REGAL REXNORD CORPRRX
REGAL REXNORD CORP Income Taxes Disclosure
Income Taxes
Income (loss) before taxes consisted of the following:
| For the Year Ended | ||||||||||||||||||||
December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||
| US | $ | (72.5) | $ | (169.2) | $ | (389.5) | ||||||||||||||
| Foreign | 425.0 | 417.2 | 387.9 | |||||||||||||||||
| Total | $ | 352.5 | $ | 248.0 | $ | (1.6) | ||||||||||||||
The provision for income taxes is summarized as follows:
| For the Year Ended | ||||||||||||||||||||
December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||
| Current | ||||||||||||||||||||
| US Federal | $ | 34.5 | $ | 45.9 | $ | 39.6 | ||||||||||||||
| US State | 7.5 | 10.0 | 6.4 | |||||||||||||||||
| Foreign | 126.9 | 146.0 | 122.0 | |||||||||||||||||
| $ | 168.9 | $ | 201.9 | $ | 168.0 | |||||||||||||||
| Deferred | ||||||||||||||||||||
| US Federal | $ | (56.0) | $ | (89.6) | $ | (84.3) | ||||||||||||||
| US State | (7.2) | (15.3) | (9.4) | |||||||||||||||||
| Foreign | (34.0) | (47.4) | (21.6) | |||||||||||||||||
| $ | (97.2) | $ | (152.3) | $ | (115.3) | |||||||||||||||
| Total | ||||||||||||||||||||
| US Federal | $ | (21.5) | $ | (43.7) | $ | (44.7) | ||||||||||||||
| US State | 0.3 | (5.3) | (3.0) | |||||||||||||||||
| Foreign | 92.9 | 98.6 | 100.4 | |||||||||||||||||
| Total | $ | 71.7 | $ | 49.6 | $ | 52.7 | ||||||||||||||
A reconciliation of the federal statutory expense (benefit) and the income tax expense reflected in the Consolidated Statements of Income (Loss) follows:
For the Year Ended December 31, 2025 | ||||||||||||||
| Amount | Percent | |||||||||||||
| US federal statutory income tax rate | $ | 74.0 | 21.0 | % | ||||||||||
| Domestic federal | ||||||||||||||
| Tax credits | (14.3) | (4.1) | % | |||||||||||
| Cross-border tax laws | ||||||||||||||
| Foreign Inclusions | 14.6 | 4.1 | % | |||||||||||
| Other | (9.3) | (2.6) | % | |||||||||||
| Other | 0.9 | 0.3 | % | |||||||||||
| Foreign tax effects | 5.0 | 1.4 | % | |||||||||||
| Other | 0.8 | 0.2 | % | |||||||||||
| Total | $ | 71.7 | 20.3 | % | ||||||||||
The Company has not presented separately in the table above the income tax expense or benefit associated with domestic federal nontaxable or nondeductible items, state taxes, changes in unrecognized tax benefits, and changes in valuation allowance as they are not material.
For the Year Ended | ||||||||||||||
December 31, 2024 | December 31, 2023 | |||||||||||||
| Federal Statutory Expense (Benefit) | $ | 52.1 | $ | (0.4) | ||||||||||
| State Income Taxes, Net of Federal Benefit | (3.2) | (8.6) | ||||||||||||
| Effect of Impairments and Divestitures | 21.2 | 35.0 | ||||||||||||
| Foreign Rate Differential | (8.3) | (10.8) | ||||||||||||
| Research and Development Credit | (8.7) | (8.7) | ||||||||||||
| Valuation Allowance | (6.6) | 4.3 | ||||||||||||
| Tax on Repatriation | 5.3 | 25.8 | ||||||||||||
| Transaction Costs | — | 6.9 | ||||||||||||
| US Tax on Foreign Operations | (6.6) | 14.2 | ||||||||||||
| Deferred Tax Remeasurement | (1.1) | 3.4 | ||||||||||||
| Other | 5.5 | (8.4) | ||||||||||||
| Income Tax Expense | $ | 49.6 | $ | 52.7 | ||||||||||
Deferred taxes arise primarily from differences in amounts reported for tax and financial statement purposes. The Company's net deferred tax liability was $716.4 million as of December 31, 2025, classified on the Consolidated Balance Sheets as a net non-current deferred income tax asset of $36.2 million and a net non-current deferred income tax liability of $752.6 million. As of December 31, 2024, the Company's net deferred tax liability was $785.5 million classified on the Consolidated Balance Sheets as a net non-current deferred income tax asset of $30.0 million and a net non-current deferred income tax liability of $815.5 million.
The components of this net deferred tax liability are as follows:
| December 31, 2025 | December 31, 2024 | |||||||||||||||||||
| Accrued Benefits | $ | 59.9 | $ | 53.1 | ||||||||||||||||
| Bad Debt Allowances | 5.3 | 7.4 | ||||||||||||||||||
| Warranty Accruals | 6.4 | 7.6 | ||||||||||||||||||
| Derivative Instruments | — | 2.6 | ||||||||||||||||||
| Inventory | 36.3 | 33.7 | ||||||||||||||||||
| Tax Loss Carryforward | 12.4 | 14.8 | ||||||||||||||||||
| Operating Lease Liability | 60.3 | 56.5 | ||||||||||||||||||
| Deferred Interest | 116.2 | 92.6 | ||||||||||||||||||
| Other | 53.1 | 35.0 | ||||||||||||||||||
| Deferred Tax Assets before Valuation Allowance | 349.9 | 303.3 | ||||||||||||||||||
| Valuation Allowance | (20.8) | (8.3) | ||||||||||||||||||
| Total Deferred Tax Assets | 329.1 | 295.0 | ||||||||||||||||||
| Property Related | (81.4) | (83.3) | ||||||||||||||||||
| Intangible Items | (891.4) | (936.4) | ||||||||||||||||||
| Accrued Liabilities | (17.0) | (11.8) | ||||||||||||||||||
| Derivative Instruments | (5.5) | — | ||||||||||||||||||
| Operating Lease Asset | (50.2) | (49.0) | ||||||||||||||||||
| Deferred Tax Liabilities | (1,045.5) | (1,080.5) | ||||||||||||||||||
| Net Deferred Tax Liability | $ | (716.4) | $ | (785.5) | ||||||||||||||||
Following is a reconciliation of the beginning and ending amount of unrecognized tax benefits:
| Unrecognized Tax Benefits, December 31, 2022 | $ | 5.7 | ||||||||||||||||||
| Gross Increases from Current Period Tax Positions | 0.3 | |||||||||||||||||||
| Gross Increases from Acquisitions | 3.8 | |||||||||||||||||||
| Lapse of Statute of Limitations | (1.3) | |||||||||||||||||||
| Unrecognized Tax Benefits, December 31, 2023 | $ | 8.5 | ||||||||||||||||||
| Gross Increases from Current Period Tax Positions | 0.8 | |||||||||||||||||||
| Acquisition Measurement Period Adjustment | (2.8) | |||||||||||||||||||
| Lapse of Statute of Limitations | (2.3) | |||||||||||||||||||
| Unrecognized Tax Benefits, December 31, 2024 | $ | 4.2 | ||||||||||||||||||
| Gross Increases from Current Period Tax Positions | 1.5 | |||||||||||||||||||
| Lapse of Statute of Limitations | (1.5) | |||||||||||||||||||
| Unrecognized Tax Benefits, December 31, 2025 | $ | 4.2 | ||||||||||||||||||
Unrecognized tax benefits as of December 31, 2025, December 31, 2024, and December 31, 2023 were $4.2 million, $4.2 million and $8.5 million, all of which would impact the effective income tax rate if recognized.
The Company recognizes interest and penalties related to unrecognized tax benefits in Provision for Income Taxes in the Consolidated Statements of Income (Loss). During 2025, 2024 and 2023, the Company recognized approximately $(0.2) million, $(0.3) million and $(0.1) million of net interest income related to unrecognized tax benefits, respectively. The Company had approximately $0.5 million and $0.7 million of accrued interest related to unrecognized tax benefits as of December 31, 2025 and December 31, 2024, respectively.
The components of income taxes paid for 2025 are as follows:
For the Year Ended December 31, 2025 | ||||||||
| US Federal | $ | 25.8 | ||||||
| US State and Local | 7.4 | |||||||
| Foreign | ||||||||
| Canada | 17.8 | |||||||
| China | 19.7 | |||||||
| Germany | 18.2 | |||||||
| India | 19.8 | |||||||
| Mexico | 19.1 | |||||||
| Netherlands | 10.7 | |||||||
| Switzerland | 11.5 | |||||||
| Other | 38.7 | |||||||
Total Foreign | 155.5 | |||||||
| Total | $ | 188.7 | ||||||
The Company conducts business globally and, as a result, files income tax returns in the US federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world. The US Internal Revenue Service is currently conducting an audit of the Company's 2022 income tax return. No material deficiencies have been assessed related to ongoing audits as of December 31, 2025. With few exceptions, the Company is no longer subject to US federal and state/local income tax examinations by tax authorities for years prior to 2022, and the Company is no longer subject to non-US income tax examinations by tax authorities for years prior to 2021.
As of December 31, 2025 and December 31, 2024 the Company had approximately $12.4 million and $14.8 million, respectively, of tax effected net operating losses in various jurisdictions. Of the $12.4 million as of December 31, 2025, $5.1 million expires over a period of 10 to 30 years and $7.3 million does not expire.
Valuation allowances totaling $20.8 million and $8.3 million as of December 31, 2025 and December 31, 2024, respectively, have been established for deferred income tax assets primarily related to certain US and foreign carryforward balances that may not be realized. Realization of the net deferred income tax assets is dependent on generating sufficient taxable income prior to their expiration. Although realization is not assured, management believes it is more-likely-than-not that the net deferred income tax assets will be realized. The amount of the net deferred income tax assets considered realizable, however, could change in the near term if future taxable income during the carryforward period fluctuates.
The Company continues to treat approximately $263.2 million of earnings from certain foreign entities as permanently reinvested and has not recorded a deferred tax liability for the local withholding taxes of approximately $21.1 million on those earnings.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into US law, which contains a broad range of tax reform provisions, including domestic research and development cost expensing, extension of 100% bonus depreciation, limitations on interest expense deductions and revisions to international tax regimes. The Company has completed its evaluation of the financial impacts of the OBBBA, which did not result in a material effect on our annual effective tax rate or cash flows for the year ended December 31, 2025. The Company does not currently anticipate OBBBA having a material effect on our annual effective tax rate or cash flows in future years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 26, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Mar 2, 2021 | |
| 2019 | Feb 26, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Mar 1, 2017 | |
| 2016 | Mar 2, 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.