect of these temporary differences as “deferred tax assets” (generally items that can be used as a tax deduction or credit in future periods) and “deferred tax liabilities” (generally items for which we received a tax deduction but the tax impact has not yet been recorded in the Consolidated Statements of Operations and Comprehensive Income).
Deferred taxes were recorded in the Consolidated Balance Sheets as follows:
| December 31 | ||||||||
| In millions | 2025 | 2024 | ||||||
Other non-current assets | $ | 134.2 | $ | 129.6 | ||||
| Deferred tax liabilities | 47.5 | 44.4 | ||||||
Net deferred tax assets | $ | 86.7 | $ | 85.2 | ||||
The tax effects of the major items recorded as deferred tax assets and liabilities were as follows:
| December 31 | ||||||||
| In millions | 2025 | 2024 | ||||||
| Deferred tax assets | ||||||||
| Accrued liabilities and reserves | $ | 52.0 | $ | 54.8 | ||||
| Pension and other post-retirement compensation and benefits | 16.6 | 17.5 | ||||||
| Employee compensation and benefits | 27.4 | 27.4 | ||||||
| Research and development costs | 44.4 | 36.6 | ||||||
| Tax loss and credit carryforwards | 728.9 | 691.4 | ||||||
| Interest limitations | 231.9 | 214.0 | ||||||
| Total deferred tax assets | 1,101.2 | 1,041.7 | ||||||
| Valuation allowance | 773.3 | 739.7 | ||||||
| Deferred tax assets, net of valuation allowance | 327.9 | 302.0 | ||||||
| Deferred tax liabilities | ||||||||
| Property, plant and equipment | 11.3 | 17.1 | ||||||
| Goodwill and other intangibles | 214.1 | 177.9 | ||||||
| Other liabilities | 15.8 | 21.8 | ||||||
| Total deferred tax liabilities | 241.2 | 216.8 | ||||||
Net deferred tax assets | $ | 86.7 | $ | 85.2 | ||||
As of December 31, 2025, tax loss carryforwards of $3,016.5 million were available to offset future income. A valuation allowance of $716.0 million exists for deferred income tax benefits related to the tax loss carryforwards which may not be realized. We believe sufficient taxable income will be generated in the respective jurisdictions to allow us to fully recover the remainder of the tax losses. The tax losses primarily relate to non-U.S. carryforwards of $2,959.9 million of which $1,793.2 million are located in jurisdictions with unlimited tax loss carryforward periods, while the remainder will begin to expire in 2026. In addition, there were $56.6 million of U.S. state tax loss carryforwards as of December 31, 2025. U.S. state tax losses of $6.3 million are in jurisdictions with unlimited tax loss carryforward periods, while the remainder will expire in future years through 2045.
Deferred taxes in the amount of $2.3 million have been provided on undistributed earnings of certain subsidiaries. Taxes have not been provided on undistributed earnings of subsidiaries where it is our intention to reinvest these earnings permanently or to repatriate the earnings only when it is tax effective to do so. It is not practicable to estimate the amount of tax that might be payable if such earnings were to be remitted.
The Organization for Economic Co-operation and Development Pillar Two Model Rules (“Pillar Two”) for a global 15.0% minimum tax have been adopted by a number of jurisdictions in which we operate. For the year ended December 31, 2025, the impact of Pillar Two on our consolidated financial statements was not material.
On July 4, 2025, the U.S. enacted H.R.1 – One Big Beautiful Bill Act (the “Act”). The Act contains numerous income tax provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act and modifications to the international tax framework. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. For the year ended December 31, 2025, the impact of the Act on our consolidated financial statements was not material.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2017 | Feb 27, 2018 | |
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.