PPG INDUSTRIES INCPPG
PPG INDUSTRIES INC Income Taxes Disclosure
Income Taxes
The provision for income taxes by taxing jurisdiction and by significant components consisted of the following:
| ($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Current | |||||||||||||||||
| U.S. federal | $62 | $67 | $95 | ||||||||||||||
| U.S. state and local | 4 | 15 | 14 | ||||||||||||||
| Foreign | 419 | 490 | 506 | ||||||||||||||
| Total current income tax expense | $485 | $572 | $615 | ||||||||||||||
| Deferred | |||||||||||||||||
| U.S. federal | ($30) | ($2) | ($156) | ||||||||||||||
| U.S. state and local | (3) | (8) | (15) | ||||||||||||||
| Foreign | 6 | (87) | (16) | ||||||||||||||
| Total deferred income tax benefit | ($27) | ($97) | ($187) | ||||||||||||||
| Total income tax expense | $458 | $475 | $428 | ||||||||||||||
The following table is a reconciliation of the statutory U.S. corporate federal income tax rate to the Company’s effective tax rate for 2025 in accordance with the guidance in ASU 2023-09:
| 2025 | |||||||||||
| ($ in millions, except percentages) | Amount | Percent | |||||||||
| U.S. federal income tax rate | $429 | 21.0 | % | ||||||||
| Foreign tax effects | |||||||||||
| Mexico | |||||||||||
| Tax rate differential | 55 | 2.7 | |||||||||
| Nontaxable inflationary effect | (23) | (1.1) | |||||||||
| Other adjustments | 34 | 1.6 | |||||||||
| Singapore | |||||||||||
| Nontaxable gain on sale | (45) | (2.2) | |||||||||
| Other adjustments | (2) | (0.1) | |||||||||
| Switzerland | |||||||||||
| Nondeductible loss on sale | 45 | 2.2 | |||||||||
| Other adjustments | (11) | (0.6) | |||||||||
| Other foreign jurisdictions | 61 | 3.0 | |||||||||
| Tax credits | (33) | (1.6) | |||||||||
| Changes in unrecognized tax benefits | (39) | (1.9) | |||||||||
| Other adjustments | |||||||||||
| Return to provision | (25) | (1.2) | |||||||||
| Other adjustments | 12 | 0.6 | |||||||||
| Effective income tax rate | $458 | 22.4 | % | ||||||||
The following table is a reconciliation of the statutory U.S. corporate federal income tax rate to the Company’s effective tax rate for 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:
| 2024 | 2023 | ||||||||||
| U.S. federal income tax rate | 21.0 | % | 21.0 | % | |||||||
| Changes in rate due to: | |||||||||||
| Taxes on non-U.S. earnings | 4.8 | 4.3 | |||||||||
| Change in valuation allowance reserves | 3.5 | 3.6 | |||||||||
| Other foreign tax effects | (4.7) | (2.8) | |||||||||
| Pillar 2 global minimum tax | 0.8 | — | |||||||||
| Impairment and other related charges, net | (0.2) | 2.0 | |||||||||
| Uncertain tax positions | 1.2 | (1.8) | |||||||||
| U.S. tax cost/(benefit) on foreign operations | 0.9 | (0.9) | |||||||||
| U.S. tax incentives | (0.8) | (0.8) | |||||||||
| Tax benefits from equity awards | — | (0.2) | |||||||||
| U.S. state and local taxes | 0.3 | — | |||||||||
| Other | (1.2) | 0.9 | |||||||||
| Effective income tax rate | 25.6 | % | 25.3 | % | |||||||
Income/(loss) before income taxes of the Company’s U.S. operations for 2025, 2024 and 2023 was $293 million, $210 million and $(129) million, respectively. Income before income taxes of the Company’s foreign operations for 2025, 2024 and 2023 was $1,752 million, $1,642 million and $1,819 million, respectively.
Income tax payments, net of refunds
The following table presents the net income taxes paid/(net refunds received) by the Company for 2025 in accordance with the guidance in ASU 2023-09:
| ($ in millions) | 2025 | ||||
Federal(1) | ($5) | ||||
| State | 7 | ||||
| Foreign | |||||
| Mexico | 205 | ||||
| China | 56 | ||||
| France | 25 | ||||
| Netherlands | 25 | ||||
| Switzerland | (27) | ||||
| Other | 152 | ||||
| Total taxes paid, net of refunds | $438 | ||||
(1)Net refund received due to overpayment of prior year tax liability related to portfolio optimization actions in 2024 and other items.
Deferred income taxes
Deferred income taxes are provided for the effect of temporary differences that arise because there are certain items treated differently for financial accounting than for income tax reporting purposes. The deferred tax assets and liabilities are determined by applying the enacted tax rate in the year in which the temporary difference is expected to reverse.
| ($ in millions) | 2025 | 2024 | |||||||||
| Deferred income tax assets related to | |||||||||||
| Employee benefits | $203 | $215 | |||||||||
| Contingent and accrued liabilities | 98 | 105 | |||||||||
| Operating loss and other carry-forwards | 324 | 389 | |||||||||
| Operating lease liabilities | 145 | 144 | |||||||||
| Research and development amortization | 304 | 259 | |||||||||
| Other | 258 | 280 | |||||||||
| Valuation allowance | (258) | (327) | |||||||||
| Total | $1,074 | $1,065 | |||||||||
| Deferred income tax liabilities related to | |||||||||||
| Property | $201 | $268 | |||||||||
| Intangibles | 643 | 607 | |||||||||
| Employee benefits | 43 | 39 | |||||||||
| Operating lease right-of-use assets | 150 | 148 | |||||||||
| Other | 13 | 105 | |||||||||
| Total | $1,050 | $1,167 | |||||||||
| Deferred income tax assets/(liabilities) – net | $24 | ($102) | |||||||||
Net operating loss and credit carryforwards
| ($ in millions) | 2025 | 2024 | Expiration | ||||||||||||||
| Available net operating loss carryforwards, tax effected: | |||||||||||||||||
| Indefinite expiration | $95 | $85 | NA | ||||||||||||||
| Definite expiration | 95 | 150 | 2026-2045 | ||||||||||||||
| Total | $190 | $235 | |||||||||||||||
| Income tax credit carryforwards | $128 | $112 | 2026-2035 | ||||||||||||||
A valuation allowance of $258 million and $327 million has been established as of December 31, 2025 and 2024, respectively, for carryforwards and certain other items when the ability to utilize them is not likely.
Undistributed foreign earnings
The Company had $7.5 billion of undistributed earnings of non-U.S. subsidiaries as of December 31, 2025. This amount relates to approximately 220 subsidiaries in more than 50 taxable jurisdictions. The Company estimates repatriation of undistributed earnings of non-U.S. subsidiaries as of December 31, 2025 would result in a tax cost of $167 million.
As of December 31, 2025, the Company had not changed its intention to reinvest foreign earnings indefinitely or repatriate when it is tax effective to do so, and as such, has not established a liability for foreign withholding taxes or other costs that would be incurred if the earnings were repatriated.
Unrecognized tax benefits
The Company files federal, state and local income tax returns in numerous domestic and foreign jurisdictions. In most tax jurisdictions, returns are subject to examination by the relevant tax authorities for a number of years after the returns have been filed. In one tax jurisdiction, the Company remains subject to examinations by the tax authority for tax years dating back to 2007. In all other major jurisdictions, the Company is no longer subject to examinations by tax authorities for years before 2016. Furthermore, the Company is no longer subject to examination by the Internal Revenue Service for U.S. federal income tax returns filed for years through 2021, and there are no examinations open by the Internal Revenue Service for U.S. federal income tax returns.
A reconciliation of the total amounts of unrecognized tax benefits (excluding interest and penalties) as of December 31 follows:
| ($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| January 1 | $141 | $121 | $145 | ||||||||||||||
| Current year tax positions - additions | 21 | 8 | 16 | ||||||||||||||
| Prior year tax positions - additions | 13 | 43 | 33 | ||||||||||||||
| Prior year tax positions - reductions | — | (1) | (14) | ||||||||||||||
| Statute of limitations expirations | (15) | (20) | (9) | ||||||||||||||
| Settlements | (14) | (6) | (51) | ||||||||||||||
Resolution of tax matter(1) | (44) | — | — | ||||||||||||||
| Foreign currency translation | 9 | (4) | 1 | ||||||||||||||
| December 31 | $111 | $141 | $121 | ||||||||||||||
(1)In 2025, the Company recorded a net charge related to the anticipated resolution of an outstanding tax matter. The Company expects to pay incremental income taxes and non-income taxes in the impacted taxing jurisdiction related to the matter. In connection with this matter, the Company reduced its provision for uncertain tax positions.
The Company expects that any reasonably possible change in the amount of unrecognized tax benefits in the next 12 months would not be significant. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $94 million as of December 31, 2025.
Interest and penalties
| ($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Accrued interest and penalties related to unrecognized tax benefits | $11 | $11 | $14 | ||||||||||||||
| (Income)/loss recognized in income tax expense related to interest and penalties | ($1) | ($2) | ($2) | ||||||||||||||
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 18, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2017 | Feb 15, 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.