Veralto CorpVLTO
Veralto Corp Income Taxes Disclosure
INCOME TAXES
Prior to the Separation, the Company’s operating results were included in Danaher’s various consolidated U.S. federal and certain state income tax returns, as well as certain foreign returns. For periods prior to the Separation, the Company’s Consolidated and Combined Financial Statements reflect income tax expense and deferred tax balances as if the Company had filed tax returns on a standalone basis separate from Danaher. The separate return method applies the accounting guidance for income taxes to the standalone financial statements as if the Company was a separate taxpayer and a standalone enterprise for periods prior to the Separation.
Earnings from operations before income taxes for the years ended December 31 were as follows:
($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
United States | $ | 697 | $ | 555 | $ | 484 | |||||||||||
Non-U.S. | 476 | 531 | 612 | ||||||||||||||
Total | $ | 1,173 | $ | 1,086 | $ | 1,096 | |||||||||||
The provision for income taxes for the years ended December 31 were as follows:
($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
Current: | |||||||||||||||||
Federal U.S. | $ | 109 | $ | 116 | $ | 86 | |||||||||||
Non-U.S. | 136 | 184 | 169 | ||||||||||||||
State and local | 37 | 27 | 27 | ||||||||||||||
Deferred: | |||||||||||||||||
Federal U.S. | (34) | (45) | (19) | ||||||||||||||
Non-U.S. | (12) | (29) | (4) | ||||||||||||||
State and local | (3) | — | (2) | ||||||||||||||
Income tax provision | $ | 233 | $ | 253 | $ | 257 | |||||||||||
The Company has determined that certain foreign earnings that have been previously taxed in the United States are not considered permanently reinvested. The cost to repatriate these earnings is limited to potential foreign withholding and state income taxes and is not expected to be material and has not been provided for. The Company intends to permanently reinvest its foreign earnings that have not previously been subject to U.S. income tax. The potential tax implications of repatriating unremitted earnings are driven by the facts at the time of distribution and therefore not practicable to determine. We regularly review our plans for reinvestment or repatriation of unremitted foreign earnings and any future change in our plans would require us to provide for the net tax impacts of these amounts.
The effective income tax rate from operations for the years ended December 31 varies from the U.S. statutory federal income tax rate as follows. Periods presented that are prior to the adoption of ASU 2023-09 have not been adjusted.
2025 | |||||||||||
($ in millions, except % of pretax earnings) | $ Value | % of Pretax Earnings | |||||||||
Statutory federal income tax rate | $ | 246 | 21.0 | % | |||||||
Increase (decrease) in tax rate resulting from: | |||||||||||
State income taxes (net of Federal income tax benefit) (a) | 26 | 2.2 | |||||||||
Foreign tax effects: | |||||||||||
Germany: | |||||||||||
Statutory rate difference | 14 | 1.2 | |||||||||
Other | 9 | 0.8 | |||||||||
Other foreign jurisdictions | (7) | (0.6) | |||||||||
Effect of cross-border tax laws: | |||||||||||
Foreign derived intangible income | (28) | (2.4) | |||||||||
Subpart F, net of foreign tax credits | (26) | (2.2) | |||||||||
Other | 2 | 0.2 | |||||||||
Nontaxable or nondeductible items | 4 | 0.3 | |||||||||
Tax credits | (8) | (0.7) | |||||||||
Changes in unrecognized tax benefits | (1) | (0.1) | |||||||||
Other | 2 | 0.2 | |||||||||
Effective income tax rate | $ | 233 | 19.9 | % | |||||||
(a) States that make up 50% of provision include: CA, CT, IL, NY, PA, and VA
Percentage of Pretax Earnings | |||||||||||
2024 | 2023 | ||||||||||
Statutory federal income tax rate | 21.0 | % | 21.0 | % | |||||||
Increase (decrease) in tax rate resulting from: | |||||||||||
State income taxes (net of Federal income tax benefit) | 2.0 | 1.9 | |||||||||
Non-U.S. rate differential | 2.1 | 3.5 | |||||||||
US Taxation of Foreign Earnings | (4.2) | (2.1) | |||||||||
Change in uncertain tax positions | 3.2 | — | |||||||||
R&D and other tax credits | (0.9) | (1.3) | |||||||||
Other | 0.7 | 1.0 | |||||||||
Net excess tax benefits from stock-based compensation | (0.6) | (0.6) | |||||||||
Effective income tax rate | 23.3 | % | 23.4 | % | |||||||
The Company’s effective tax rate for 2025, 2024 and 2023 differs from the U.S. federal statutory rate of 21.0%, due principally to the Company’s earnings outside the United States that are taxed at rates different than the U.S. federal statutory rate, state taxes, as well as the impact of the following:
•The effective tax rate of 19.9% in 2025 includes a net discrete tax benefit related to the reduction of the tax indemnification related to the Separation, release of a valuation allowance on deferred tax assets, and excess tax benefits from stock-based compensation. This decreased the reported rate on a net basis by 1.4%.
•The effective tax rate of 23.3% in 2024 includes net tax provisions primarily related to changes in estimates associated with prior period uncertain tax positions and the reduction of the tax indemnification related to the Separation partially offset by excess tax benefits from stock-based compensation. This increased the reported rate on a net basis by 0.6%. It also includes a 0.3% unfavorable impact of a non-deductible loss on the sale of a product line.
•The effective tax rate of 23.4% in 2023 includes net tax benefits primarily related to excess tax benefits from stock-based compensation. This decreased the reported rate on a net basis by 1.0%.
On July 4, 2025, an act to provide for reconciliation to title II of H. Con. Res. 14 (known commonly as the One Big Beautiful Bill Act (“OBBBA”)) was enacted into law. The OBBBA includes eliminating the requirement to capitalize U.S. R&D, permanent extension of certain provisions of the Tax Cuts & Jobs Act of 2017 and other corporate tax impacts. The Company has considered the impact on the Consolidated and Combined Financial Statements and concluded it is immaterial.
Significant components of the Company’s deferred tax assets and liabilities from operations at the end of each fiscal year were as follows:
($ in millions) | 2025 | 2024 | |||||||||
Deferred tax assets: | |||||||||||
Allowance for credit losses | $ | 7 | $ | 6 | |||||||
Inventories | 15 | 18 | |||||||||
Employee benefit plans | 15 | 8 | |||||||||
Other accruals and prepayments | 129 | 112 | |||||||||
Stock-based compensation expense | 20 | 17 | |||||||||
Operating lease liabilities | 46 | 37 | |||||||||
Capitalized research and development costs | 102 | 86 | |||||||||
Tax credit, operating loss and capital loss carryforwards | 40 | 57 | |||||||||
Net investment hedge | 15 | — | |||||||||
Valuation allowances | (21) | (32) | |||||||||
Total deferred tax assets | 368 | 309 | |||||||||
Deferred tax liabilities: | |||||||||||
Depreciation | (16) | (13) | |||||||||
Operating lease right-of-use assets | (43) | (35) | |||||||||
Goodwill and other intangible assets | (263) | (270) | |||||||||
Net investment hedge | — | (3) | |||||||||
Total deferred tax liability | (322) | (321) | |||||||||
Net deferred tax assets (liabilities) | $ | 46 | $ | (12) | |||||||
Deferred tax assets and deferred tax liabilities are included in other assets and other long-term liabilities, respectively, in the accompanying Consolidated Balance Sheets.
A valuation allowance is recorded on certain deferred tax assets if it has been determined it is more likely than not that all or a portion of these assets will not be realized. The valuation allowances in 2025 and 2024 are primarily attributable to foreign net operating loss carryforwards.
As of December 31, 2025, our U.S. and non-U.S. net operating loss carryforwards totaled $142 million, of which $42 million is related to federal and state net operating loss carryforwards, and $100 million related to non-U.S. net operating loss carryforwards. Certain of these losses can be carried forward indefinitely and others can be carried forward to various expiration dates from 2026 through 2045.
The Company recognizes tax benefits from uncertain tax positions only if, in its assessment, it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized from such positions are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. Judgment is required in evaluating tax positions and determining income tax provisions. The Company re-evaluates the technical merits of its tax positions and may recognize an uncertain tax benefit in certain circumstances, including when: (i) a tax audit is completed; (ii) applicable tax laws change, including a tax case ruling or legislative guidance; or (iii) the applicable statute of limitations expires.
As of December 31, 2025, tax benefits totaled $175 million ($116 million, net of the impact of $85 million of indirect tax benefits offset by $28 million associated with potential interest and penalties). As of December 31, 2024, tax benefits totaled $156 million ($116 million, net of the impact of $66 million of indirect tax benefits offset by $26 million associated with potential interest and penalties). The Company recognized approximately $2 million of net tax expense from potential interest and penalties during 2025, $7 million of net tax expense from potential interest and penalties during 2024, and $1 million of net tax benefits from the reversal of potential interest and penalties during 2023. To the extent taxes are not assessed with respect to uncertain tax positions, substantially all amounts accrued (including interest and penalties and net of indirect offsets) will be reduced and reflected as a reduction of the overall income tax provision. Unrecognized tax benefits and associated accrued interest and penalties are included in our income tax provision, income and other accrued expenses as detailed in Note 11.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding amounts accrued for potential interest and penalties, is as follows:
($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
Unrecognized tax benefits, beginning of year | $ | 156 | $ | 97 | $ | 94 | |||||||||||
Additions based on tax positions related to the current year | 26 | 46 | — | ||||||||||||||
Additions for tax positions of prior years | 7 | 15 | 7 | ||||||||||||||
Reductions for tax positions of prior years | (16) | — | (3) | ||||||||||||||
Acquisitions, divestitures and other | — | — | 4 | ||||||||||||||
Statute of limitations expirations | (1) | (1) | (1) | ||||||||||||||
Settlements | (1) | — | (4) | ||||||||||||||
Effect of foreign currency translation | 4 | (1) | — | ||||||||||||||
Unrecognized tax benefits, end of year | $ | 175 | $ | 156 | $ | 97 | |||||||||||
The Company conducts business globally, and the Former Parent filed numerous consolidated and separate income tax returns in the U.S. federal and state and non-U.S. jurisdictions. The non-U.S. countries in which the Company has a significant presence include Belgium, Brazil, Canada, China, Germany, the Netherlands and the United Kingdom. Excluding these non-U.S. jurisdictions, the Company believes that a change in the statutory tax rate of any individual non-U.S. country would not have a material effect on the Company’s Consolidated and Combined Financial Statements given the geographic dispersion of the Company’s income.
The Company is routinely examined by various domestic and international taxing authorities. In connection with the Separation, the Company entered into certain agreements with Danaher, including a tax matters agreement. The tax matters agreement distinguishes between the treatment of tax matters for “Joint” filings compared to “Separate” filings prior to the Separation. “Joint” filings involve legal entities, such as those in the United States, that include operations from both Danaher and the Company. By contrast, “Separate” filings involve certain entities (primarily outside of the United States) that exclusively include either Danaher’s or the Company’s operations, respectively. In accordance with the tax matters agreement, Danaher is liable for and has indemnified the Company against all income tax liabilities involving “Joint” filings for periods prior to the Separation. The Company remains liable for certain pre-Separation income tax liabilities including those related to the Company’s “Separate” filings.
The Company files U.S. federal income tax returns and income tax returns in various state, local and foreign jurisdictions. The Company has various income tax audits ongoing at any time throughout the world. Except for jurisdictions where the Company has NOLs or tax credit carryforwards, the Company is no longer subject to any tax assessment from tax authorities for years prior to 2020.
Income taxes paid, net of refunds received, by jurisdiction for the year ended December 31 is as follows:
($ in millions) | 2025 | ||||
Federal | $ | 71 | |||
State | $ | 29 | |||
Brazil | $ | 16 | |||
China | $ | 12 | |||
Germany | $ | 44 | |||
Other Foreign | $ | 63 | |||
Total Taxes Paid | $ | 235 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
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.