Western Union CO Income Taxes Disclosure
10. Income Taxes
The components of pre-tax income, generally based on the jurisdiction of the legal entity, were as follows (in millions):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Domestic |
|
$ |
(134.7 |
) |
|
$ |
(75.7 |
) |
|
$ |
(40.0 |
) |
Foreign |
|
|
760.4 |
|
|
|
694.3 |
|
|
|
785.8 |
|
Total pre-tax income |
|
$ |
625.7 |
|
|
$ |
618.6 |
|
|
$ |
745.8 |
|
For the years ended December 31, 2025, 2024, and 2023, 122%, 112%, and 105% of the Company’s pre-tax income was derived from foreign sources, respectively.
For the year ended December 31, 2025, the Company’s effective tax rates differed from statutory rates as follows (in millions):
|
|
Year Ended December 31, |
|
|||||
|
|
2025 |
|
|||||
Federal statutory rate |
|
$ |
131.4 |
|
|
|
21.0 |
% |
State and local income taxes, net of federal income tax benefits(a) |
|
|
0.8 |
|
|
|
0.1 |
% |
Foreign tax effects |
|
|
|
|
|
|
||
Malta |
|
|
|
|
|
|
||
Tax rate differential |
|
|
18.3 |
|
|
|
2.9 |
% |
Notional interest deduction |
|
|
(23.3 |
) |
|
|
(3.7 |
)% |
Other |
|
|
(0.3 |
) |
|
|
(0.1 |
)% |
United Arab Emirates |
|
|
|
|
|
|
||
Tax rate differential |
|
|
(49.2 |
) |
|
|
(7.9 |
)% |
Minimum tax |
|
|
9.9 |
|
|
|
1.6 |
% |
Other |
|
|
3.9 |
|
|
|
0.6 |
% |
Other foreign jurisdictions |
|
|
9.2 |
|
|
|
1.5 |
% |
Effect of cross-border tax laws |
|
|
|
|
|
|
||
Global intangible low-taxed income, net of credits |
|
|
5.6 |
|
|
|
0.9 |
% |
Subpart F income, net of credits |
|
|
8.8 |
|
|
|
1.4 |
% |
Changes in valuation allowances |
|
|
2.0 |
|
|
|
0.3 |
% |
Nontaxable and nondeductible items |
|
|
|
|
|
|
||
Stock-based compensation awards |
|
|
6.6 |
|
|
|
1.1 |
% |
Other |
|
|
0.9 |
|
|
|
0.2 |
% |
Changes in unrecognized tax benefits |
|
|
5.5 |
|
|
|
0.9 |
% |
Other adjustments |
|
|
(4.0 |
) |
|
|
(0.6 |
)% |
Effective tax rate |
|
$ |
126.1 |
|
|
|
20.2 |
% |
For the years ended December 31, 2024, and 2023, the Company’s effective tax rates differed from statutory rates as follows (in millions):
|
|
Year Ended December 31, |
|
|||||
|
|
2024 |
|
|
2023 |
|
||
Federal statutory rate |
|
|
21.0 |
% |
|
|
21.0 |
% |
State income taxes, net of federal income tax benefits |
|
|
(0.1 |
)% |
|
|
0.3 |
% |
Foreign rate differential, net of United States tax paid on foreign earnings (6.9% and 3.0%, respectively) |
|
|
(7.2 |
)% |
|
|
(8.5 |
)% |
Divestitures |
|
|
— |
% |
|
|
0.5 |
% |
Lapse of statute of limitations |
|
|
(0.7 |
)% |
|
|
(0.8 |
)% |
Valuation allowances |
|
|
0.4 |
% |
|
|
0.7 |
% |
Uncertain tax positions |
|
|
(0.2 |
)% |
|
|
2.3 |
% |
IRS settlement |
|
|
(22.3 |
)% |
|
|
— |
% |
International reorganization |
|
|
(40.2 |
)% |
|
|
— |
% |
Other |
|
|
(1.7 |
)% |
|
|
0.6 |
% |
Effective tax rate |
|
|
(51.0 |
)% |
|
|
16.1 |
% |
The change in the Company’s effective tax rate for the year ended December 31, 2025 compared to the prior year was primarily due to the recognition of deferred tax assets, net of valuation allowance, associated with the reorganization of the Company's international operations and a settlement of the IRS examination of the Company's federal income tax returns, which resulted in tax benefits of $255.2 million and $137.8 million, respectively. Both of these items occurred and were recognized in the year ended December 31, 2024, and the change in the Company’s effective tax rate for the year ended December 31, 2024 compared to the year ended December 31, 2023 was also primarily due to these items.
In addition to the items included in the reconciliation of the Company’s comparable effective tax rate, in the fourth quarter of 2023, the Company concluded steps to eliminate certain intercompany financing subsidiaries. The steps resulted in cancellation of certain intercompany debts which were offset by utilization of net operating losses that prior to the fourth quarter of 2023 were determined to have a remote possibility of realization, subject to full valuation allowance. There was no net tax effect of these steps.
The Company’s provision for/(benefit from) income taxes consisted of the following components (in millions):
|
|
Year Ended December 31, |
|
|||||||||
|
|
2025 |
|
|
2024 |
|
|
2023 |
|
|||
Current: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
$ |
16.9 |
|
|
$ |
(111.1 |
) |
|
$ |
30.6 |
|
State and local |
|
|
4.4 |
|
|
|
(3.8 |
) |
|
|
2.7 |
|
Foreign |
|
|
69.9 |
|
|
|
48.1 |
|
|
|
97.5 |
|
Total current taxes |
|
|
91.2 |
|
|
|
(66.8 |
) |
|
|
130.8 |
|
Deferred: |
|
|
|
|
|
|
|
|
|
|||
Federal |
|
|
(9.1 |
) |
|
|
10.8 |
|
|
|
(12.1 |
) |
State and local |
|
|
(1.0 |
) |
|
|
(0.9 |
) |
|
|
(0.7 |
) |
Foreign |
|
|
45.0 |
|
|
|
(258.7 |
) |
|
|
1.8 |
|
Total deferred taxes |
|
|
34.9 |
|
|
|
(248.8 |
) |
|
|
(11.0 |
) |
|
|
$ |
126.1 |
|
|
$ |
(315.6 |
) |
|
$ |
119.8 |
|
For the year ended December 31, 2025, the components of income taxes paid was as follows (in millions):
|
|
December 31, 2025 |
|
|
U.S. federal |
|
$ |
238.2 |
|
U.S. state and local(a) |
|
|
1.7 |
|
Foreign(a) |
|
|
55.8 |
|
Income taxes paid, net of amounts refunded |
|
$ |
295.7 |
|
Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the book and tax bases of the Company’s assets and liabilities. The following table outlines the principal components of deferred tax items (in millions):
|
|
December 31, |
|
|||||
|
|
2025 |
|
|
2024 |
|
||
Deferred tax assets related to: |
|
|
|
|
|
|
||
Reserves, accrued expenses and employee-related items |
|
$ |
20.1 |
|
|
$ |
16.6 |
|
Lease liabilities |
|
|
16.5 |
|
|
|
19.2 |
|
Tax attribute carryovers |
|
|
45.7 |
|
|
|
67.7 |
|
Intangibles, property and equipment |
|
|
270.5 |
|
|
|
297.3 |
|
Deferred benefits of uncertain tax positions |
|
|
7.2 |
|
|
|
6.8 |
|
Securities and investments |
|
|
2.3 |
|
|
|
6.4 |
|
Other |
|
|
4.5 |
|
|
|
3.2 |
|
Valuation allowance |
|
|
(93.3 |
) |
|
|
(90.3 |
) |
Total deferred tax assets |
|
|
273.5 |
|
|
|
326.9 |
|
Deferred tax liabilities related to: |
|
|
|
|
|
|
||
Intangibles, property and equipment |
|
|
190.0 |
|
|
|
205.1 |
|
Lease right-of-use assets |
|
|
10.5 |
|
|
|
12.4 |
|
Total deferred tax liabilities |
|
|
200.5 |
|
|
|
217.5 |
|
Net deferred tax asset/(liability)(a) |
|
$ |
73.0 |
|
|
$ |
109.4 |
|
Deferred tax assets for tax attribute carryovers and valuation allowance included in the above table exclude the impact of tax attribute carryovers determined to have a remote possibility of realization.
The valuation allowances are primarily the result of uncertainties regarding the Company’s ability to recognize tax benefits associated with certain United States foreign tax credit carryforwards, certain foreign and state net operating losses, and certain foreign deferred tax assets related to indefinite-lived intangibles. Changes in circumstances, or the identification and implementation of relevant tax planning strategies, could make it foreseeable that the Company will recover these deferred tax assets in the future, which could lead to a reversal of these valuation allowances and a reduction in income tax expense.
The Company has outside book-tax basis differences that primarily relate to undistributed foreign earnings not already subject to United States federal, state, or non-United States income taxation. Such undistributed earnings continue to be indefinitely reinvested in foreign operations. Upon future realization of the Company’s book-tax basis differences, the Company could be subject to United States federal income taxes, state taxes, and possible withholding taxes payable to various foreign countries. However, determination of this amount of unrecognized deferred tax liability is not practicable because of complexities associated with its hypothetical calculation.
Tax reform legislation enacted into United States law in 2017 (“the Tax Act”) imposed a domestic one-time tax on the Company’s previously undistributed earnings of foreign subsidiaries, with certain exceptions. This tax charge, combined with the Company’s other 2017 United States taxable income and tax attributes, resulted in a 2017 United States federal tax liability of approximately $800 million. The Company elected to pay this liability in periodic installments with the final installment payment occurring in the second quarter of 2025. For the years ended December 31, 2025, 2024, and 2023, the Company made installment payments of $218.7 million, $159.3 million, and $119.5 million, respectively.
On July 4, 2025, the United States government enacted into law the One Big Beautiful Bill Act (the “OBBB”). The OBBB includes a broad range of tax reform provisions affecting businesses, and while the Company continues to evaluate
the provisions of the OBBB as they become effective, the income tax provisions of the OBBB did not have a material impact on its current financial position or results of operations.
Uncertain Tax Positions
The Company has established contingency reserves for a variety of tax exposures. As of December 31, 2025, the total amount of tax contingency reserves was $21.0 million, including accrued interest and penalties, net of related items. The Company’s tax reserves reflect management’s judgment as to the resolution of the issues involved if subject to judicial review or other settlement. While the Company believes its reserves are adequate to cover reasonably expected tax risks, there can be no assurance that, in all instances, an issue raised by a tax authority will be resolved at a financial cost that does not exceed its related reserve. With respect to these reserves, the Company’s income tax expense would include: (i) any changes in tax reserves arising from material changes in facts and circumstances (i.e., new information) surrounding a tax issue during the period and (ii) any difference from the Company’s tax position as recorded in the financial statements and the final resolution of a tax issue during the period. Such resolution could materially increase or decrease income tax expense in the Company’s consolidated financial statements in future periods and could impact operating cash flows.
Unrecognized tax benefits represent the aggregate tax effect of differences between tax return positions and the amounts otherwise recognized in the Company’s consolidated financial statements and are reflected in Income taxes payable in the Consolidated Balance Sheets. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest and penalties and before offset of related items, is as follows (in millions):
|
|
2025 |
|
|
2024 |
|
||
Balance as of January 1 |
|
$ |
55.6 |
|
|
$ |
269.4 |
|
Increase related to current period tax positions(a) |
|
|
2.9 |
|
|
|
1.0 |
|
Increase related to prior period tax positions |
|
|
5.9 |
|
|
|
0.8 |
|
Decrease related to prior period tax positions |
|
|
— |
|
|
|
— |
|
Decrease due to settlements with taxing authorities |
|
|
(10.6 |
) |
|
|
(213.1 |
) |
Decrease due to lapse of applicable statute of limitations |
|
|
(1.1 |
) |
|
|
(2.4 |
) |
Decrease due to effects of foreign currency exchange rates |
|
|
(0.1 |
) |
|
|
(0.1 |
) |
Balance as of December 31 |
|
$ |
52.6 |
|
|
$ |
55.6 |
|
The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate was $47.7 million and $45.1 million as of December 31, 2025 and 2024, respectively, excluding interest and penalties.
The Company recognizes interest and penalties with respect to unrecognized tax benefits in Provision for/(benefit from) income taxes in its Consolidated Statements of Income and records the associated liability in Income taxes payable in its Consolidated Balance Sheets. The Company recognized $(5.5) million, $(15.3) million, and $14.7 million in interest and penalties during the years ended December 31, 2025, 2024, and 2023, respectively. The Company has accrued $11.0 million and $16.6 million for the payment of interest and penalties as of December 31, 2025 and 2024, respectively. The unrecognized tax benefits accrual as of December 31, 2025 consists of federal, state, and foreign tax matters.
The Company and its subsidiaries file tax returns for the United States, for multiple states and localities, and for various non-United States jurisdictions, with these filings subject to examination by the respective authorities.
The conclusion of the examination of the Company's consolidated federal income tax returns for and 2018 resulted in both agreed and unagreed adjustments. The agreed adjustments have been reflected in the Company's financial statements, and the Company settled certain of the unagreed adjustments during the third quarter of 2024, which resulted in a tax benefit of $137.8 million for the year ended December 31, 2024. The Company is contesting the one remaining
unagreed adjustment at the IRS Appeals level and has fully reserved for this unagreed adjustment. The Company's U.S. federal income tax returns since 2022 are also eligible to be examined.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 22, 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.