UNIVERSAL CORP /VA/UVV
UNIVERSAL CORP /VA/ Income Taxes Disclosure
INCOME TAXES
The Company operates in the United States and many foreign countries and is subject to the tax laws of multiple jurisdictions. Changes in tax laws or the interpretation of tax laws can affect the Company’s earnings, as can the resolution of pending and contested tax issues. The Company’s consolidated effective income tax rate is affected by a number of factors, including the mix of domestic and foreign earnings and the effect of exchange rate changes on local taxable income and deferred taxes in foreign countries.
For fiscal years ended March 31, 2026, 2025, and 2024 the Company’s U.S. federal statutory tax rate was 21.0%. The U.S. tax system is primarily territorial based after the enactment of the Tax Cuts and Jobs Act of 2017. The U.S. tax law imposes a tax on U.S. shareholders on certain low-taxed income earned by controlled foreign corporations, referred to as net controlled foreign corporation tested income (“NCTI”). The Company has made an accounting policy election to account for any additional tax resulting from the NCTI provisions in the year in which it is incurred and has not recorded any deferred taxes on temporary book-tax differences related to this income.
The Company continues to assume repatriation of all undistributed earnings of its consolidated foreign subsidiaries and has therefore provided for expected foreign withholding taxes on the distribution of those earnings where applicable, net of any U.S. tax credit attributable to those withholding taxes. Brazil enacted new legislation applying a 10% withholding tax on dividends approved after December 31, 2025 to nonresident shareholders. The Company's tax holiday in Mozambique ended on December 31, 2025, increasing the local statutory rate to 32% and the withholding tax on dividends to 20%. The Company has asserted permanent reinvestment of the book basis of certain foreign subsidiaries, and accordingly, no deferred income tax liability has been recorded for any potential taxable gain that may be realized on a future disposition or liquidation of any of those subsidiaries. It is not practicable for the Company to quantify any deferred income tax liability that would be attributable to those events.
In various countries in which the Company operates, legislation has been enacted incorporating the Organisation for Economic Co-operation and Development’s Global Anti-Base Erosion Pillar Two model rules establishing a 15% global minimum tax. The estimated tax impact of such legislation has been included in the provision for income taxes and is not material. Like NCTI, this is treated as a period cost and does not have any additional deferred taxes related to these new laws.
Income Tax Expense
Income taxes for the fiscal years ended March 31, 2026, 2025, and 2024 consisted of the following:
| Fiscal Year Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Current | |||||||||||||||||
| United States | $ | (2,408) | $ | 7,038 | $ | 5,107 | |||||||||||
| State and local | 406 | 713 | 696 | ||||||||||||||
| Foreign | 49,619 | 32,112 | 30,711 | ||||||||||||||
| 47,617 | 39,863 | 36,514 | |||||||||||||||
| Deferred | |||||||||||||||||
| United States | (8,169) | (2,631) | (824) | ||||||||||||||
| State and local | (842) | (22) | (138) | ||||||||||||||
| Foreign | 8,051 | 3,736 | (4,443) | ||||||||||||||
| (960) | 1,083 | (5,405) | |||||||||||||||
| Total | $ | 46,657 | $ | 40,946 | $ | 31,109 | |||||||||||
Foreign taxes include any applicable U.S. tax expense on the earnings of foreign subsidiaries for fiscal years 2025 and 2024.
Consolidated Effective Income Tax Rate
A reconciliation of the U.S. federal statutory tax rate to the Company’s effective income tax rate is as follows:
| March 31, 2026 | |||||||||||
| Amount | Percentage | ||||||||||
| Tax expense at U.S. federal statutory rate | $ | 21,557 | 21.0 | % | |||||||
| State and local income taxes | (344) | (0.3) | % | ||||||||
| International | |||||||||||
| Brazil | |||||||||||
| Foreign rate differential | 8,116 | 7.9 | % | ||||||||
| ICMS not included in tax base | (8,093) | (7.9) | % | ||||||||
| Local statutory differences | 4,200 | 4.1 | % | ||||||||
| Withholding taxes | 5,410 | 5.3 | % | ||||||||
| Dominican Republic | |||||||||||
| Foreign rate differential | 3,478 | 3.4 | % | ||||||||
| Withholding taxes | (1,656) | (1.6) | % | ||||||||
| Malawi | |||||||||||
| Foreign rate differential | 5,179 | 5.0 | % | ||||||||
| Local statutory differences | 480 | 0.5 | % | ||||||||
| Withholding taxes | 1,031 | 1.0 | % | ||||||||
| Mexico | |||||||||||
| Foreign rate differential | (540) | (0.5) | % | ||||||||
| Local statutory differences | 2,515 | 2.4 | % | ||||||||
| Withholding taxes | 216 | 0.2 | % | ||||||||
| Mozambique | |||||||||||
| Foreign rate differential | (8,171) | (8.0) | % | ||||||||
| Local statutory differences | (1,199) | (1.2) | % | ||||||||
| Withholding taxes | (93) | (0.1) | % | ||||||||
| Philippines | |||||||||||
| Foreign rate differential | 621 | 0.6 | % | ||||||||
| Local statutory differences | 208 | 0.2 | % | ||||||||
| Withholding taxes | 1,367 | 1.3 | % | ||||||||
| Switzerland | |||||||||||
| Foreign rate differential | (143) | (0.1) | % | ||||||||
| Local statutory differences | 121 | 0.1 | % | ||||||||
| Withholding taxes | 2,194 | 2.1 | % | ||||||||
| Zimbabwe | |||||||||||
| Dividends paid from previously taxed earnings | (3,533) | (3.4) | % | ||||||||
| Withholding taxes paid on dividends paid from previously tax earnings | 2,523 | 2.5 | % | ||||||||
| Other international jurisdictions local statutory differences | 5,100 | 5.0 | % | ||||||||
| Effect of cross border tax laws | |||||||||||
| Net controlled foreign corporation tested income, net of foreign tax credits | 6,241 | 6.1 | % | ||||||||
| Branch income, taxed in U.S., net of foreign tax credits | 1,557 | 1.5 | % | ||||||||
| Other | 1,833 | 1.8 | % | ||||||||
| Tax Credits | |||||||||||
| Foreign tax credits | (4,455) | (4.3) | % | ||||||||
| Nontaxable or nondeductible items | 817 | 0.8 | % | ||||||||
| Changes in unrecognized tax benefits | 31 | — | % | ||||||||
| Other | |||||||||||
| All other | 89 | 0.1 | % | ||||||||
| Total | $ | 46,657 | 45.5 | % | |||||||
For the fiscal year ending March 31, 2026, state taxes in Pennsylvania, New Jersey, and Illinois make up the majority (greater than 50%) of the state and local tax category.
| Fiscal Year Ended March 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| U.S. federal statutory tax rate | 21.0 | % | 21.0 | % | |||||||
| State income taxes, net of federal benefit | 0.4 | 0.3 | |||||||||
| Foreign earnings taxed at rates other than the U.S. federal statutory tax rate | (3.7) | (5.2) | |||||||||
| Foreign dividend withholding taxes | 6.7 | 2.9 | |||||||||
| Changes in uncertain tax positions | — | (0.2) | |||||||||
| Other | 2.2 | 0.2 | |||||||||
| Effective income tax rate | 26.6 | % | 19.0 | % | |||||||
Components of Income Before Income Taxes
The U.S. and foreign components of income before income taxes were as follows:
| Fiscal Year Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| United States | $ | (79,551) | $ | 5,529 | $ | 22,517 | |||||||||||
| Foreign | 182,203 | 148,686 | 141,563 | ||||||||||||||
| Total | $ | 102,652 | $ | 154,215 | $ | 164,080 | |||||||||||
Deferred Income Tax Liabilities and Assets
Significant components of deferred tax liabilities and assets were as follows:
| March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Liabilities | |||||||||||
| Foreign withholding taxes | $ | 26,928 | $ | 20,989 | |||||||
| Property, plant and equipment | 15,468 | 14,730 | |||||||||
| Undistributed earnings | 3,296 | 3,362 | |||||||||
| Operating lease right-of-use assets | 9,871 | 8,238 | |||||||||
| Goodwill and other intangible assets | 20,494 | 30,834 | |||||||||
| Interest rate swap | 16 | 1,013 | |||||||||
| All other | 3,535 | 1,680 | |||||||||
| Total deferred tax liabilities | $ | 79,608 | $ | 80,846 | |||||||
| Assets | |||||||||||
| Employee benefit plans | $ | 10,590 | $ | 12,624 | |||||||
| Reserves and accruals | 6,472 | 6,325 | |||||||||
| Deferred income | 4,167 | 3,989 | |||||||||
| Operating lease right-of-use liabilities | 9,513 | 7,496 | |||||||||
| Currency translation losses of foreign subsidiaries | 2,156 | 2,156 | |||||||||
| Local currency exchange losses of foreign subsidiaries | 3,018 | 4,466 | |||||||||
| Interest expense limitation carryforward | 9,008 | 6,369 | |||||||||
| Foreign tax credit carryforward | 11,563 | 8,795 | |||||||||
| Capital loss carryforwards | 4,055 | 4,097 | |||||||||
| All other | 13,368 | 13,470 | |||||||||
| Total deferred tax assets | 73,910 | 69,787 | |||||||||
| Valuation allowance | (18,584) | (14,492) | |||||||||
| Net deferred tax assets | $ | 55,326 | $ | 55,295 | |||||||
At March 31, 2026, the Company had no material net operating loss carryforwards in either its domestic or foreign operations.
Combined Income Tax Expense (Benefit)
The combined income tax expense (benefit) allocable to continuing operations and other comprehensive income was as follows:
| Fiscal Year Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Continuing operations | $ | 46,657 | $ | 40,946 | $ | 31,109 | |||||||||||
| Other comprehensive loss | 165 | (532) | (1,056) | ||||||||||||||
| Total | $ | 46,822 | $ | 40,414 | $ | 30,053 | |||||||||||
Uncertain Tax Positions
A reconciliation of the beginning and ending balance of the gross liability for uncertain tax positions is as follows:
| Fiscal Year Ended March 31, | |||||||||||||||||
| 2026 | 2025 | 2024 | |||||||||||||||
| Liability for uncertain tax positions, beginning of year | $ | 1,006 | $ | 1,070 | $ | 1,415 | |||||||||||
| Additions: | |||||||||||||||||
| Related to tax positions for the current year | 63 | 71 | 65 | ||||||||||||||
| Reductions: | |||||||||||||||||
| Due to lapses of statutes of limitations | (49) | (56) | (56) | ||||||||||||||
| Due to tax settlements | — | — | (311) | ||||||||||||||
| Effect of currency rate changes | 24 | (79) | (43) | ||||||||||||||
| Liability for uncertain tax positions, end of year | $ | 1,044 | $ | 1,006 | $ | 1,070 | |||||||||||
The liability for uncertain tax positions at March 31, 2026 includes approximately $1.0 million that could have an effect on the consolidated effective tax rate if the tax benefits are recognized.
Amounts accrued or reversed for interest and penalties were not material for fiscal years 2024 through 2026, and liabilities recorded for penalties at March 31, 2026 and 2025 were also not material.
Universal and its subsidiaries file a U.S. federal consolidated income tax return, as well as returns in several U.S. states and a number of foreign jurisdictions. Open tax years in U.S. Federal, state, and foreign jurisdictions range from 3 to 6 years. There is an exception for the Company’s U.S. Federal fiscal year 2018 tax return due to the election on the amended return that extended the statute to 30 years.
Cash Taxes
The following table provides the cash income taxes paid, net of refunds for the year ended March 31, 2026:
| March 31, 2026 | |||||
| Income tax payments (net of refunds): | |||||
| United States: | |||||
| U.S. Federal | $ | 7,602 | |||
| U.S. State and Local | 539 | ||||
| Total United States | 8,141 | ||||
| Foreign: | |||||
| Brazil | 4,841 | ||||
| Italy | 4,715 | ||||
| Malawi | 7,729 | ||||
| Philippines | 4,712 | ||||
| Singapore | 4,985 | ||||
| Zimbabwe | 2,523 | ||||
| Other Foreign | 5,471 | ||||
| Total Foreign | 34,976 | ||||
| Total | $ | 43,117 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Jun 1, 2026 | Showing above |
| 2025 | May 30, 2025 | |
| 2024 | May 29, 2024 | |
| 2023 | May 25, 2023 | |
| 2022 | May 27, 2022 | |
| 2021 | May 28, 2021 | |
| 2020 | May 28, 2020 | |
| 2019 | May 24, 2019 | |
| 2018 | May 25, 2018 | |
| 2017 | May 26, 2017 | |
| 2016 | May 27, 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.