WESCO INTERNATIONAL INCWCC
WESCO INTERNATIONAL INC Income Taxes Disclosure
11. INCOME TAXES
The following table sets forth the components of income before income taxes by jurisdiction:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In millions) | |||||||||||||||||
| United States | $ | 625.2 | $ | 713.7 | $ | 739.4 | |||||||||||
| Foreign | 230.7 | 237.3 | 252.6 | ||||||||||||||
| Income before income taxes | $ | 855.9 | $ | 951.0 | $ | 992.0 | |||||||||||
The following table sets forth the components of the provision for income taxes:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In millions) | |||||||||||||||||
| Current income taxes: | |||||||||||||||||
U.S. federal | $ | 85.8 | $ | 150.2 | $ | 124.8 | |||||||||||
| State | 38.6 | 41.5 | 34.6 | ||||||||||||||
| Foreign | 81.6 | 79.8 | 74.4 | ||||||||||||||
| Total current income taxes | 206.0 | 271.5 | 233.8 | ||||||||||||||
| Deferred income taxes: | |||||||||||||||||
U.S. federal | 9.3 | (22.8) | (1.0) | ||||||||||||||
| State | 2.6 | (5.0) | 2.7 | ||||||||||||||
| Foreign | (4.5) | (12.1) | (9.6) | ||||||||||||||
| Total deferred income taxes | 7.4 | (39.9) | (7.9) | ||||||||||||||
| Provision for income taxes | $ | 213.4 | $ | 231.6 | $ | 225.9 | |||||||||||
The following table sets forth the reconciliation of the tax provision at the U.S. federal statutory income tax rate to income tax expense and the effective tax rate for the year ended December 31, 2025:
| Year Ended December 31, 2025 | |||||||||||
| (In millions) | |||||||||||
| U.S. federal statutory tax rate | $ | 179.7 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect(1) | 33.1 | 3.9 | |||||||||
| Foreign tax effects: | |||||||||||
| Canada: | |||||||||||
| Provincial income taxes | 10.5 | 1.2 | |||||||||
| Statutory tax rate difference between Canada and United States | (9.2) | (1.1) | |||||||||
| Other | (1.7) | (0.2) | |||||||||
| Ireland | 12.0 | 1.4 | |||||||||
| Other foreign jurisdictions | 17.2 | 2.0 | |||||||||
| Effect of cross-border tax laws: | |||||||||||
| Foreign-derived intangible income | (11.7) | (1.4) | |||||||||
| Global intangible low-taxed income | 20.6 | 2.4 | |||||||||
| Other | 3.0 | 0.3 | |||||||||
| Tax credits: | |||||||||||
| Foreign tax credits | (32.4) | (3.8) | |||||||||
| Other | (11.1) | (1.3) | |||||||||
| Changes in valuation allowances | 6.2 | 0.7 | |||||||||
Nontaxable or nondeductible items(2) | 1.7 | 0.2 | |||||||||
| Changes in unrecognized tax benefits | (5.5) | (0.6) | |||||||||
| Other | 1.0 | 0.2 | |||||||||
| Provision for income taxes and effective tax rate | $ | 213.4 | 24.9 | % | |||||||
(1)
(2) The Nontaxable or Nondeductible Items category includes the tax impact of share-based payments under ASC 718, Compensation—Stock Compensation, and non-deductible executive compensation under IRC Section 162(m). The net tax impact of these items for the year ended December 31, 2025 was a $2.6 million reduction in income tax expense (a 0.3% reduction in effective tax rate).
The following table sets forth the reconciliation between the U.S. federal statutory income tax rate and the effective tax rate for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
U.S. federal statutory rate | 21.0 | % | 21.0 | % | |||||||
| State income taxes, net of federal income tax benefit | 2.9 | 3.0 | |||||||||
| Tax effect of intercompany financing | (1.0) | (0.9) | |||||||||
| Change in valuation allowance | 1.0 | (0.9) | |||||||||
Tax effect of foreign income | 1.0 | 1.1 | |||||||||
| Other | (0.5) | (0.5) | |||||||||
| Effective tax rate | 24.4 | % | 22.8 | % | |||||||
The following table sets forth the components of income taxes paid (net of refunds received) by jurisdiction for the year ended December 31, 2025:
| (In millions) | |||||
U.S. federal(1) | $ | 113.6 | |||
| U.S. state and local: | |||||
U.S. state and local - other(2) | 37.4 | ||||
| Total U.S. state and local | 37.4 | ||||
| Foreign: | |||||
| Canada - federal | 25.6 | ||||
Foreign - other(2) | 61.2 | ||||
| Total foreign | 86.8 | ||||
| Income taxes paid (net of refunds received) | $ | 237.8 | |||
(1) U.S. federal income taxes paid (net of refunds received) includes amounts to purchase transferable clean energy tax credits.
(2) The amount of income taxes paid (net of refunds received) to respective individual jurisdiction(s) during the year do not meet the 5% disaggregation threshold.
During the year ended December 31, 2025, the Company purchased $95.2 million of transferable clean energy tax credits. The Company used $91.1 million of these tax credits to reduce its 2024 U.S. federal income tax liability and $4.1 million to reduce its 2025 U.S. federal income tax liability.
The One Big Beautiful Bill Act (“OBBBA”), enacted into law on July 4, 2025, introduced significant changes to the U.S. federal income tax laws. The OBBBA made permanent certain expiring provisions of the TCJA and modified other provisions of the TCJA, as well as the Inflation Reduction Act of 2022 (the “IRA”). These changes included the permanent extension of 100% “bonus” depreciation for certain property, the permanent restoration of the tax-basis EBITDA-based limitation on the deductibility of business interest expense subject to certain modifications to the computation of tax-basis EBITDA, and the immediate expensing of qualified domestic research and development expenses. The OBBBA also made permanent, with certain modifications, certain TCJA provisions concerning the current taxation of income from international operations. The OBBBA contained various effective dates with certain provisions becoming effective in 2025 and others in 2026 and beyond. The Company has reflected the estimated impact of the OBBBA on current and deferred income taxes in its Consolidated Balance Sheets.
The corporate alternative minimum tax (“CAMT”) was enacted as part of the IRA. The CAMT imposes a minimum tax of 15% on the adjusted financial statement income (“AFSI”) of “applicable corporations” (i.e., those with average annual AFSI over a three-year period in excess of $1 billion). CAMT is effective for tax years beginning after December 31, 2022. The Company currently expects to be treated as an applicable corporation for the year ended December 31, 2025. However, the Company does not expect to incur any CAMT liability in 2025. Consequently, no additional tax provision has been recorded. The Company was not an applicable corporation subject to CAMT for the years ended December 31, 2024 and 2023.
The undistributed earnings of the Company’s foreign subsidiaries amounted to approximately $2,109.2 million as of December 31, 2025. Most of these earnings have been taxed in the U.S. under either the one-time transition tax or the GILTI tax regime imposed by the TCJA. Wesco has elected to pay the transition tax in installments over an eight-year period ending in 2026. As of December 31, 2025, the Company’s remaining liability for the transition tax was $13.7 million, which is recorded
as a component of other current liabilities in the Consolidated Balance Sheet. The Company continues to assert that the remaining undistributed earnings of its foreign subsidiaries are indefinitely reinvested. The distribution of earnings by Wesco’s foreign subsidiaries in the form of dividends, or otherwise, may be subject to additional taxation. The Company estimates that additional taxes of approximately $116.6 million would be payable upon the remittance of all previously undistributed foreign earnings as of December 31, 2025, based upon the laws in effect on that date. The Company believes that it is able to maintain sufficient liquidity for its domestic operations and commitments without repatriating cash from Wesco’s foreign subsidiaries.
The following table sets forth deferred tax assets and liabilities:
| As of December 31, | |||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||
| (In millions) | |||||||||||||||||||||||
| Assets | Liabilities | Assets | Liabilities | ||||||||||||||||||||
| Accounts receivable | $ | 23.6 | $ | — | $ | 22.4 | $ | — | |||||||||||||||
| Inventories | 53.0 | — | 50.7 | — | |||||||||||||||||||
| Depreciation of property, buildings and equipment | — | 12.9 | — | 20.9 | |||||||||||||||||||
| Operating leases | 252.2 | 241.0 | 210.1 | 200.3 | |||||||||||||||||||
| Amortization of intangible assets | — | 540.2 | — | 545.9 | |||||||||||||||||||
| Employee benefits | 31.5 | — | 27.8 | — | |||||||||||||||||||
| Stock-based compensation | 9.3 | — | 8.8 | — | |||||||||||||||||||
| Disallowed business interest expense | 3.7 | — | 4.8 | — | |||||||||||||||||||
Loss carryforwards | 41.4 | — | 35.6 | — | |||||||||||||||||||
| Foreign tax credit carryforwards | 29.9 | — | 41.0 | — | |||||||||||||||||||
| Other | 24.0 | 8.1 | 33.2 | 8.4 | |||||||||||||||||||
| Deferred income taxes before valuation allowance | 468.6 | 802.2 | 434.4 | 775.5 | |||||||||||||||||||
| Valuation allowance | (47.9) | — | (32.6) | — | |||||||||||||||||||
| Total deferred income taxes | $ | 420.7 | $ | 802.2 | $ | 401.8 | $ | 775.5 | |||||||||||||||
Wesco had deferred tax assets of $37.3 million and $31.7 million as of December 31, 2025 and 2024, respectively, related to foreign loss carryforwards. These loss carryforwards expire beginning in 2026 through 2043, while some may be carried forward indefinitely. The Company has determined that certain foreign loss carryforwards will not be realized before they expire. Accordingly, the Company has recorded a valuation allowance of $21.4 million and $19.5 million against deferred tax assets related to certain foreign loss carryforwards as of December 31, 2025 and 2024, respectively. Additionally, these foreign jurisdictions had deferred tax assets of $9.5 million and $6.6 million as of December 31, 2025 and 2024, respectively, related to other future deductible temporary differences. The Company has recorded a full valuation allowance against these amounts as of December 31, 2025 and 2024, respectively.
As of December 31, 2025 and 2024, Wesco had deferred tax assets of $4.1 million and $3.9 million, respectively, related to state net operating loss carryforwards. These net operating loss carryforwards expire beginning in 2026 through 2044, while some may be carried forward indefinitely. The Company has determined that certain state net operating loss carryforwards will not be realized. Accordingly, the Company has recorded a valuation allowance of $4.1 million and $0.9 million against deferred tax assets related to certain state net operating loss carryforwards as of December 31, 2025 and 2024, respectively.
As of December 31, 2025 and 2024, Wesco had deferred tax assets of $3.7 million and $4.8 million, respectively, in certain foreign and state jurisdictions related to disallowed business interest expense. The carryforward period for disallowed business interest expense is indefinite. The Company has determined that disallowed business interest expense carryforwards for certain jurisdictions will not be realized. Accordingly, the Company has recorded a valuation allowance of $2.0 million and $0.8 million against deferred tax assets related to disallowed business interest expense carryforwards in these jurisdictions as of December 31, 2025 and 2024, respectively.
As of December 31, 2025 and 2024, Wesco had deferred tax assets of $29.9 million and $41.0 million, respectively, related to foreign tax credit carryforwards. The foreign tax credit carryforwards expire beginning in 2026 through 2035. The Company has determined that certain foreign tax credit carryforwards will not be realized before they expire. Accordingly, the Company has recorded a valuation allowance of $11.0 million and $4.8 million against these deferred tax assets as of December 31, 2025 and 2024, respectively. Wesco’s ability to realize its deferred tax assets related to foreign tax credit carryforwards may be impacted by U.S. tax legislation, our ability to generate sufficient foreign source taxable income, and tax planning strategies
that the Company may implement. The impact of these items, if any, on Wesco’s assessment of the realizability of these deferred tax assets will be recorded as a discrete item in the period in which the Company’s assessment changes.
The Company is under examination by tax authorities in various jurisdictions and remains subject to examination until the applicable statutes of limitation expire. The statutes of limitation for the material jurisdictions in which the Company files income tax returns remain open as follows:
U.S. — federal | 2022 and forward | |||||||
U.S. — material states | 2021 and forward | |||||||
| Canada | 2012 and forward | |||||||
U.K. | 2020 and forward | |||||||
| Australia | 2018 and forward | |||||||
Ireland | 2021 and forward | |||||||
The following table sets forth the reconciliation of gross unrecognized tax benefits:
| As of December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In millions) | |||||||||||||||||
| Beginning balance January 1 | $ | 131.2 | $ | 121.3 | $ | 109.3 | |||||||||||
| Additions for current year tax positions | 25.3 | 20.5 | 29.2 | ||||||||||||||
| Additions for prior year tax positions | 4.3 | 9.1 | 6.6 | ||||||||||||||
| Additions for acquired tax positions | — | — | 0.9 | ||||||||||||||
| Reductions for prior year tax positions | (17.3) | (2.2) | (6.7) | ||||||||||||||
| Settlements | (0.3) | — | (2.5) | ||||||||||||||
| Lapse in statute of limitations | (8.3) | (13.0) | (15.8) | ||||||||||||||
| Foreign currency exchange rate changes | 3.2 | (4.5) | 0.3 | ||||||||||||||
| Ending balance December 31 | $ | 138.1 | $ | 131.2 | $ | 121.3 | |||||||||||
The amount of unrecognized tax benefits that would affect the effective tax rate if recognized in the consolidated financial statements for the years ended December 31, 2025, 2024 and 2023 were $25.9 million, $36.8 million, and $40.1 million, respectively.
The Company classifies interest related to unrecognized tax benefits as a component of interest expense, net in the Consolidated Statements of Income and Comprehensive Income. The Company recognized net interest expense on unrecognized tax benefits of $10.7 million for the year ended December 31, 2025. The Company recognized net interest income on unrecognized tax benefits of $1.6 million and $1.1 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2025 and 2024, Wesco had a liability of $23.1 million and $7.7 million, respectively, for interest expense related to unrecognized tax benefits. The Company classifies penalties related to unrecognized tax benefits as part of income tax expense. Penalties recorded in income tax expense for the years ended December 31, 2025, 2024 and 2023 were immaterial. As of December 31, 2025 and 2024, Wesco had a liability of $4.2 million and $3.7 million, respectively, for penalties related to unrecognized tax benefits.
In October 2021, one of the Company’s Mexican affiliates received a tax assessment from the Mexican tax authorities in the amount of approximately $26.0 million related to its 2012 income tax return. This amount, updated for adjustments required under Mexican law, was approximately $33.4 million as of December 31, 2025. The Company believes the assessment is without merit and has filed an annulment lawsuit in the Mexican Federal Court of Administrative Justice. The Company expects to prevail in this litigation and, accordingly, has not recognized a liability for this assessment in its consolidated financial statements.
In July 2022, one of the Company’s Canadian affiliates received tax assessments from the Canada Revenue Agency (“CRA”) totaling approximately $11.0 million, including tax and interest, related to its 2012 through 2014 income tax returns. The Company’s Canadian affiliate subsequently received a related penalty assessment of approximately $2.7 million in May 2023. The assessments totaled approximately $20.3 million in the aggregate, including additional interest updated through December 31, 2025. The Company believes these assessments are without merit and has appealed to the Tax Court of Canada. The Company expects to prevail in the courts and, therefore, has not recognized a liability for these assessments in its consolidated financial statements. The CRA continues to audit the 2015 through 2019 tax years of Wesco’s Canadian affiliates and the Company expects to eventually receive similar assessments for these tax years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 13, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 25, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Feb 24, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 22, 2017 | |
| 2015 | Feb 22, 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.