TRINITY INDUSTRIES INCTRN
TRINITY INDUSTRIES INC Income Taxes Disclosure
Income Taxes
The components of income from continuing operations before income taxes are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Domestic | $ | 365.0 | $ | 212.9 | $ | 137.2 | |||||||||||
| Foreign | 10.4 | 8.9 | 11.8 | ||||||||||||||
| Income from continuing operations before income taxes | $ | 375.4 | $ | 221.8 | $ | 149.0 | |||||||||||
The components of the provision (benefit) for income taxes from continuing operations are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 2.7 | $ | 60.1 | $ | 38.7 | |||||||||||
| State | 3.3 | 2.6 | 1.3 | ||||||||||||||
| Foreign | 7.4 | 9.8 | 10.5 | ||||||||||||||
| Total current | 13.4 | 72.5 | 50.5 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 66.7 | (24.1) | (20.7) | ||||||||||||||
| State | 11.3 | 1.5 | (8.1) | ||||||||||||||
| Foreign | (0.5) | 0.5 | (12.7) | ||||||||||||||
| Total deferred | 77.5 | (22.1) | (41.5) | ||||||||||||||
| Provision (benefit) | $ | 90.9 | $ | 50.4 | $ | 9.0 | |||||||||||
The provision for income taxes from continuing operations results in effective tax rates that differ from the statutory rates. The following is a reconciliation between the statutory U.S. federal income tax rate and our effective income tax rate on income before income taxes:
| Year Ended December 31, 2025 | |||||||||||
| Amount | Percent | ||||||||||
| ($ in millions) | |||||||||||
| U.S. federal statutory income tax rate | $ | 78.8 | 21.0 | % | |||||||
State and local income tax, net of federal income tax effect (1) | 13.9 | 3.7 | |||||||||
| Foreign tax effects: | |||||||||||
| Mexico: | |||||||||||
| Withholding taxes | 3.0 | 0.8 | |||||||||
| Other | (0.7) | (0.2) | |||||||||
| Canada: | |||||||||||
| Withholding taxes | 3.7 | 1.0 | |||||||||
| Tax credits: | |||||||||||
| Foreign tax credits | (8.3) | (2.2) | |||||||||
| Other | (1.8) | (0.5) | |||||||||
| Changes in valuation allowances | 3.0 | 0.8 | |||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Noncontrolling interest in partially‑owned subsidiaries | (5.1) | (1.4) | |||||||||
| Other | 2.8 | 0.8 | |||||||||
| Other adjustments | 1.6 | 0.4 | |||||||||
| Effective tax rate | $ | 90.9 | 24.2 | % | |||||||
(1) State taxes in Illinois and California made up the majority (greater than 50%) of the tax effect in this category.
On July 4, 2025, the One Big Beautiful Bill Act (the "Act") was enacted. The Act includes multiple business tax provisions, including the reinstatement of 100% bonus depreciation and a change in the calculation of deductible interest expense. These changes were incorporated into our provision for income taxes for the year ended December 31, 2025, resulting in an increase to our deferred tax expense, offset by a corresponding decrease to our current tax expense. The Act did not have a material impact on our total income tax expense or our effective tax rates for the year ended December 31, 2025.
As previously disclosed and prior to the adoption of ASU 2023-09, the provision for income taxes from continuing operations results in effective tax rates that differ from the statutory rates. The following is a reconciliation between the statutory U.S. federal income tax rate and our effective income tax rate on income before income taxes:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| U.S. federal statutory income tax rate | 21.0 | % | 21.0 | % | |||||||
| Foreign branch taxes | 1.1 | 1.8 | |||||||||
| State taxes | 1.8 | 2.2 | |||||||||
| Executive compensation limitations | 1.1 | 1.3 | |||||||||
| Noncontrolling interest in partially-owned subsidiaries | (1.8) | (1.8) | |||||||||
| Equity compensation | (0.7) | (0.5) | |||||||||
| Changes in valuation allowance and reserves | (0.8) | (2.2) | |||||||||
| Changes in tax laws and apportionment | 0.5 | (7.1) | |||||||||
| Release of residual taxes from AOCI | — | (8.1) | |||||||||
| Other, net | 0.5 | (0.6) | |||||||||
| Effective tax rate | 22.7 | % | 6.0 | % | |||||||
During the year ended December 31, 2023, one of our partially-owned subsidiaries released residual tax effects that had previously been recorded in AOCI. This deferred tax benefit was originally recorded before the partially-owned subsidiary was treated as a flow-through entity, remaining in AOCI until the underlying book-to-tax difference no longer existed, which occurred during the year ended December 31, 2023. As a result, we recorded an $11.9 million income tax benefit in our Consolidated Statements of Operations during the year ended December 31, 2023.
We remeasure our state deferred tax liability on a regular basis based upon our estimate of our state tax apportionment as applied to enacted state tax rates. We also adjust our deferred balances based upon changes in tax laws and rates during the period in which those laws and rates are enacted, as well as adjusting for acquisition and disposition activity of businesses. During 2025, the state of Illinois changed its tax laws, resulting in a one-time, non-cash deferred tax expense of $4.8 million. As a result of our changes in apportionment, tax law changes, and business additions, we recorded a non-cash, deferred tax expense of $5.1 million, an expense of $0.9 million, and a benefit of $10.6 million during the years ended December 31, 2025, 2024, and 2023, respectively.
The tax provision for the year ended December 31, 2025 reflects an expense for an adjustment in our valuation allowance of $3.3 million primarily for foreign tax credit, state tax carryforwards, and general business tax credits. The tax provisions for the years ended December 31, 2024 and 2023 reflect a benefit for a net adjustment to our valuation allowances of $1.8 million and $3.2 million, respectively, primarily for deferred tax assets in Mexico, state tax loss carryforwards, state reserves, and federal tax credits.
Deferred income taxes represent the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax liabilities and assets are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation, depletion, and amortization | $ | 1,297.5 | $ | 1,110.0 | |||||||
| Partially-owned subsidiaries basis difference | 38.5 | 124.7 | |||||||||
| Right-of-use assets | 20.5 | 21.5 | |||||||||
| Accrued liabilities and other | 1.7 | 7.0 | |||||||||
| Total deferred tax liabilities | 1,358.2 | 1,263.2 | |||||||||
| Deferred tax assets: | |||||||||||
| Workers compensation, pensions, and other benefits | 31.3 | 33.6 | |||||||||
| Interest expense | 81.9 | 108.8 | |||||||||
| Warranties and reserves | 3.6 | 3.0 | |||||||||
| Equity items | 1.2 | 1.2 | |||||||||
| Tax loss carryforwards and credits | 107.2 | 30.7 | |||||||||
| Inventory | 5.7 | 6.7 | |||||||||
| Lease liabilities | 24.2 | 25.3 | |||||||||
| Total deferred tax assets | 255.1 | 209.3 | |||||||||
| Net deferred tax liabilities before valuation allowances | 1,103.1 | 1,053.9 | |||||||||
| Valuation allowances | 24.3 | 20.8 | |||||||||
| Net deferred tax liabilities before reserve for uncertain tax positions | 1,127.4 | 1,074.7 | |||||||||
| Deferred tax assets included in reserve for uncertain tax positions | (0.6) | (0.7) | |||||||||
| Net deferred tax liability | $ | 1,126.8 | $ | 1,074.0 | |||||||
At December 31, 2025, we had $326.1 million of federal tax loss carryforwards, $17.9 million of tax-effected state loss carryforwards that generally expire between the years 2026 and 2045, and $20.7 million of net federal and state credits remaining. We have established valuation allowances for federal, state, and foreign tax operating losses and credits that we have estimated may not be realizable.
Taxing authority examinations
Our federal tax return years through 2021 are closed under statute and the years 2022-2024 remain open. We have state tax returns that are under audit in the normal course of business, and the statutes of limitations for our Mexican subsidiaries' tax returns remain open for audit for 2020 and forward. We believe we are appropriately reserved for any potential matters.
Income taxes paid, net of refunds
The components of income taxes paid, net of refunds, are as follows:
| Year Ended December 31, 2025 | |||||
| (in millions) | |||||
Federal (1) | $ | 42.4 | |||
| State | 0.7 | ||||
| Foreign: | |||||
| Mexico | 5.1 | ||||
| Canada | 2.7 | ||||
| Other | 0.5 | ||||
| Income taxes paid, net of refunds | $ | 51.4 | |||
(1) Includes the purchase of $40.0 million in federal transferable tax credits for $38.4 million during the year ended December 31, 2025. These credits were used to offset the Company’s federal income tax liability for 2024, generating an income tax receivable and resulting in the recognition of a tax benefit of $1.6 million for the year ended December 31, 2025.
Income tax payments, net of refunds, during the years ended December 31, 2024 and 2023 totaled $54.6 million and $42.4 million, respectively.
Unrecognized tax benefits
Our unrecognized tax benefits for the years ended December 31, 2025, 2024, and 2023 were $0.6 million, $0.9 million, and $1.0 million, respectively. There were no material changes to our unrecognized tax benefits during the years ended December 31, 2025, 2024, and 2023.
The Company accounts for interest expense and penalties related to income tax issues as income tax expense. Accordingly, interest expense and penalties associated with an uncertain tax position are included in the income tax provision. The total amount of accrued interest and penalties as of December 31, 2025 and 2024 was $2.5 million and $2.4 million, respectively. We had no material changes to interest or penalties relating to uncertain tax positions for the years ended December 31, 2025, 2024, and 2023.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 24, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 19, 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.