Triton International LtdTRTN-PA

Triton International Ltd Income Taxes Disclosure

10-KFiled Feb 29, 20245 min read
Income Taxes
The Company is a Bermuda exempted company. Bermuda does not currently impose a corporate income tax. The Company is subject to taxation in certain foreign jurisdictions on a portion of its income attributable to such jurisdictions. The two main subsidiaries of Triton are Triton Container International Limited ("TCIL") and TAL International Group ("TAL".) TCIL is a Bermuda exempted company and therefore no income tax is imposed. However, a portion of TCIL’s income is subject to taxation in the U.S. TAL is a U.S. company and therefore is subject to taxation in the U.S.

Effects of Pillar 2

The Organization for Economic Co-operation and Development (the “OECD”) has issued various proposals that would change long-standing global tax principles. These proposals include a two-pillar approach to global taxation, focusing on global profit allocation and a global minimum tax rate ("Pillar Two"). Numerous jurisdictions where the Company, its ultimate parent Brookfield Corporation, and its subsidiaries operate have enacted Pillar Two or are actively considering changes to their tax laws to adopt Pillar Two. The Company continues to assess the impact of Pillar Two as countries actively consider changes to
their tax laws to adopt certain parts of the OECD's proposal, and will continue to monitor and reflect the impact of such legislative changes in future financial statements as appropriate.

The following table sets forth income tax expense (benefit) for the periods indicated (in thousands):
Year Ended December 31,
202320222021
Current taxes:
Bermuda$— $— $— 
U.S.45,861 46,380 6,528 
Foreign580 952 230 
$46,441 $47,332 $6,758 
Deferred taxes:
Bermuda$— $— $— 
U.S.8,010 23,522 43,604 
Foreign13 (47)(5)
8,023 23,475 43,599 
Total income tax expense (benefit)$54,464 $70,807 $50,357 

The following table sets forth the components of income (loss) before income taxes (in thousands):
Year Ended December 31,
202320222021
Bermuda sources$325,453 $532,391 $346,023 
U.S. sources201,960 284,468 233,518 
Foreign sources1,140 870 1,056 
Income (loss) before income taxes$528,553 $817,729 $580,597 

The following table sets forth the difference between the Bermuda statutory income tax rate and the effective tax rate on the Consolidated Statements of Operations for the periods indicated below:
Year Ended December 31,
202320222021
Bermuda tax rate— %— %— %
Change in enacted tax act0.86 %0.66 %— %
U.S. income taxed at other than the statutory rate8.54 %7.58 %8.75 %
Effect of uncertain tax positions— %(0.06)%(0.09)%
Foreign income taxed at other than the statutory rate0.10 %0.16 %0.11 %
Effect of permanent differences0.75 %0.10 %0.21 %
Other discrete items0.05 %0.22 %(0.31)%
Effective income tax rate10.30 %8.66 %8.67 %
The following table sets forth the components of deferred income tax assets and liabilities (in thousands):
December 31, 2023December 31, 2022
Deferred income tax assets:
Net operating loss and interest expense limitation carryforwards$6,244 $3,669 
Deferred income2,344 2,444 
Accrued liabilities and other payables5,191 3,076 
Total gross deferred tax assets13,779 9,189 
Less: Valuation allowance— (200)
Net deferred tax assets$13,779 $8,989 
Deferred income tax liabilities:
Accelerated depreciation$321,494 $337,375 
Deferred partnership income (loss)100,961 73,583 
Goodwill and other intangible amortization4,055 3,974 
Derivative instruments3,170 5,383 
Deferred income— 302 
Total gross deferred tax liability429,680 420,617 
Net deferred income tax liability$415,901 $411,628 

At December 31, 2023, the Company had U.S. state net operating loss carryforwards of $10.1 million that expire at various times beginning in 2025 and net interest expense limitation carryforwards of $26.4 million that have an indefinite carryforward period. The Company held a valuation allowance of $0.2 million at December 31, 2022 related to U.S. state net operating losses. The Company released the entire valuation allowance of $0.2 million at December 31, 2023, as it is more likely than not that Triton will be able to utilize these state net operating losses.

In assessing the potential future realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods during which the deferred tax assets are deductible, the Company believes it is more likely than not that the Company will realize the benefits of these deductible differences at December 31, 2023.

Certain income taxes on unremitted earnings have not been reflected on the consolidated financial statements because such earnings are intended to be permanently reinvested in those jurisdictions. Such earnings and related income taxes are estimated to be approximately $378.5 million and $113.4 million, respectively, at December 31, 2023.

The following table sets forth the unrecognized tax benefit amounts (in thousands):
December 31, 2023December 31, 2022
Beginning balance at January 1$— $327 
Lapse of statute of limitations— (327)
Ending balance at December 31$— $— 

The Company files income tax returns in several jurisdictions including the U.S. and certain U.S. states. The tax years 2020 through 2023 remain subject to examination by major tax jurisdictions.
The Company accrues interest and penalties related to income taxes in the provision for income taxes. The following table summarizes interest and penalty expense (in thousands):
Year Ended December 31,
 202320222021
Interest expense (benefit)$— $(86)$(78)
Penalty expense (benefit)$— $(98)$(97)

The following table summarizes the components of income taxes payable included in Accounts payable and other accrued expenses on the Consolidated Balance Sheets (in thousands):
December 31, 2023December 31, 2022
Corporate income taxes payable$99 $— 
Unrecognized tax benefits— — 
Interest accrued— — 
Penalties— — 
Income taxes payable$99 $— 

Historical Timeline

Fiscal YearFiled
2023Feb 29, 2024Showing above
2022Feb 14, 2023
2021Feb 15, 2022
2020Feb 16, 2021
2019Feb 14, 2020
2018Feb 19, 2019
2017Feb 27, 2018
2016Mar 20, 2017

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.

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