WEST PHARMACEUTICAL SERVICES INCWST
WEST PHARMACEUTICAL SERVICES INC Income Taxes Disclosure
Income Taxes
As a global organization, we and our subsidiaries file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. As of December 31, 2025, the statute of limitations for the U.S. federal tax years 2022 through 2025 remain open to examination. For U.S. state and local jurisdictions, tax years 2021 through 2025 are open to examination. We are also subject to examination in various foreign jurisdictions for tax years 2018 through 2025.
A reconciliation of the beginning and ending amount of the liability for unrecognized tax benefits is as follows:
| ($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at January 1 | $ | 43.6 | $ | 38.8 | $ | 36.5 | |||||||||||
| Increase due to current year position | 16.4 | 5.3 | 6.4 | ||||||||||||||
| Increase (decrease) due to prior year position | 0.5 | 0.7 | (1.0) | ||||||||||||||
| Reduction for expiration of statute of limitations/audits | (4.4) | (1.2) | (3.1) | ||||||||||||||
| Balance at December 31 | $ | 56.1 | $ | 43.6 | $ | 38.8 | |||||||||||
In addition, we had balances in accrued liabilities for interest and penalties of $8.9 million and $6.6 million at December 31, 2025 and 2024, respectively. As of December 31, 2025, we had $56.1 million of total gross unrecognized tax benefits, the entirety of which, if recognized, would favorably impact the effective income tax rate.
The components of income before income taxes and equity in net income of affiliated companies are:
| ($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| U.S. operations | $ | 228.3 | $ | 243.4 | $ | 369.4 | |||||||||||
| International operations | 372.6 | 342.1 | 328.6 | ||||||||||||||
| Total income before income taxes and equity in net income of affiliated companies | $ | 600.9 | $ | 585.5 | $ | 698.0 | |||||||||||
The related provision for income taxes consists of:
| ($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 44.3 | $ | 29.8 | $ | 30.2 | |||||||||||
| State | 8.0 | 2.1 | (4.2) | ||||||||||||||
| International | 83.0 | 79.1 | 58.8 | ||||||||||||||
| Current income tax provision | 135.3 | 111.0 | 84.8 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (14.2) | (16.6) | (11.8) | ||||||||||||||
| State | 0.2 | (1.7) | 0.2 | ||||||||||||||
| International | 0.3 | 14.8 | 49.1 | ||||||||||||||
| Deferred income tax provision | (13.7) | (3.5) | 37.5 | ||||||||||||||
| Income tax expense | $ | 121.6 | $ | 107.5 | $ | 122.3 | |||||||||||
Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes.
The significant components of our deferred tax assets and liabilities at December 31 are:
| ($ in millions) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Net operating loss carryforwards | $ | 3.2 | $ | 6.1 | |||||||
| Tax credit carryforwards | 7.6 | 2.1 | |||||||||
| Pension and deferred compensation | 43.9 | 28.9 | |||||||||
| Other | 17.0 | 17.9 | |||||||||
| Capitalized R&D expenses | 32.3 | 30.1 | |||||||||
| Leases | 26.3 | 21.5 | |||||||||
| Valuation allowance | (16.2) | (12.8) | |||||||||
| Total deferred tax assets | 114.1 | 93.8 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property, plant, and equipment | 64.7 | 60.9 | |||||||||
| Tax on undistributed earnings of subsidiaries | 2.3 | 0.4 | |||||||||
| Leases | 25.7 | 22.0 | |||||||||
| Other | 6.0 | 5.0 | |||||||||
| Total deferred tax liabilities | 98.7 | 88.3 | |||||||||
| Net deferred tax asset | $ | 15.4 | $ | 5.5 | |||||||
A reconciliation of the U.S. federal corporate tax rate to our effective consolidated tax rate on income before income taxes and equity in net income of affiliated companies is as follows:
| 2025 | |||||||||||
| Amount ($ in millions) | Rate (%) | ||||||||||
| US federal statutory income tax rate | $ | 126.2 | 21.0 | % | |||||||
State and local income tax, net of federal (national) effect(1) | 6.1 | 1.0 | |||||||||
| Foreign tax effects: | |||||||||||
| Germany: | |||||||||||
| Trade tax | 18.4 | 3.1 | |||||||||
| Other | (3.9) | (0.7) | |||||||||
| Ireland: | |||||||||||
| Effect of rates different than statutory | (8.8) | (1.5) | |||||||||
| Other | 3.8 | 0.7 | |||||||||
| Other foreign jurisdictions | 0.2 | — | |||||||||
| Effect of cross border taxes: | |||||||||||
| Foreign-derived intangible income | (15.2) | (2.5) | |||||||||
| Other | 9.5 | 1.6 | |||||||||
| Tax Credits: | |||||||||||
| Foreign tax credit | (27.9) | (4.6) | |||||||||
| Other | (2.9) | (0.5) | |||||||||
| Nontaxable and nondeductible items, net | 1.3 | 0.2 | |||||||||
| Changes in valuation allowances | 5.2 | 0.9 | |||||||||
| Other adjustments | (2.9) | (0.6) | |||||||||
| Changes in unrecognized tax benefits | 12.5 | 2.1 | |||||||||
| Effective tax rate | $ | 121.6 | 20.2 | % | |||||||
(1) State taxes in Arizona, Illinois, and Pennsylvania, contributed to the majority of the tax effect in this category.
| 2024 | 2023 | ||||||||||
| U.S. federal corporate tax rate | 21.0 | % | 21.0 | % | |||||||
| Tax on international operations other than U.S. tax rate | 1.5 | 1.2 | |||||||||
| Adjustments to reserves for unrecognized tax benefits | 0.8 | 0.3 | |||||||||
| U.S. tax on international earnings, net of foreign tax credits | 0.1 | 0.5 | |||||||||
| Foreign-Derived Intangible Income Deductions (FDII) | (1.2) | (1.6) | |||||||||
| State income taxes, net of federal tax effect | 0.3 | 0.1 | |||||||||
| U.S. research and development credits | (0.6) | (0.7) | |||||||||
| Excess tax benefits on share-based payments | (3.3) | (4.6) | |||||||||
| Royalty acceleration | — | 0.5 | |||||||||
| Tax on undistributed earnings of subsidiaries | (0.5) | 0.3 | |||||||||
| Other | 0.3 | 0.5 | |||||||||
| Effective tax rate | 18.4 | % | 17.5 | % | |||||||
During 2025, we recorded a tax benefit of $4.5 million associated with stock-based compensation.
During 2024, we recorded a tax benefit of $19.5 million associated with stock-based compensation. The Company recognized a $2.3 million tax benefit related to a reduction in the tax liability on the unremitted earnings of its Germany subsidiaries due to a law change in 2024.
During 2023, we recorded a tax benefit of $32.0 million associated with stock-based compensation. The Company recognized a $3.0 million state tax benefit based on the outcome of a recent court case. In addition, the Company recorded $2.8 million of tax expense due to a change in the permanent reinvestment assertion of its German subsidiaries.
On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the U.S. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The impact to the Company’s income tax expense and effective tax rate for the twelve months ended December 31, 2025 associated with this legislation is not material.
State operating loss carryforwards of $63.1 million created a deferred tax asset of $3.2 million. Management estimates that certain state operating loss carryforwards are unlikely to be utilized and the associated deferred tax assets have been appropriately reserved. State loss carryforwards expire as follows: $19.7 million in 2026 and $43.4 million thereafter.
During 2019, we utilized all of our remaining U.S. federal research and development credit carryforwards. State research and development credit carryforwards of $1.1 million created a deferred tax asset of $0.9 million which expire after 2026. As of December 31, 2025, we have $6.9 million of U.S. foreign tax credit carryforwards, which will begin to expire in 2035. Management estimates that the portion of the U.S. foreign tax credit carryforwards associated with the passive basket are unlikely to be utilized and have been appropriately reserved.
Since 2018, West has reasserted indefinite reinvestment related to all post-2017 unremitted earnings in all of our foreign subsidiaries. To support the funding of share repurchase programs, see Note 4, Net Income Per Share, West may continue to repatriate earnings from its German affiliates in the future and has recorded a tax liability of $2.3 million. Accordingly, West will continue to not assert permanent reinvestment related to all of the earnings of its wholly owned German affiliates through 2025. West will continue to assert permanent reinvestment of earnings for all other foreign jurisdictions and intends to only repatriate earnings when the tax impact is de minimis.
Accordingly, no deferred taxes have been provided for withholding taxes or other taxes that would result upon repatriation of approximately $780 million of undistributed earnings from foreign subsidiaries (except our German affiliates) to the U.S., as those earnings continue to be permanently reinvested. Further, it is impracticable for us to estimate any future tax costs for any unrecognized deferred tax liabilities associated with our indefinite reinvestment assertion, because the actual tax liability, if any, would be dependent on complex analysis and calculations considering various tax laws, exchange rates, circumstances existing when there is a repatriation, sale or liquidation, or other factors.
Total income taxes paid (net of refunds) consists of:
| ($ in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Federal | $ | 22.3 | |||||||||||||||
| State | (1.0) | ||||||||||||||||
| Foreign: | |||||||||||||||||
| France | 8.6 | ||||||||||||||||
| Germany - Federal | 24.5 | ||||||||||||||||
| Germany - Eschweiler | 21.8 | ||||||||||||||||
| Ireland | 15.8 | ||||||||||||||||
| Other foreign | 33.2 | ||||||||||||||||
| Total | $ | 125.2 | $ | 71.4 | $ | 90.8 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2017 | Feb 26, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 26, 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.