Perimeter Solutions, Inc.PRM
Perimeter Solutions, Inc. Income Taxes Disclosure
INCOME TAXES
(1) State taxes in California, Illinois, Oregon, and New Jersey made up the majority (greater than 50 percent) of the tax effect in this category
Income Tax (Expense) Benefit
The Company’s income tax (expense) benefit consisted of the following components (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Luxembourg | $ | — | $ | — | $ | — | |||||||||||
| U.S. federal | (20,668) | (36,605) | (7,178) | ||||||||||||||
| U.S. state and local | (6,519) | (13,249) | (1,485) | ||||||||||||||
| Other foreign jurisdictions | (17,076) | (8,745) | (11,250) | ||||||||||||||
| Total current | (44,263) | (58,599) | (19,913) | ||||||||||||||
| Deferred: | |||||||||||||||||
| U.S. federal | 59,550 | 81,253 | 20,584 | ||||||||||||||
| U.S. state and local | 14,173 | 17,394 | 4,886 | ||||||||||||||
| Other foreign jurisdictions | 421 | 910 | 346 | ||||||||||||||
| Total deferred | 74,144 | 99,557 | 25,816 | ||||||||||||||
| Total income tax benefit | $ | 29,881 | $ | 40,958 | $ | 5,903 | |||||||||||
The Company’s (loss) income before income taxes consists of the following components (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Luxembourg | $ | — | $ | (244,594) | $ | 85,705 | |||||||||||
| U.S. | (294,177) | 170,922 | (61,995) | ||||||||||||||
| Other foreign jurisdictions | 57,930 | 26,809 | 37,873 | ||||||||||||||
| Total (loss) income before taxes | $ | (236,247) | $ | (46,863) | $ | 61,583 | |||||||||||
The total provision for income taxes can be reconciled to the tax computed at the Company’s statutory tax rate in the country of domicile (United States for 2025 and 2024 and Luxembourg for 2023) as follows:
| Year Ended December 31, 2025 | |||||||||||
| Amount (in thousands) | Percent | ||||||||||
| U.S. federal statutory tax rate | $ | 49,612 | 21.00 | % | |||||||
State and local income tax, net of federal (national) income tax effect(1) | 9,023 | 3.82 | % | ||||||||
| Foreign tax effects | |||||||||||
| Other foreign jurisdictions | (4,183) | (1.77) | % | ||||||||
| Effect of cross-border tax laws | 804 | 0.34 | % | ||||||||
| Tax credits | 318 | 0.13 | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Nondeductible officer compensation | (26,051) | (11.03) | % | ||||||||
| Other | 358 | 0.16 | % | ||||||||
| Effective tax rate | $ | 29,881 | 12.65 | % | |||||||
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| National statutory tax rate | 21.00 | % | 24.94 | % | |||||||
| Increase/(reduction) in income tax rate: | |||||||||||
| U.S. state and local income taxes, net | 14.39 | (6.35) | |||||||||
| Effect of rates different from statutory | 17.60 | 4.50 | |||||||||
| Nondeductible officer compensation | (5.19) | 0.04 | |||||||||
| Tax on undistributed earnings | 22.53 | 3.55 | |||||||||
| Section 250 deduction | 0.67 | (0.59) | |||||||||
| Nontaxable gain/loss on earn-out liability | — | (2.48) | |||||||||
| Founders advisory fees | 29.48 | (48.09) | |||||||||
| Tax rate changes | 0.67 | (0.15) | |||||||||
| Changes in prior year estimates | 0.78 | 3.38 | |||||||||
| Write-off of deferred taxes in exited jurisdiction | (57.72) | — | |||||||||
| Change in valuation allowance | 45.34 | 11.58 | |||||||||
| Other, net | (2.15) | 0.08 | |||||||||
| Effective tax rate | 87.40 | % | (9.59) | % | |||||||
Redomiciliation Transaction
On November 20, 2024, the Redomiciliation Transaction was consummated resulting in a change in domicile for the Company from Luxembourg to the U.S. Following the Redomiciliation Transaction, the Company is subject to U.S. corporate income tax and will file consolidated income tax returns with its U.S. subsidiaries for its U.S. federal and various state government return obligations. The Redomiciliation Transaction resulted in the recognition of a U.S. deferred tax asset for deferred compensation, the removal of deferred taxes on undistributed U.S. earnings, and the removal of various Luxembourg deferred taxes and corresponding valuation allowance.
One Big Beautiful Bill Act
On July 4, 2025, “An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14” and commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was enacted into law in the U.S. The OBBBA includes broad changes to U.S. tax law including full expensing of qualified capital expenditures, full expensing of domestic research and development expenditures, modification of limitation on business interest, and modifications to the international tax framework. The Company is required under U.S. GAAP to recognize the effects of the new legislation in its financial statements in the period of enactment. The OBBBA did not impact the Company’s effective tax rate for the year ended December 31, 2025.
Income Taxes Paid
Income taxes paid, net of refunds, are as follows (in thousands):
| Year Ended December 31, 2025 | ||||||||
| U.S. federal | $ | 26,022 | ||||||
| U.S. state and local | ||||||||
| California | 5,502 | |||||||
| Other | 9,692 | |||||||
| 15,194 | ||||||||
| Foreign | ||||||||
| Spain | 3,196 | |||||||
| Other | 4,439 | |||||||
| 7,635 | ||||||||
| Total income taxes paid, net of refunds | $ | 48,851 | ||||||
Deferred Tax Assets and Liabilities
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax reporting. Significant portions of the Company’s deferred tax assets and deferred tax liabilities are as follows (in thousands):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | — | $ | 1,684 | |||||||
| Inventories | 122 | 59 | |||||||||
| Interest | — | 118 | |||||||||
| Accrued expenses and other current liabilities | 7,020 | 5,211 | |||||||||
| Lease liabilities | 8,268 | 4,141 | |||||||||
| Deferred compensation | 143,939 | 79,413 | |||||||||
| Other | 3,458 | 5,598 | |||||||||
| Valuation allowance | (87) | (1,957) | |||||||||
| Total deferred tax assets | 162,720 | 94,267 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property, plant and equipment | (13,664) | (10,362) | |||||||||
| Goodwill and other intangibles | (218,590) | (230,290) | |||||||||
| Undistributed earnings | (2,082) | (1,183) | |||||||||
| Right-of-use assets | (7,958) | (3,965) | |||||||||
| Other | (374) | (370) | |||||||||
| Total deferred tax liabilities | (242,668) | (246,170) | |||||||||
| Net deferred tax liability | $ | (79,948) | $ | (151,903) | |||||||
As of December 31, 2025, the Company had no recognized net operating loss carryforwards.
In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of existing deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this
assessment. While the Company expects to realize the remaining net deferred tax assets, changes in future taxable income or in tax laws may alter this expectation and result in future changes to the valuation allowance.
The valuation allowance for deferred tax assets as of December 31, 2025 relates to capital loss carryforwards in Canada that, in the judgment of the Company, are not more likely than not to be realized. The valuation allowance for deferred tax assets as of December 31, 2024 primarily relates to net operating loss and interest deduction limitation carryforwards that, in the judgment of the Company, are not more likely than not to be realized. The change in valuation allowance for deferred tax assets for the year ending December 31, 2025 was a net decrease of $1.9 million.
As of December 31, 2025, the Company has provided deferred taxes of $2.1 million associated with withholding taxes on accumulated undistributed earnings generated by foreign subsidiaries. Earnings of countries within the European Union would be subject to zero withholding tax on future distributions of unremitted earnings. The Company continues to assert permanent reinvestment of the remaining undistributed earnings for which deferred taxes have not been provided for as of December 31, 2025. The computation of the potential deferred tax liability associated with these undistributed earnings is not practicable. If there are policy changes, the Company would record the applicable taxes in the period of change.
Uncertain Tax Benefits
The Company evaluates its tax positions and recognizes only tax benefits that, more likely than not, will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The tax position is measured at the largest amount of benefit that has a greater than 50.0% likelihood of being realized upon settlement. As of December 31, 2025 and 2024 the Company had $23.2 million of uncertain tax positions that, if recognized, would not affect the effective tax rate. As of December 31, 2025 and 2024, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the consolidated statement of operations and comprehensive (loss) income.
The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):
| 2025 | 2024 | ||||||||||
| Balance at beginning of year | $ | 23,245 | $ | 23,245 | |||||||
| Increase in prior years’ tax positions | — | — | |||||||||
| Decrease in prior years’ tax positions | — | — | |||||||||
| Balance at end of year | $ | 23,245 | $ | 23,245 | |||||||
The Company files income tax returns in U.S. federal and state jurisdictions, and other foreign jurisdictions. As of December 31, 2025, tax years 2022 through 2024 are subject to examination by the tax authorities in the U.S.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 31, 2022 | |
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.