Quad/Graphics, Inc.QUAD
Quad/Graphics, Inc. Income Taxes Disclosure
Note 12. Income Taxes
Income taxes have been based on the following components of earnings (loss) before income taxes for the years ended December 31, 2025 and 2024:
| 2025 | 2024 | ||||||||||
| United States | $ | 7.8 | $ | (8.6) | |||||||
| Foreign | 24.7 | (35.9) | |||||||||
| Total | $ | 32.5 | $ | (44.5) | |||||||
The components of income tax expense for the years ended December 31, 2025, and 2024, were as follows:
| 2025 | 2024 | ||||||||||
| Federal: | |||||||||||
| Current | $ | 0.9 | $ | 2.9 | |||||||
| Deferred | (2.9) | (2.3) | |||||||||
| State: | |||||||||||
| Current | 0.8 | 0.8 | |||||||||
| Deferred | (0.7) | 0.1 | |||||||||
| Foreign: | |||||||||||
| Current | 3.2 | 4.7 | |||||||||
| Deferred | 4.2 | 0.2 | |||||||||
| Total income tax expense | $ | 5.5 | $ | 6.4 | |||||||
The Company adopted Accounting Standards Update 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” during the year ended December 31, 2025 on a prospective basis. ASU 2023-09 amends ASC 740, Income Taxes, to expand income tax disclosures and requires that the Company disclose: (i) the income tax rate reconciliation using both percentages and reporting currency amounts; (ii) specific categories within the income tax rate reconciliation; (iii) additional information for reconciling items that meet a quantitative threshold; (iv) the composition of state and local income taxes by jurisdiction; and (v) the amount of income taxes paid by jurisdiction.
Adoption of the ASU did not affect the Company’s consolidated financial position, results of operations, or cash flows, but it resulted in expanded income tax disclosures included herein for the year ended December 31, 2025. The following table below provides the updated requirements of ASU 2023-09 and outlines the reconciliation of differences between the Federal statutory tax rate and the Company’s income tax expense for the year ended December 31, 2025:
| 2025 | |||||||||||
| $ | % | ||||||||||
| United States statutory tax rate | $ | 6.8 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect (1) | 0.1 | 0.4 | % | ||||||||
| Foreign tax effects | |||||||||||
| Mexico | |||||||||||
| Foreign rate differential | 1.6 | 5.1 | % | ||||||||
| Deferred tax liability for unremitted earnings | 1.4 | 4.4 | % | ||||||||
Adjustment to valuation allowances (2) | (1.1) | (3.2) | % | ||||||||
| Other | 0.7 | 2.1 | % | ||||||||
| Other foreign jurisdictions | 0.4 | 1.3 | % | ||||||||
| Tax credits | (0.8) | (2.6) | % | ||||||||
Adjustment to valuation allowances (3) | (2.8) | (8.8) | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Stock sale of foreign subsidiary | (3.6) | (11.2) | % | ||||||||
| Executive compensation limitation | 2.3 | 7.0 | % | ||||||||
| Nondeductible bad debt | 1.2 | 3.6 | % | ||||||||
| Changes in unrecognized tax benefits | (0.3) | (1.0) | % | ||||||||
| Other adjustments | |||||||||||
| Adjustment of deferred tax liabilities | (0.7) | (2.2) | % | ||||||||
| Other | 0.3 | 1.1 | % | ||||||||
| Income tax expense | $ | 5.5 | 17.0 | % | |||||||
(1)During the year ended December 31, 2025, state taxes in Oregon and Texas made up the majority of the tax effect in this category. The $0.1 million effective rate reconciling item for State taxes, net of federal benefit, in 2025, includes a $0.5 million adjustment for partial release of valuation allowance reserves.
(2)The $1.1 million adjustment to valuation allowances in Mexico in the year ended December 31, 2025, primarily relates to releasing reserves related to expiring net operating loss carryforwards.
(3)The $2.8 million adjustment to valuation allowances in the year ended December 31, 2025, primarily relates to releasing reserves related to deferred tax assets for interest limitation for federal income tax purposes.
The following table outlines the reconciliation of differences between the Federal statutory tax rate and the Company’s income tax expense for the year ended December 31, 2024:
| 2024 | |||||
| Federal statutory rate | $ | (9.3) | |||
| Adjustment to valuation allowances | 14.5 | ||||
| Impairment on European operations | 8.7 | ||||
| Adjustment of uncertain tax positions and audit assessments | (5.9) | ||||
| Adjustment of deferred tax liabilities | (4.8) | ||||
| Executive compensation limitation | 2.7 | ||||
| Other permanent tax differences | 1.2 | ||||
| Impact from foreign branches | (1.1) | ||||
| Credits | (0.9) | ||||
| State taxes, net of federal benefit | 0.9 | ||||
| Foreign rate differential | 0.3 | ||||
| Other | 0.1 | ||||
| Income tax expense | $ | 6.4 | |||
The $14.5 million adjustment to valuation allowance in 2024 primarily relates to adjusting reserves related to deferred tax assets for interest limitation, credits and other deferred tax assets that are not expected to be realized in the future for federal income tax purposes. The $0.9 million effective rate reconciling item for State taxes, net of federal benefit, in 2024 includes a $3.1 million adjustment for partial release of valuation allowance reserves.
The following is a supplemental schedule of cash paid for income taxes (net of refunds) for the year ended December 31, 2025:
| 2025 | |||||
| U.S. Federal | $ | 1.0 | |||
| State: | |||||
| Oregon | 0.5 | ||||
| Other | 0.2 | ||||
| State total | 0.7 | ||||
| Foreign: | |||||
| Mexico | 1.5 | ||||
| Poland | 0.2 | ||||
| Other | 0.4 | ||||
| Foreign total | 2.1 | ||||
| Total cash paid for income taxes (net of refunds) | $ | 3.8 | |||
Deferred Income Taxes
The significant deferred tax assets and liabilities as of December 31, 2025 and 2024, were as follows:
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss and other tax carryforwards | $ | 70.7 | $ | 67.3 | |||||||
| Goodwill and intangible assets | 18.0 | 23.6 | |||||||||
| Pension and workers' compensation benefits | 16.2 | 20.1 | |||||||||
| Research or experimental expenditures | 15.4 | 15.3 | |||||||||
| Accrued liabilities | 9.2 | 8.6 | |||||||||
| Interest limitation | 6.4 | 9.9 | |||||||||
| Accrued compensation | 6.3 | 7.0 | |||||||||
| Allowance for doubtful accounts | 3.4 | 5.3 | |||||||||
| Other | 4.8 | 7.7 | |||||||||
| Total deferred tax assets | 150.4 | 164.8 | |||||||||
| Valuation allowance | (92.9) | (97.9) | |||||||||
Net deferred tax assets (1) | $ | 57.5 | $ | 66.9 | |||||||
| Deferred tax liabilities: | |||||||||||
| Property, plant and equipment | $ | (53.4) | $ | (58.2) | |||||||
| Other | (3.9) | (4.8) | |||||||||
| Total deferred tax liabilities | (57.3) | (63.0) | |||||||||
| Net deferred tax assets | $ | 0.2 | $ | 3.9 | |||||||
______________________________
(1)Deferred tax assets totaling $3.8 million are classified as held for sale and are included in other long-term assets within the Company’s consolidated balance sheet as of December 31, 2024. Refer to Note 21, “Assets Held for Sale,” for further information on the assets classified as held for sale. These balances are excluded from the table above.
The Company has recorded deferred income tax liabilities of $4.0 million and $3.2 million as of December 31, 2025 and 2024, respectively, which were included in deferred income taxes in the consolidated balance sheets. The Company has also recorded deferred income tax assets of $4.2 million and $7.1 million as of December 31, 2025 and 2024, respectively, which were included in other long-term assets in the consolidated balance sheets.
At December 31, 2025, the Company had the following gross amounts of tax-related carryforwards:
•Net operating loss carryforwards of $8.3 million, $21.1 million and $477.4 million for federal, foreign and state, respectively. The federal net operating loss carryforward is available without expiration. Of the foreign net operating loss carryforwards, $3.9 million is available without expiration, while the remainder expires through 2045. Of the state net operating loss carryforwards, $82.2 million is available without expiration, while the remainder expires through 2045.
•Various credit carryforwards of $6.7 million and $40.2 million for federal and state, respectively. The federal carryforward expires through 2045 and the state credit carryforwards include $32.3 million that is available without expiration, while the remainder expires through 2039.
As of December 31, 2025, the Company has recorded a valuation allowance of $92.9 million on its consolidated balance sheet primarily related to the tax-affected amounts of the above carryforwards. The valuation allowance includes $22.5 million, $8.0 million and $62.4 million of federal, foreign and state deferred tax assets, respectively, that are not expected to be realized.
Uncertain Tax Positions
The following table summarizes the activity of the Company’s liability for unrecognized tax benefits at December 31, 2025 and 2024:
| 2025 | 2024 | ||||||||||
| Balance at January 1, | $ | 8.9 | $ | 16.7 | |||||||
| Additions for tax positions of prior years | 1.6 | 0.2 | |||||||||
| Reductions for tax positions of prior years | (1.7) | — | |||||||||
| Lapses of applicable statutes of limitations | — | (6.7) | |||||||||
| Cumulative translation adjustment | 0.9 | (1.3) | |||||||||
| Balance at December 31, | $ | 9.7 | $ | 8.9 | |||||||
As of December 31, 2025, $5.7 million of unrecognized tax benefits would impact the Company’s effective tax rate, if recognized.
The Company classified interest expense and any related penalties related to income tax uncertainties as a component of income tax expense. The following table summarizes the Company’s interest expense related to tax uncertainties and penalties recognized during the years ended December 31, 2025 and 2024:
| 2025 | 2024 | ||||||||||
| Interest expense | $ | 0.2 | $ | 0.2 | |||||||
| Penalties | 0.3 | 0.4 | |||||||||
Accrued interest and penalties related to income tax uncertainties are reported as components of other current liabilities and other long-term liabilities in the consolidated balance sheets. The following table summarizes the Company’s liabilities for accrued interest and penalties, after the impact of translation adjustments, related to income tax uncertainties at December 31, 2025 and 2024:
| December 31, 2025 | December 31, 2024 | ||||||||||||||||||||||
| Accrued interest | Accrued penalties | Accrued interest | Accrued penalties | ||||||||||||||||||||
| Other current liabilities | $ | — | $ | — | $ | — | $ | — | |||||||||||||||
| Other long-term liabilities | 3.6 | 2.3 | 2.9 | 1.7 | |||||||||||||||||||
| Total liabilities | $ | 3.6 | $ | 2.3 | $ | 2.9 | $ | 1.7 | |||||||||||||||
The Company has tax years from 2022 through 2025 that remain open and subject to examination by the Internal Revenue Service. Tax years from 2021 through 2025 remain open and subject to examination in the Company’s various major state jurisdictions within the United States. Tax years 2011 and 2016 through 2025 remain open and subject to examination or litigation in the Company’s major foreign jurisdictions.
The Company has analyzed its global working capital and cash requirements and the potential tax liabilities attributable to repatriation of earnings and has determined not to change its permanent reinvestment assertion for all jurisdictions except Mexico. The Company recorded an immaterial deferred income tax liability in the current year to represent the estimate of the U.S. income and foreign withholding tax associated with unremitted foreign earnings not considered permanently reinvested. The Company does not have significant prior year untaxed, undistributed earnings from its foreign operations at December 31, 2025, and the Company does not provide for, nor expect to incur, any significant, additional taxes which could become payable upon repatriation of such amounts for jurisdiction that are considered permanently reinvested.
United States Tax Reform
On July 4, 2025, the United States government passed into law a broad reconciliation bill, commonly referred to as the One Big Beautiful Bill Act (the “OBBB Act”), impacting various areas of domestic policy, including changes to the Internal Revenue Code. The OBBB Act did not have a material impact to the Company’s financial statements for the current period ended December 31, 2025. The Company anticipates the OBBB Act will result in a favorable reduction in U.S. cash tax payments for at least the next few years.
Reform of International Taxation
The Organization for Economic Co-operation and Development’s reform of international taxation known as Pillar Two Global Anti-Base Erosion Rules is effective for the Company since 2024. The Company continues to monitor ongoing developments concerning this tax reform within applicable jurisdictions. As of December 31, 2025, the Company qualifies for safe harbor provisions in jurisdictions with adopted Pillar 2 legislation and did not record a tax impact within its consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 18, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 27, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 19, 2020 | |
| 2018 | Feb 20, 2019 | |
| 2017 | Feb 21, 2018 | |
| 2016 | Feb 22, 2017 | |
| 2015 | Feb 23, 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.