QuidelOrtho CorpQDEL
QuidelOrtho Corp Income Taxes Disclosure
Income Taxes
Significant components of the provision for income taxes were as follows:
| Fiscal Year Ended | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (1.5) | $ | (1.1) | $ | (49.3) | |||||||||||
| State | 0.6 | 4.9 | (1.6) | ||||||||||||||
| Foreign | 24.9 | 22.1 | 36.4 | ||||||||||||||
| Total current provision (benefit) | 24.0 | 25.9 | (14.5) | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (5.5) | (130.5) | 8.5 | ||||||||||||||
| State | 1.2 | 0.6 | (3.6) | ||||||||||||||
| Foreign | 4.4 | 24.5 | (9.4) | ||||||||||||||
| Total deferred benefit | 0.1 | (105.4) | (4.5) | ||||||||||||||
| Provision for (benefit from) income taxes | $ | 24.1 | $ | (79.5) | $ | (19.0) | |||||||||||
The Company’s income before income taxes was subject to taxes in the following jurisdictions for the following periods:
| Fiscal Year Ended | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| United States | $ | (523.8) | $ | (2,167.1) | $ | (163.9) | |||||||||||
| Foreign | (583.9) | 35.6 | 134.8 | ||||||||||||||
| Loss before income taxes | $ | (1,107.7) | $ | (2,131.5) | $ | (29.1) | |||||||||||
Significant components of the Company’s deferred tax assets and deferred tax liabilities as of December 28, 2025 and December 29, 2024 are shown below:
| (In millions) | December 28, 2025 | December 29, 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Lease liability | $ | 43.8 | $ | 46.2 | |||||||
| Allowance for returns and discounts | 42.7 | 38.4 | |||||||||
| Inventory reserve | 22.2 | 14.7 | |||||||||
| Stock-based compensation | 7.8 | 9.7 | |||||||||
| Tax loss, interest expense and credit carryforwards | 487.1 | 468.7 | |||||||||
| Research & development expenses | 68.1 | 95.7 | |||||||||
| Employee related obligations | 14.9 | 13.2 | |||||||||
| Other, net | 48.4 | — | |||||||||
| Total deferred tax assets | 735.0 | 686.6 | |||||||||
| Valuation allowance for deferred tax assets | (249.8) | (142.4) | |||||||||
| Total deferred tax assets, net of valuation allowance | 485.2 | 544.2 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Right-of-use assets | (35.2) | (38.9) | |||||||||
| Intangible assets | (456.2) | (468.6) | |||||||||
| Property, plant and equipment | (83.5) | (107.5) | |||||||||
| Other, net | — | (5.7) | |||||||||
| Total deferred tax liabilities | (574.9) | (620.7) | |||||||||
| Net deferred tax liabilities | $ | (89.7) | $ | (76.5) | |||||||
Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. During the fiscal year ended 2024 and subsequently in 2025, the Company was no longer demonstrating positive worldwide cumulative pre-tax book income, driven primarily by the impairment of goodwill during 2024 and 2025. Absent utilizing more subjective projections of future income, a portion of the Company’s federal net operating loss and interest expense carryforwards, a portion of certain state net operating loss, interest expense and tax credit carryforwards, and deferred tax assets related to certain foreign subsidiaries were not more likely than not to be realized. The Company maintained a valuation allowance during the fiscal year ended 2025 for those U.S. and foreign deferred tax assets not more likely than not to be utilized.
The valuation allowance of $249.8 million as of December 28, 2025 represents the portion of the deferred tax asset that management could not conclude was more likely than not to be realized. The Company’s valuation allowance relates primarily to the realization of recorded tax benefits on tax interest and loss carryforwards from operations in the U.S. federal and state jurisdictions as well as Luxembourg, tax credits in U.S. state jurisdictions, and foreign distributors deferred tax assets. The amount of the deferred tax assets considered realizable could be adjusted in future years based on changes in available positive and negative evidence. The Company’s overall valuation allowance recorded on deferred tax assets increased primarily due to an increase in deferred tax assets related to additional U.S. net operating losses and other deferred tax assets recorded during the fiscal year ended 2025.
As of December 28, 2025, the Company had U.S. federal NOL carryforwards of $1,008.5 million, of which $345.0 million are subject to expiration through 2037 and $663.5 million are not subject to expiration. In addition, the Company has state NOLs of approximately $719.7 million, which will expire in years 2026 through 2044. As of December 28, 2025, the Company had U.S. federal research credit carryforwards of $26.0 million and federal foreign tax credits of $2.2 million, which will begin to expire in 2034 and 2028, respectively. In addition, the Company had state research credits of $21.1 million and state business credit carryforwards of $25.6 million, of which none expire. As of December 28, 2025, the Company had $148.1 million of NOL carryforwards in certain non-U.S. jurisdictions, net of uncertain tax positions. Of these, $110.3 million have no expiration and the remaining $37.9 million will expire in years through 2040.
Pursuant to Internal Revenue Code Sections 382 and 383, the Company’s use of its NOL and tax credit carryforwards may be limited as a result of cumulative changes in ownership of more than 50% over a three-year period. As a result of an ownership change that occurred in the second quarter of fiscal year ended 2022, the Company may be limited in its ability to utilize its NOL carryforwards and certain other attributes, starting on the ownership change date.
The reconciliation of income tax computed at the federal statutory rate to the provision for income taxes from continuing operations pursuant to the disclosure requirements of ASU 2023-09 for the fiscal year ended 2025 was as follows:
| Fiscal Year Ended | |||||||||||
| 2025 | |||||||||||
| (In millions, except percentages) | Amount | Percent | |||||||||
| U.S. Federal Statutory Tax Rate | $ | (232.6) | 21.00 | % | |||||||
State and Local Income Taxes, net of Federal Income Tax Effect (1) | (8.0) | 0.72 | |||||||||
| Foreign Tax Effects | |||||||||||
| China | |||||||||||
| Goodwill Impairment | 14.3 | (1.29) | |||||||||
| Other | 1.0 | (0.09) | |||||||||
| United Kingdom | |||||||||||
| Goodwill Impairment | 88.7 | (8.01) | |||||||||
| Other | (1.6) | 0.14 | |||||||||
| France | |||||||||||
| Goodwill Impairment | 20.2 | (1.82) | |||||||||
| Other | 1.5 | (0.13) | |||||||||
| Other Foreign Jurisdictions | |||||||||||
| Goodwill Impairment | 23.7 | (2.14) | |||||||||
| Other | 17.3 | (1.56) | |||||||||
| Effects of Cross-Border Tax Laws | 8.4 | (0.76) | |||||||||
| Tax Credits | |||||||||||
| Other | (1.8) | 0.16 | |||||||||
| Change in Valuation Allowance | 76.4 | (6.90) | |||||||||
| Non-Deductible Items | |||||||||||
| Other | 9.6 | (0.86) | |||||||||
| Changes in Unrecognized Tax Benefits | 9.7 | (0.88) | |||||||||
| Other Adjustments | |||||||||||
| Other | (2.7) | 0.25 | |||||||||
| Provision for income taxes | $ | 24.1 | (2.17) | % | |||||||
(1)During the fiscal year ended 2025, state taxes in California, Texas, Florida, Georgia, Pennsylvania, Tennessee and Illinois comprised greater than 50% of the tax effect in this category.
The reconciliation of income tax computed at the federal statutory rate to the benefit from income taxes from continuing operations for fiscal years ended 2024 and 2023 was as follows:
| Fiscal Year Ended | |||||||||||
| (In millions) | 2024 | 2023 | |||||||||
| Tax benefit at statutory tax rate | $ | (447.6) | $ | (6.1) | |||||||
| State tax benefit, net of federal tax | (7.2) | (2.8) | |||||||||
| Foreign income taxed at rates other than the applicable U.S. rate | 10.3 | (23.0) | |||||||||
| Goodwill Impairment | 316.2 | — | |||||||||
| Permanent differences | 14.8 | (4.3) | |||||||||
| Federal and state research credits—current year | (5.1) | (10.3) | |||||||||
| Stock-based compensation | 6.2 | 1.5 | |||||||||
| Change in valuation allowance | 31.3 | 10.4 | |||||||||
| Global Intangible Low-Taxed Income | 0.1 | 20.1 | |||||||||
| Change in uncertain tax positions | (7.8) | (11.8) | |||||||||
| Other | 9.3 | 7.3 | |||||||||
| Benefit from income taxes | $ | (79.5) | $ | (19.0) | |||||||
The Company recognizes liabilities for uncertain tax positions based on a two-step process. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is more than 50% likely of being realized upon settlement. While the Company believes that it has appropriate support for the positions taken on its tax returns, the Company regularly assesses the potential outcome of examinations by tax authorities in determining the adequacy of its provision for income taxes.
The following table summarizes the activity related to the Company’s unrecognized tax benefits:
| Fiscal Year Ended | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Beginning balance | $ | 183.9 | $ | 28.8 | $ | 40.0 | |||||||||||
| Increases related to current year tax positions | 13.5 | — | 2.6 | ||||||||||||||
| Increases (decreases) related to prior year tax positions | — | 165.4 | (0.1) | ||||||||||||||
| Decreases due to settlements and expirations | (0.8) | (10.3) | (13.7) | ||||||||||||||
| Ending balance | $ | 196.6 | $ | 183.9 | $ | 28.8 | |||||||||||
As of December 28, 2025, December 29, 2024 and December 31, 2023, the Company had unrecognized tax benefits of $196.6 million, $183.9 million, and $28.8 million, respectively, of which $20.8 million, $16.3 million and $21.6 million, respectively, would reduce the Company’s annual effective tax rate, if recognized.
The Company’s policy is to recognize the interest expense and penalties related to income tax matters as a component of the income tax expense. The Company had accrued interest and penalties associated with uncertain tax positions of $2.4 million as of December 28, 2025 and $1.6 million as of December 29, 2024. The Company recognized net interest income of $0.2 million, $2.4 million and $4.3 million for fiscal years ended 2025, 2024 and 2023, respectively, due to the reversals of prior year accrued interest.
The Company is subject to periodic audits by domestic and foreign tax authorities. Due to the carryforward of unutilized credits, the Company’s federal tax years from 2014 and onwards are subject to examination by the U.S. authorities. The Company’s state and foreign tax years for 2001 and onwards are subject to examination by applicable tax authorities. The Company believes that it has appropriate support for the income tax positions taken on its tax returns and that its accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax law applied to the facts of each matter.
Ortho is currently under audit in certain jurisdictions for tax years under the responsibility of Johnson & Johnson. Pursuant to the stock and asset purchase agreement entered into by Ortho and Johnson & Johnson in January 2014, Johnson & Johnson retained all income tax liabilities accrued as of the date of acquisition, including reserves for unrecognized tax benefits. Accordingly, all tax liabilities related to these tax years will be indemnified by Johnson & Johnson. During the fourth quarter of fiscal year ended 2023, the federal examination for tax years 2013 through 2014 closed with no liability due. As such, the
related unrecognized tax benefits and interest were released totaling $19.9 million, offset by $5.4 million of competent authority benefits reversed. As of December 28, 2025, the remaining indemnification receivable from Johnson & Johnson totaled $3.3 million and is included as a component of Prepaid expenses and other current assets on the Consolidated Balance Sheet.
In 2024, the Company determined that an uncertain tax benefit was required to be established related to net operating loss and interest expense carryforwards associated with an on-going Luxembourg income tax audit for tax years 2017 through 2020. As such, Luxembourg net operating loss and interest expense carryforward deferred tax assets that were previously fully offset by a valuation allowance have been reduced by the amount of uncertain tax benefits recorded as a contra deferred tax asset.
The following table summarizes the changes to the valuation allowance for balances for fiscal years ended 2025, 2024 and 2023:
| Beginning Balance | Additions Due to Current Year Acquisitions | Additions Charged to (Benefit From) Provision for Income Taxes | Currency Translation/Other(1) | Ending Balance | |||||||||||||||||||||||||
| Deferred tax valuation allowance | |||||||||||||||||||||||||||||
| Fiscal year ended December 28, 2025 | $ | 142.4 | — | 113.0 | (5.6) | $ | 249.8 | ||||||||||||||||||||||
| Fiscal year ended December 29, 2024 | $ | 274.7 | — | 31.3 | (163.6) | $ | 142.4 | ||||||||||||||||||||||
| Fiscal year ended December 31, 2023 | $ | 251.3 | — | 10.4 | 13.0 | $ | 274.7 | ||||||||||||||||||||||
(1) The other decreases in valuation allowance during fiscal year ended 2024 related predominately to reserves for unrecognized tax benefits recorded on certain Luxembourg tax loss carryforwards during the period.
Disclosed below is a summary of net income taxes paid or refunded by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for fiscal year ended 2025.
| Fiscal Year Ended | |||||
| (In millions) | 2025 | ||||
| Income Tax Payments (Net of Refunds) | |||||
| U.S. Federal | $ | (23.2) | |||
| U.S. State and Local | |||||
| New York | (4.7) | ||||
| Other | (6.1) | ||||
| Foreign | |||||
| China | 3.6 | ||||
| Other | 5.0 | ||||
| Total Taxes Paid (Net of Refunds) | $ | (25.4) | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 29, 2024 | |
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.