Sotera Health CoSHC
Sotera Health Co Income Taxes Disclosure
Income Taxes
The geographic sources of income before income taxes were as follows:
(thousands of U.S. dollars) | |||||||||||||||||
| Year ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| U.S. | $ | (69,357) | $ | (116,049) | $ | (100,635) | |||||||||||
| Foreign | 216,863 | 229,923 | 206,662 | ||||||||||||||
Income before income taxes | $ | 147,506 | $ | 113,874 | $ | 106,027 | |||||||||||
Provision for income taxes consisted of the following:
(thousands of U.S. dollars) | |||||||||||||||||
| Year ended December 31, | 2025 | 2024 | 2023 | ||||||||||||||
| Current | |||||||||||||||||
| Federal U.S. | $ | 8,975 | $ | 708 | $ | (3,809) | |||||||||||
| State U.S. | 1,108 | 1,100 | 924 | ||||||||||||||
| Foreign | 59,452 | 58,235 | 54,087 | ||||||||||||||
| Total current provision | 69,535 | 60,043 | 51,202 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal U.S. | (328) | 13,645 | 6,933 | ||||||||||||||
| State U.S. | 670 | (837) | (619) | ||||||||||||||
| Foreign | (320) | (3,375) | (2,865) | ||||||||||||||
| Total deferred provision | 22 | 9,433 | 3,449 | ||||||||||||||
Total provision for income taxes | $ | 69,557 | $ | 69,476 | $ | 54,651 | |||||||||||
The provision for income taxes for the year ended December 31, 2025 is reconciled with the U.S. federal statutory rate as follows:
| Year ended December 31, | 2025 | ||||||||||
(thousands of U.S. dollars) | Amount | Percent | |||||||||
| U.S. Federal Statutory Tax Rate | $ | 30,976 | 21.0 | % | |||||||
Increase (decrease) in taxes as a result of: | |||||||||||
State and Local Income Taxes, Net of Federal Income Tax Effect (a) | 2,495 | 1.7 | |||||||||
| Foreign Tax Effects | |||||||||||
| Canada | |||||||||||
| State taxes, net of federal income tax effect | 12,637 | 8.6 | |||||||||
| Foreign rate differential | (6,891) | (4.7) | |||||||||
| Withholding tax | 15,259 | 10.3 | |||||||||
| Other | 1,058 | 0.7 | |||||||||
| Brazil | |||||||||||
| Foreign rate differential | 1,887 | 1.3 | |||||||||
| Nontaxable income from application of presumed profits method | (2,301) | (1.6) | |||||||||
| Other | 1,903 | 1.3 | |||||||||
| Belgium | |||||||||||
| Changes in valuation allowance | 1,807 | 1.2 | |||||||||
| Prior year differences | (1,990) | (1.3) | |||||||||
| Other | 1,960 | 1.3 | |||||||||
| Other Foreign Jurisdictions | 3,522 | 2.4 | |||||||||
| Effect of Cross Border Tax Laws | |||||||||||
| Global intangible low-taxed income | 1,800 | 1.2 | |||||||||
| Changes in Valuation Allowance | 3,128 | 2.1 | |||||||||
| Nontaxable or Nondeductible Items | |||||||||||
| Non-deductible equity compensation | 2,256 | 1.5 | |||||||||
| Other Adjustments | 51 | — | |||||||||
| Total provision for income taxes | $ | 69,557 | 47.2 | % | |||||||
(a)State taxes in California, Illinois and Utah made up the majority (greater than 50 percent) of the tax effect in this category.
The provision for income taxes for the years ended December 31, 2024 and 2023 is reconciled with the U.S. federal statutory rate as follows:
(thousands of U.S. dollars) | |||||||||||
| Year ended December 31, | 2024 | 2023 | |||||||||
| Provision computed at federal statutory rate | $ | 23,914 | $ | 22,265 | |||||||
| Increase (decrease) in taxes as a result of: | |||||||||||
| State taxes, net of federal benefit | (2,840) | (2,889) | |||||||||
| Valuation allowance | 35,660 | 19,494 | |||||||||
| Global intangible low-tax income | 1,691 | 4,861 | |||||||||
| Nondeductible share-based compensation | 3,859 | 3,192 | |||||||||
| Foreign tax rate differential | 11,893 | 10,595 | |||||||||
| Impact of rate changes on deferred tax balances | (914) | (92) | |||||||||
| Tax holiday | (1,335) | (1,082) | |||||||||
| Audit settlement | 17 | 739 | |||||||||
| Tax credits | (259) | — | |||||||||
| Other | (2,210) | (2,432) | |||||||||
Total provision for income taxes | $ | 69,476 | $ | 54,651 | |||||||
The components of the tax effects of temporary differences and carryforwards that gave rise to significant portions of the deferred tax assets and liabilities are as follows:
(thousands of U.S. dollars) | |||||||||||
| As of December 31, | 2025 | 2024 | |||||||||
| Net operating loss carryforwards | $ | 57,210 | $ | 56,097 | |||||||
| Net capital loss carryforwards | 3,652 | 2,890 | |||||||||
| Reserves and accruals | 16,532 | 8,187 | |||||||||
| Employee benefits and compensation | 12,636 | 10,481 | |||||||||
| Asset retirement obligations | 12,432 | 11,506 | |||||||||
| Lease liability | 16,462 | 14,381 | |||||||||
| Disallowed interest carryforward | 186,937 | 167,369 | |||||||||
| Other | 10,690 | 8,804 | |||||||||
| Deferred tax assets before valuation allowance | 316,551 | 279,715 | |||||||||
| Valuation allowance | (172,294) | (160,595) | |||||||||
Net deferred tax assets | 144,257 | 119,120 | |||||||||
| Depreciation and amortization | (188,522) | (170,646) | |||||||||
Reserves and accruals | (15,207) | (11,240) | |||||||||
| Other | (7,750) | (3,869) | |||||||||
| Total deferred tax liabilities | (211,479) | (185,755) | |||||||||
Net deferred tax liabilities | $ | (67,222) | $ | (66,635) | |||||||
| Noncurrent net deferred tax assets | $ | 3,853 | $ | 2,865 | |||||||
| Noncurrent net deferred tax liabilities | (71,075) | (69,500) | |||||||||
Noncurrent net deferred tax liabilities | $ | (67,222) | $ | (66,635) | |||||||
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes a broad range of tax reform provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act of 2017, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The Company has included the impact of the provisions effective in its 2025 consolidated financial statements, recording a
$16.6 million tax benefit related to the reduction of the valuation allowance attributable to the change in the limitation on the deductibility of interest expense. There were no other material impacts to the Company’s results of operations or financial condition.
At December 31, 2025 and 2024, the Company had available U.S. federal net operating loss carryforwards of $155.4 million and $164.1 million, respectively, which have no expiration date. At December 31, 2025 and 2024, the Company had available state net operating loss carryforwards of $299.5 million and $293.8 million, respectively, of which $64.1 million and $89.6 million have no expiration date, and foreign net operating loss carryforwards of approximately $32.6 million and $21.4 million, respectively, the majority of which have no expiration date. At December 31, 2025 and 2024, a valuation allowance was established against foreign net operating loss carryforwards for $5.4 million and $3.6 million, respectively. At December 31, 2025 we established a valuation allowance against U.S. federal net operating loss carryforwards of $0.8 million. At December 31, 2025 and 2024, we also established a valuation allowance against U.S. state net operating loss carryforwards for $17.2 million and $12.5 million, respectively. Based on management’s assessment, it is not more likely than not that these deferred tax assets will be realized through future taxable income.
At December 31, 2025 and 2024, the deferred tax liability balance related to repatriation of earnings not deemed to be indefinitely reinvested was $7.8 million and $3.8 million, respectively. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in these entities (i.e., basis difference in excess of that subject to the one-time transition tax) is not practicable.
The Company recognizes interest and penalties as part of the provision for income taxes. For the years ended December 31, 2025, 2024 and 2023, interest and penalties related to uncertain income tax positions that were recognized in the Consolidated Statements of Operations and Comprehensive Income (Loss) were not material.
The Company, which represents all of its subsidiaries, files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company is no longer subject to U.S. federal, state, and local tax examinations before 2016, and non-U.S. income tax examinations by tax authorities for years before 2012. Tax years through December 31, 2018 have been audited by the Internal Revenue Service and are effectively closed for U.S. federal income tax purposes and no other fiscal years are currently under audit. For Nordion’s Canadian tax, all tax years through October 31, 2018 have been closed through audit or statute, and no other fiscal years are currently under audit.
A portion of the Company’s foreign operations benefit from a tax holiday, which is set to expire in 2030. This tax holiday may be terminated early if certain conditions are not met. The tax benefit attributable to this holiday was $1.1 million and $1.3 million for the fiscal years ended December 31, 2025 and 2024, respectively.
The amounts of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes for the year ended December 31, 2025 were as follows:
| Year ended December 31, | 2025 | ||||||||||
| (thousands of US dollars) | Amount | Percent | |||||||||
| Federal U.S. | $ | 1,570 | 2.6 | % | |||||||
| State U.S. | 369 | 0.6 | |||||||||
| Foreign | |||||||||||
| Canada | 34,597 | 56.8 | |||||||||
| Belgium | 7,477 | 12.3 | |||||||||
| United Kingdom | 3,958 | 6.5 | |||||||||
| Mexico | 3,310 | 5.4 | |||||||||
| All other foreign countries | 9,592 | 15.8 | |||||||||
| Total cash paid for income taxes, net of refunds received | $ | 60,873 | |||||||||
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.