Sensata Technologies Holding plcST
Sensata Technologies Holding plc Income Taxes Disclosure
Income Taxes
Refer to Note 2: Significant Accounting Policies for detailed discussion of the accounting policies related to income taxes. The Company is incorporated and domiciled in the United Kingdom; therefore, amounts presented as ‘domestic’ in the following disclosures refer to the U.K., while amounts labeled ‘foreign’ represent jurisdictions outside the U.K. Beginning in 2025, we adopted the enhanced income tax disclosure requirements pursuant to ASU 2023-09 prospectively. In addition, prior-year amounts have been restated to present the United Kingdom as ‘domestic,’ consistent with our jurisdiction of domicile. Previously, amounts labeled as ‘domestic’ reflected U.S. operations. This change in presentation has been applied retrospectively for comparability and does not affect total income tax expense or net income.
Income from continuing operations
Income/(loss) before taxes for the years ended December 31, 2025, 2024, and 2023 was categorized by jurisdiction as follows:
Domestic | Foreign | Total | |||||||||||||||
| 2025 | $ | 53.3 | $ | 70.1 | $ | 123.3 | |||||||||||
| 2024 | $ | 35.0 | $ | (46.8) | $ | (11.8) | |||||||||||
| 2023 | $ | 7.5 | $ | 10.3 | $ | 17.8 | |||||||||||
Components of income tax expense (benefit)
Provision for income taxes for the years ended December 31, 2025, 2024, and 2023 comprised provisions for (or benefits from) income tax by jurisdiction as follows:
Domestic | Foreign | Total | |||||||||||||||
| 2025 | |||||||||||||||||
| Current | $ | 6.3 | $ | 86.0 | $ | 92.3 | |||||||||||
| Deferred | 4.1 | (4.3) | (0.2) | ||||||||||||||
| Total | $ | 10.4 | $ | 81.6 | $ | 92.0 | |||||||||||
| 2024 | |||||||||||||||||
| Current | $ | 18.9 | $ | 74.2 | $ | 93.1 | |||||||||||
| Deferred | (10.2) | (223.2) | (233.4) | ||||||||||||||
| Total | $ | 8.7 | $ | (149.0) | $ | (140.3) | |||||||||||
| 2023 | |||||||||||||||||
| Current | $ | 0.1 | $ | 75.8 | $ | 75.9 | |||||||||||
| Deferred | (0.8) | (53.3) | (54.2) | ||||||||||||||
| Total | $ | (0.7) | $ | 22.5 | $ | 21.8 | |||||||||||
Cash taxes paid
The following table presents income taxes paid (net of refunds received) during the year ended December 31, 2025, disaggregated by jurisdiction.
| 2025 | |||||
China | $ | 58.1 | |||
Netherlands | 19.8 | ||||
Germany - Federal | 6.8 | ||||
Mexico | 7.6 | ||||
UK | 7.6 | ||||
Other foreign | 15.1 | ||||
Total | $ | 114.9 | |||
Income taxes paid (net of refunds) were $92.6 million, and $95.5 million for the years ending December 31, 2024 and 2023, respectively.
Income taxes paid are presented on a cash basis and are net of refunds received during the year. Amounts paid to individual jurisdictions are separately presented when they equal or exceed 5% of total income taxes paid; all other jurisdictions are aggregated.
Income taxes paid include withholding taxes that are the legal obligation of the Company and are creditable or final in the applicable jurisdictions.
Effective tax rate reconciliation
The following table reconciles income tax expense (benefit) from continuing operations to the amount computed and the corresponding percentage of pre-tax income by applying the U.K. statutory income tax rate to pre-tax income for the year ended December 31, 2025:
| Amount | Percentage of Pre-tax Income | |||||||
Income tax at U.K. statutory rate (25.0%) | $ | 30.8 | 25.0 | % | ||||
| Foreign tax effects | ||||||||
| United States reconciling items | ||||||||
| US - state and local income taxes, net of federal income tax effect | 2.9 | 2.4 | % | |||||
| US - rate differential | 8.1 | 6.6 | % | |||||
| US - goodwill impairment | 46.4 | 37.6 | % | |||||
| US - other reconciling items | 6.6 | 5.4 | % | |||||
| Bulgaria reconciling items | ||||||||
| Bulgaria - rate differential | (4.6) | (3.7) | % | |||||
| Bulgaria - other reconciling items | 1.7 | 1.4 | % | |||||
| China reconciling items | ||||||||
| China - rate differential | (11.6) | (9.4) | % | |||||
| China - R&D superdeduction | (4.7) | (3.8) | % | |||||
| China - withholding taxes | 10.5 | 8.5 | % | |||||
| China - other reconciling items | 3.3 | 2.7 | % | |||||
| Malta reconciling items | ||||||||
Malta - notional interest deduction | 14.2 | 11.5 | % | |||||
Malta - change in valuation allowance | (14.2) | (11.5) | % | |||||
Malta - other reconciling items | (2.1) | (1.7) | % | |||||
Mexico reconciling items | ||||||||
Mexico - other reconciling items | 4.5 | 3.6 | % | |||||
| Netherlands reconciling items | ||||||||
| Netherlands - change in valuation allowance | 13.8 | 11.2 | % | |||||
| Netherlands - other reconciling items | (0.5) | (0.4) | % | |||||
Switzerland reconciling items | ||||||||
Switzerland - rate differential | (6.3) | (5.1) | % | |||||
Switzerland - other reconciling items | (0.1) | (0.1) | % | |||||
Foreign tax effects of other jurisdictions | 5.8 | 4.7 | % | |||||
Other adjustments | (3.6) | (2.9) | % | |||||
| Change in unrecognized tax benefits | (9.0) | (7.3) | % | |||||
| Total income tax expense/effective tax rate | $ | 92.0 | 74.6 | % | ||||
The following table reconciles income tax expense (benefit) from continuing operations to the amount computed by applying the U.K. statutory income tax rate to pre-tax income under the previous format for the years ended December 31, 2024 and 2023 as follows:
| For the year ended December 31, 2024 | For the year ended December 31, 2023 | |||||||
Tax computed at statutory rate of 25% for 2024 and 23.5% for 2023 | $ | (3.0) | $ | 4.2 | ||||
Capital restructuring and dispositions | 40.6 | (286.4) | ||||||
| Valuation allowances | (180.0) | 278.5 | ||||||
Goodwill impairment | 31.5 | 41.2 | ||||||
| Foreign rate differential | (13.1) | (17.7) | ||||||
| Withholding taxes not creditable | 6.1 | 14.1 | ||||||
| Research and development incentives | (10.4) | (9.0) | ||||||
| U.S. state taxes, net of federal benefit | (23.4) | (8.7) | ||||||
| Unrealized foreign currency exchange losses/(gains), net | 2.3 | 1.4 | ||||||
| Reserve for tax exposure | (0.9) | 1.1 | ||||||
| Changes in tax laws or rates | (2.6) | (0.3) | ||||||
U.S. pension settlement | 9.9 | — | ||||||
| Nontaxable items and other | 2.7 | 3.5 | ||||||
| Provision for income taxes | $ | (140.3) | $ | 21.8 | ||||
Foreign tax rate differential
We operate in multiple jurisdictions including but not limited to Bulgaria, China, Malaysia, Malta, the Netherlands, South Korea, the U.S., and the U.K. This can result in a foreign tax rate differential that may reflect a tax benefit or detriment. This differential can vary annually based upon the jurisdictional mix of earnings and changes in current and future enacted tax rates.
Certain of our subsidiaries are currently eligible, or have been eligible, for tax exemptions or reduced tax rates in their respective jurisdictions. The impact on current tax expense of the tax holidays and exemptions is included in the foreign tax rate differential disclosure, reconciling the statutory rate to our effective rate. The remeasurement of the deferred tax assets and liabilities is included in the change in tax laws or rates caption.
Withholding taxes not creditable
Withholding taxes may apply to intercompany interest, royalty, management fees, and certain payments to third parties. Such taxes are deducted if they cannot be credited against the recipient’s tax liability in its country of residence. We have also considered the withholding taxes associated with unremitted earnings and the recipient's ability to obtain a tax credit for such taxes. Earnings are not considered to be indefinitely reinvested in certain jurisdictions in which they were earned. In these jurisdictions we recognize a deferred tax liability on withholding and other taxes on intercompany payments including dividends.
Research and development incentives
Certain income of our U.K. subsidiaries is eligible for lower tax rates under the "patent box" regime, resulting in certain of our intellectual property income being taxed at a rate lower than the U.K. statutory tax rate. Qualified investments are eligible for a bonus deduction under China’s R&D super deduction regime. In the U.S., we benefit from R&D credit incentives.
Capital restructuring and dispositions
For the year ended December 31, 2024, the increase is primarily due to a strategy executed to secure the future deductibility of certain intellectual property rights. This unfavorable impact was partially offset by losses from the sale of the Insights business. Additionally, for the year ended December 31, 2023, the transfer of these intellectual property rights led to the recording of a deferred tax asset with a full valuation allowance.
Goodwill impairment
During the years ended December 31, 2025, 2024 and 2023, we incurred a non-cash impairment charge for goodwill that is generally nondeductible for tax purposes.
Deferred income tax assets and liabilities
The primary components of deferred income tax assets and liabilities as of December 31, 2025 and 2024 were as follows:
As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss, interest expense, and other carryforwards | $ | 550.0 | $ | 567.3 | |||||||
| Prepaid and accrued expenses | 41.9 | 34.7 | |||||||||
| Intangible assets and goodwill | 80.6 | 104.0 | |||||||||
| Pension liability and other | 7.9 | 9.2 | |||||||||
| Property, plant and equipment | 15.9 | 13.0 | |||||||||
| Share-based compensation | 6.3 | 7.8 | |||||||||
| Inventories and related reserves | 18.2 | 21.9 | |||||||||
| Unrealized exchange loss | 3.8 | 3.8 | |||||||||
| Total deferred tax assets | 724.8 | 761.8 | |||||||||
| Valuation allowance | (415.9) | (413.9) | |||||||||
| Net deferred tax asset | 308.8 | 347.8 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets and goodwill | (222.8) | (240.1) | |||||||||
Tax on undistributed earnings of subsidiaries | (17.0) | (36.6) | |||||||||
| Operating lease right of use assets | (1.7) | (2.5) | |||||||||
| Property, plant and equipment | (15.3) | (14.5) | |||||||||
| Unrealized exchange gain | (1.8) | — | |||||||||
| Total deferred tax liabilities | (258.5) | (293.8) | |||||||||
| Net deferred tax liability | $ | 50.3 | $ | 54.1 | |||||||
As of December 31, 2024, approximately $1.5 million of net deferred tax assets were associated with assets held for sale. Refer to Note 21: Divestitures for further information.
Valuation allowance and net operating loss carryforwards
We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized. In measuring our deferred tax assets, we consider all available evidence, both positive and negative, to determine whether, based on the weight of that evidence, a valuation allowance is needed for all or some portion of the deferred tax assets. Significant judgment is required in considering the relative impact of the negative and positive evidence, and weight given to each category of evidence is commensurate with the extent to which it can be objectively verified. The more negative evidence that exists, the more positive evidence is necessary, and the more difficult it is to support a conclusion that a valuation allowance is not needed. Additionally, we utilize the "more likely than not" criteria established in FASB ASC Topic 740 to determine whether the future tax benefit from the deferred tax assets should be recognized. As a result, we have established valuation allowances on the deferred tax assets in jurisdictions that have incurred net operating losses and in which it is more likely than not that such losses will not be utilized in the foreseeable future.
As of each reporting date, we consider new evidence, both positive and negative, that could impact our view with regard to future realization of deferred tax assets. Our interest expense carryforwards in certain jurisdictions are subject to limitations. We consider these limitations in our assessment of positive and negative evidence. Our assessment of these limitations has resulted in the conclusion that a portion of our interest carryforwards is subject to a valuation allowance at both December 31, 2025 and December 31, 2024. We continually evaluate both the positive and negative evidence for these valuation allowances. We believe that there is a reasonable possibility that within the next 12 months, sufficient positive evidence may become available to allow a conclusion that a portion of the valuation allowance against these interest carryforwards will no longer be needed. Release of the valuation allowance would result in the recognition of this deferred tax asset and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are dependent on the level of profitability and likelihood of future utilization of this attributes that we are able to actually achieve.
For tax purposes, certain goodwill and indefinite-lived intangible assets are generally amortizable over 5 to 15 years. For book purposes, goodwill and indefinite-lived intangible assets are not amortized but are tested for impairment annually. The tax amortization of goodwill and indefinite-lived intangible assets will result in a taxable temporary difference, which will not reverse unless the related book goodwill or indefinite-lived intangible asset is impaired or written off. This liability may not be
used to support deductible temporary differences, such as net operating loss carryforwards, which may expire within a definite period.
The total valuation allowance increased $2.0 million in the year ended December 31, 2025 and decreased $155.6 million in the year 2024. During the year ended December 31, 2024, we executed a strategy to secure the future tax deductibility of certain intellectual property resulting in a $257.7 million reduction to the valuation allowance that was placed against this deferred tax asset in the year ended December 31, 2023. Subsequently reported tax benefits relating to the valuation allowance for deferred tax assets as of December 31, 2025 and 2024 have been allocated to income tax benefit recognized in the consolidated statements of operations.
As of December 31, 2025, we have U.S. federal net operating loss carryforwards of $506.2 million, of which $13.1 million will expire from 2031 to 2034, and $493.1 million do not expire. We have state net operating loss carryforwards with limited and unlimited lives. Our limited life state net operating losses will expire beginning in 2026. As of December 31, 2025, we have suspended interest expense carryforwards of $199.6 million in the U.S., $354.2 million in the Netherlands, and $137.8 million in the U.K., all of which have an unlimited life. We also have net operating loss carryforwards in various foreign jurisdictions of $459.1 million, which will begin to expire in 2026.
Unrecognized tax benefits
All uncertain tax positions have been classified in our balance sheet as noncurrent. A reconciliation of the amount of unrecognized tax benefits is as follows:
For the year ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Balance at beginning of year | $ | 180.2 | $ | 187.2 | $ | 224.6 | ||||||||||||||
| Increases related to current year tax positions | 1.0 | 2.1 | 3.3 | |||||||||||||||||
| Increases related to prior year tax positions | 0.1 | 1.0 | 1.2 | |||||||||||||||||
| Decreases related to business combinations and dispositions | — | (0.1) | — | |||||||||||||||||
| Decreases related to settlements with tax authorities | — | — | (0.4) | |||||||||||||||||
| Decreases related to prior year tax positions | (1.8) | (9.6) | (41.2) | |||||||||||||||||
| Decreases related to lapse of applicable statute of limitations | (5.9) | — | (0.7) | |||||||||||||||||
| (Decreases)/increases related to foreign currency exchange rates | 0.3 | (0.4) | 0.4 | |||||||||||||||||
| Balance at end of year | $ | 173.9 | $ | 180.2 | $ | 187.2 | ||||||||||||||
We recognize interest and penalties related to unrecognized tax benefits in the consolidated statements of operations and the consolidated balance sheets. The following table presents the expense/(income) related to such interest and penalties recognized in the consolidated statements of operations during the years ended December 31, 2025, 2024, and 2023, and the amount of interest and penalties recorded on the consolidated balance sheets as of December 31, 2025 and 2024:
| Statements of Operations | Balance Sheets | ||||||||||||||||||||||||||||
For the year ended December 31, | As of December 31, | ||||||||||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | 2025 | 2024 | ||||||||||||||||||||||||
| Interest | $ | (2.3) | $ | 1.4 | $ | 0.3 | $ | 1.5 | $ | 3.9 | |||||||||||||||||||
| Penalties | $ | 0.0 | $ | (0.1) | $ | 0.0 | $ | 0.4 | $ | 0.4 | |||||||||||||||||||
The amount of unrecognized tax benefits as of December 31, 2025 that if recognized would impact our effective tax rate is $130.6 million.
The Company is subject to income tax examinations by tax authorities in jurisdictions in which it operates. In the United Kingdom, tax years 2022 through 2025 remain open to examination under HMRC's normal four-year assessment time limit measured from the end of the relevant accounting period (absent extended-period triggers). Tax years in other significant jurisdictions remain open to examination as follows: China and Switzerland (2023 through 2025), the Netherlands (2021 through 2025), and the United States (2022 through 2025). Certain U.S. state and local jurisdictions remain open for similar periods; these jurisdictions are not individually material to the Company.
On December 15, 2022, the European Union ("EU") Member States formally adopted the EU's Pillar Two Directive, which generally establishes a minimum effective tax rate of 15% on a jurisdictional basis. The Directive became effective for the Company for the fiscal years beginning on or after January 1, 2024.
The Company has evaluated the impact of the Pillar Two rules, including enacted legislation and administrative guidance in the jurisdictions in which it operates, and continues to monitor further developments. Based on the Company’s analysis to date, the adoption of Pillar Two has not had a material impact on the Company’s consolidated financial statements or related disclosures for the years ended December 31, 2025 and 2024. The Company will continue to assess the impact of Pillar Two as additional guidance is issued and as jurisdictions finalize or amend their implementing legislation.
In July 2025, the U.S. enacted Public Law 119-21 (An Act to provide for reconciliation pursuant to title II of H. Con. Res. 14) (commonly referred to as the “One Big Beautiful Bill”). The legislation includes multiple effective dates, with certain provisions retroactive to January 1, 2025, and others becoming effective through 2027.
The Company is continuing to evaluate the provisions of the legislation, including available elections, and the related impacts on its consolidated financial statements and disclosures. While the Company does not expect the adoption of Public Law 119-21 to have a material adverse impact on its consolidated financial statements, the evaluation of certain provisions remains ongoing.
Indemnifications
We have various indemnification provisions in place with parties including Honeywell (sellers of First Technology Automotive and Special Products), the former shareholders of Elastic M2M, Inc., Sendyne Corp., SmartWitness Holdings, Inc., Xirgo Technologies Intermediate Holdings, LLC and Xirgo Holdings, Inc., whereby such provisions provide for the reimbursement of future tax liabilities paid by us that relate to the pre-acquisition periods of the acquired businesses.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Feb 13, 2023 | |
| 2021 | Feb 10, 2022 | |
| 2020 | Feb 12, 2021 | |
| 2019 | Feb 11, 2020 | |
| 2018 | Feb 6, 2019 | |
| 2017 | Feb 1, 2018 | |
| 2016 | Feb 2, 2017 | |
| 2015 | Feb 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.