SENSIENT TECHNOLOGIES CORPSXT
SENSIENT TECHNOLOGIES CORP Income Taxes Disclosure
11. Income Taxes
Earnings before income taxes were as follows:
|
(In thousands)
|
2025
|
2024
|
2023
|
|||||||||
|
United States
|
$
|
66,358
|
$
|
57,318
|
$
|
45,900
|
||||||
|
Foreign
|
111,189
|
105,480
|
83,951
|
|||||||||
|
Total
|
$
|
177,547
|
$
|
162,798
|
$
|
129,851
|
||||||
The provision for income taxes was as follows:
|
(In thousands)
|
2025
|
2024
|
2023
|
|||||||||
|
Current income tax expense:
|
||||||||||||
|
Federal
|
$
|
13,395
|
$
|
20,307
|
$
|
11,153
|
||||||
|
State
|
1,936
|
3,375
|
2,814
|
|||||||||
|
Foreign
|
30,432
|
33,048
|
27,590
|
|||||||||
|
|
45,763
|
56,730
|
41,557
|
|||||||||
|
Deferred expense (benefit):
|
||||||||||||
|
Federal
|
46
|
(12,743
|
)
|
(4,656
|
)
|
|||||||
|
State
|
(1,338
|
)
|
(581
|
)
|
(813
|
)
|
||||||
|
Foreign
|
(1,413
|
)
|
(5,274
|
)
|
369
|
|||||||
|
|
(2,705
|
)
|
(18,598
|
)
|
(5,100
|
)
|
||||||
|
Income taxes
|
$
|
43,058
|
$
|
38,132
|
$
|
36,457
|
||||||
Payments of income taxes were as follows:
|
(In thousands)
|
2025
|
|||
| Federal |
$ | 13,686 | ||
| State |
3,211 | |||
| Germany |
7,389 | |||
| Thailand | 4,904 | |||
| Mexico | 3,846 | |||
| China |
3,141 | |||
| France |
2,408 | |||
| Foreign - Other |
10,221 | |||
| Total |
$ | 48,806 | ||
The company adopted ASU 2023-09 prospectively in 2025. The 2025 reconciliation
between the U.S. Federal tax rate and the actual effective tax rate under ASU 2023-09 is below. The reconciliation for 2024 and 2023 under the prior guidance follows.
|
|
2025
|
|||||||
|
|
Amount | Percent | ||||||
| Taxes at statutory rate |
$ | 37,285 | 21.0 | % | ||||
| State income taxes, net of federal income tax benefit |
||||||||
|
Wisconsin1
|
(1,053 | ) | (0.6 | ) | ||||
|
Other state income taxes1
|
1,140
|
0.6 | ||||||
| Tax credits |
||||||||
|
Research and Development tax credits
|
(3,674 | ) | (2.1 | ) | ||||
| Foreign tax effects |
||||||||
|
Germany
|
||||||||
|
Foreign statutory tax rate difference
|
(1,622 | ) | (0.9 | ) | ||||
|
Enacted change in tax rate impact on deferred items
|
(1,726 | ) | (1.0 | ) | ||||
|
Local taxes
|
4,039 | 2.3 | ||||||
|
Other foreign jurisdictions
|
6,823 | 3.9 | ||||||
| Effect of cross-border taxes |
||||||||
|
Global intangible low-taxed income
|
474 | 0.3 | ||||||
|
Foreign derived intangible income
|
(2,175 | ) | (1.2 | ) | ||||
|
Other effects of cross-border taxes
|
733 | 0.4 | ||||||
| Nontaxable or nondeductible items |
||||||||
|
Nondeductible compensation
|
2,452 | 1.4 | ||||||
|
Other nontaxable or nondeductible items
|
(155 | ) | (0.1 | ) | ||||
| Changes in unrecognized benefits |
198 | 0.1 | ||||||
| Other reconciling items |
319 | 0.2 | ||||||
| Effective taxes and tax rate |
$ | 43,058 | 24.3 | % | ||||
1 Wisconsin had a release of a valuation allowance related to its net operating loss. The states that make up the majority of
the Other state income taxes category are California and Illinois.
|
|
2024
|
2023
|
||||||
|
Taxes at statutory rate
|
21.0
|
%
|
21.0
|
%
|
||||
|
State income taxes, net of federal income tax benefit
|
1.0
|
1.1
|
||||||
|
Tax credits
|
(1.6
|
)
|
(1.9
|
)
|
||||
|
Taxes on foreign earnings
|
4.1
|
4.8
|
||||||
|
Global Intangible Low-Taxed Income
|
0.5
|
0.6
|
||||||
|
Foreign Derived Intangible Income
|
(1.2
|
)
|
(1.3
|
)
|
||||
|
Resolution of prior years’ tax matters
|
0.6
|
0.3
|
||||||
|
Valuation allowance adjustments
|
(1.4
|
)
|
2.8
|
|||||
| Nondeductible compensation |
0.9 | 1.2 | ||||||
|
Other, net
|
(0.5
|
)
|
(0.5
|
)
|
||||
|
Effective tax rate
|
23.4
|
%
|
28.1
|
%
|
||||
For 2024 and 2023, taxes on foreign tax effects include the difference between the tax rates applied to
foreign earnings relative to the U.S. statutory tax rate, accruals for foreign unrecognized tax benefits, and the impact of the U.S. foreign tax credit, not including the impact from Global Intangible Low-Taxed Income (GILTI). The impact on the
Company’s effective tax rate varies from year to year based on the finalization of prior year foreign and domestic tax items, audit settlements, and mix of foreign earnings. The effective tax rates in 2025, 2024, and 2023 were all impacted by the release of valuation
allowances related to net operating losses (NOLs) and the limited deductibility of costs related to the Portfolio Optimization Plan. See Note 14, Portfolio Optimization Plan. The effective tax rate in 2025 was also impacted by the change
in the German tax rate. The effective tax rate in 2023 was also impacted by the release of valuation allowances related to the foreign tax credit carryover.
The Company’s valuation allowance at December 31, 2025 and 2024 was $29.1 million and $29.7 million, respectively. In 2025, the valuation allowance related to foreign NOLs was increased, and the valuation allowance related to state NOLs
was reduced. In 2024, the valuation allowance related to foreign NOLs was reduced, and the valuation allowance related to state NOLs was increased.
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities consisted of the following:
|
(In thousands)
|
2025
|
2024
|
||||||
|
Deferred tax assets:
|
||||||||
|
Benefit plans
|
$
|
10,859
|
$
|
8,123
|
||||
|
Liabilities and reserves
|
20,886
|
20,322
|
||||||
|
Operating loss and credit carryovers
|
58,598
|
59,834
|
||||||
|
Capitalized research and development costs
|
22,745 | 18,666 | ||||||
|
Other
|
20,788
|
5,355
|
||||||
|
Gross deferred tax assets
|
133,876
|
112,300
|
||||||
|
Valuation allowance
|
(29,053
|
)
|
(29,743
|
)
|
||||
|
Deferred tax assets
|
104,823
|
82,557
|
||||||
|
Deferred tax liabilities:
|
||||||||
|
Property, plant, and equipment
|
(28,265
|
)
|
(26,092
|
)
|
||||
|
Goodwill
|
(19,005
|
)
|
(20,685
|
)
|
||||
|
Deferred tax liabilities
|
(47,270
|
)
|
(46,777
|
)
|
||||
|
Net deferred tax assets
|
$
|
57,553
|
$
|
35,780
|
||||
At December 31, 2025, foreign tax credit carryovers were $27.3 million, all of which expire before 2040. At December 31, 2025, foreign operating loss carryovers were $90.5
million. Included in the foreign operating loss carryovers are losses of $16.5 million that expire through 2040 and $74.0 million that expire after 2040 or do not have an expiration date. At December 31, 2025, state operating loss carryovers were $110.0 million, which expire prior to 2040.
The Company is electing to recognize GILTI as a period expense in the period the tax is incurred.
The Organisation for Economic Co-operation and Development has issued Pillar Two model rules imposing a global minimum corporate tax rate of 15%. The Pillar Two model rules have not had a material impact on the Company, and we will continue to monitor U.S. and global legislative action related to Pillar Two for potential
impacts.
Federal and state income taxes are provided on international subsidiary income distributed to or taxable in the U.S. during the year. At December 31, 2025, no additional
income or withholding taxes have been provided for the $920.0 million of undistributed earnings or any additional outside basis
differences inherent in these entities, as these amounts are considered to be invested indefinitely. If the undistributed earnings were repatriated, the Company estimates it
would have a withholding tax liability of $45.8 million. The determination of the tax liability for any outside basis differences is not
practicable.
A reconciliation of the change in the liability for unrecognized tax benefits for 2025 and 2024 is as follows:
|
(In thousands)
|
2025
|
2024
|
||||||
|
Balance at beginning of year
|
$
|
4,391
|
$
|
4,251
|
||||
|
Increases for tax positions taken in the current year
|
840
|
865
|
||||||
| Increases for tax positions taken in prior years | 130 | 422 | ||||||
|
Decreases related to settlements with tax authorities
|
(736
|
)
|
-
|
|||||
|
Decreases as a result of lapse of the applicable statutes of limitations
|
(952
|
)
|
(765
|
)
|
||||
|
Foreign currency exchange rate changes
|
457
|
(382
|
)
|
|||||
|
Balance at the end of year
|
$
|
4,130
|
$
|
4,391
|
||||
The amount of the unrecognized tax benefits that would affect the effective tax rate, if recognized, was approximately $4.1 million. The Company recognizes interest and penalties related to the unrecognized tax benefits in income tax expense. $0.5 million of accrued interest and penalties were reported as an income tax liability as of both December 31, 2025 and 2024. The liability for unrecognized tax benefits relates to multiple
jurisdictions and is reported in Other Liabilities on the Company’s Consolidated Balance Sheet at December 31, 2025.
With limited exceptions, the Company is no longer subject to federal, state, and local, or non-U.S. income tax examinations by tax authorities for years before 2021.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2017 | Feb 23, 2018 | |
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.