INCOME TAXES

The Company is responsible for filing consolidated U.S. federal, foreign and combined, unitary or separate state income tax returns. The Company is responsible for paying the taxes relating to such returns, including any subsequent adjustments resulting from the redetermination of such tax liabilities by the applicable taxing authorities.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The amendments in this update required prospective changes to certain annual income tax disclosures and are effective for Wabtec's annual reporting periods beginning January 1, 2025. As such, the impacted disclosures for 2025 are reflected below in accordance with the updated requirements. These updates include specific categories and presentation within the income tax rate reconciliation and enhanced disaggregation of disclosures about income taxes paid and income tax expense, among other changes. As allowed under the ASU, Wabtec has not applied these changes retroactively. The amendments in this update did not affect the recognition, measurement, or financial statement presentation of income taxes.

The components of the income before income taxes for the Company’s domestic and foreign operations for the years ended December 31 are provided below:


	For the year ended December 31,
In millions	2025		2024		2023
Domestic	$	938	$	782	$	506
Foreign	654		628		586
Income before income taxes	$	1,592	$	1,410	$	1,092

The consolidated provision for income taxes included in the Consolidated Statements of Income consisted of the following:


	For the year ended December 31,
In millions	2025		2024		2023
Current tax expense
Federal	$	146	$	106	$	148
State	36		26		29
Foreign	216		160		148
	398		292		325
Deferred tax expense (benefit)
Federal	28		26		(50)
State	(8)		9		1
Foreign	(9)		16		(9)
	11		51		(58)
Total provision	$	409	$	343	$	267

A reconciliation of the United States federal statutory income tax rate to the effective income tax rate on operations for the years ended December 31 is provided below:


	For the year ended December 31,
$ in millions	2025
U.S. federal statutory rate	$	334	21.0	%
State and local income tax, net of federal income tax effect	24		1.5
Foreign tax effects	64		4.0
Effect of cross-border tax laws:
Foreign branch income	19		1.2
Other	17		1.1
Tax credits:
Foreign tax credits	(48)		(3.0)
Other	(10)		(0.6)

Nontaxable or nondeductible items	4		0.3
Changes in unrecognized tax benefits	17		1.0
Other adjustments	(12)		(0.8)
Effective rate	$	409	25.7	%

The majority of State and local income tax, net of federal income tax effect for the year ended December 31, 2025 is attributable to state taxes in Illinois, Pennsylvania, California, and Texas.


	For the year ended December 31,
In millions	2024		2023
U.S. federal statutory rate	21.0	%	21.0	%
State taxes	1.8		1.5
Foreign	3.1		2.0
Research and development credit	(0.7)		(0.6)
Non-taxable gain on acquisition	—		(0.8)
U.S. net operating loss carryback	(1.0)		—
Changes in valuation allowances	(0.4)		1.0
U.S. tax reform provision	0.5		0.6
Other, net	—		(0.2)
Effective rate	24.3	%	24.5	%

The increase in effective tax rate from 2024 to 2025 was primarily due to changes in jurisdictional mix of earnings and the non-deductible loss generated from the divestiture of a business as part of the Portfolio Optimization initiative.

The decrease in effective tax rate from 2023 to 2024 was primarily due to changes in valuation allowances and audit closures, partially offset by a change in the jurisdictional mix of earnings and the non-recurrence of the non-taxable gain generated on the acquisition of LKZ in 2023.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. Among other provisions, this act includes permanently extending and modifying certain expiring provisions of the 2017 Tax Cuts and Jobs Act and immediate expensing of domestic research and development expenses. The impacts of these provisions do not have a material impact on the consolidated financial statements.

Components of deferred tax assets and liabilities were as follows:


	December 31,
In millions	2025		2024
Deferred income tax assets:
Accrued expenses and reserves	$	64	$	38
Warranty reserve	47		53
Deferred compensation/employee benefits	103		92
Right-of-use assets	94		74
Pension and postretirement obligations	14		13

Inventory	34		39
Deferred revenue	127		93
Tax credit carry forwards	36		—
Net operating loss carry forwards	132		106
Other	52		50
Gross deferred income tax assets	703		558
Less: Valuation allowance	(57)		(52)
Total deferred income tax assets	646		506
Deferred income tax liabilities:
Property, plant & equipment	55		64
Right-of-use liabilities	89		71
Intangible assets	1,036		663
Total deferred income tax liabilities	1,180		798
Net deferred income tax liability	$	534	$	292

A valuation allowance is recorded when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As of December 31, 2025, the valuation allowance for certain deferred tax asset carryforwards was $57 million, primarily in the United States, South Africa, China and the Netherlands.

The Company has net operating loss carry-forwards in the amount of $438 million, of which $216 million are indefinite lived, $109 million expire within ten years and $113 million expire in various periods between December 31, 2036 to December 31, 2045.

Components of cash taxes paid, net of refunds, were as follows:


	For the year ended December 31,
In millions	2025
United States federal taxes	$	139
State taxes	22
Foreign taxes:
Australia	18
Brazil	19

India	45

Kazakhstan	23
Other foreign jurisdictions	76
Income taxes paid, net of amounts refunded	$	342

Income taxes paid, net of amounts refunded for the years ended December 31, 2024 and 2023, were $237 million and $233 million, respectively.

As of December 31, 2025, the liability for income taxes associated with unrecognized tax benefits was $29 million, of which $18 million, if recognized, would favorably affect the Company’s effective income tax rate. As of December 31, 2024, the liability for income taxes associated with unrecognized tax benefits was $19 million, of which $18 million, if recognized,

would favorably affect the Company’s effective income tax rate. A reconciliation of the beginning and ending amount of the gross liability for income taxes associated with unrecognized tax benefits follows:


In millions	2025		2024		2023
Balance at beginning of year	$	19	$	40	$	33
Unrecognized tax benefits in prior periods	11		3		13
Audit settlement during year	(1)		(22)		(5)
Expiration of audit statute of limitations	—		(2)		(1)
Balance at end of year	$	29	$	19	$	40

The Company includes interest and penalties related to unrecognized tax benefits in income tax expense. As of December 31, 2025 and 2024, the total interest and penalties accrued was approximately $19 million and $13 million, respectively.

An audit of the Company’s U.S. federal income tax return for the year 2017 is ongoing and select state and non-U.S. income tax audits are also underway. With limited exception, the Company is no longer subject to examination by various U.S. and foreign taxing authorities for years before 2020.

Historical Timeline

Fiscal Year	Filed
2025	Feb 13, 2026	Showing above
2024	Feb 12, 2025

2023	Feb 14, 2024

2022	Feb 15, 2023

2020	Feb 19, 2021

2019	Feb 24, 2020

2018	Feb 27, 2019

2017	Feb 26, 2018

2016	Feb 28, 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.

WESTINGHOUSE AIR BRAKE TECHNOLOGIES CORP Income Taxes Disclosure

Historical Timeline

About Income Taxes Disclosures

Other Available Disclosures