v3.25.4

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | NOTE 14. INCOME TAXES Earnings and Income Taxes Earnings before income taxes for the years ended December 31 were as follows:
($ in millions) | 2025 |  | 2024 |  | 2023
United States | $ | 451.7 |  |  | $ | 429.5 |  |  | $ | 482.8 |
Non-U.S. | 56.5 |  |  | 68.1 |  |  | 0.7 |
Total | $ | 508.2 |  |  | $ | 497.6 |  |  | $ | 483.5 |
The provision (benefit) for income taxes for the years ended December 31 were as follows:
($ in millions) | 2025 |  | 2024 |  | 2023
Current: |  |  |  |  |
Federal U.S. | $ | 57.7 |  |  | $ | 69.8 |  |  | $ | 109.3 |
Non-U.S. | 21.4 |  |  | 23.9 |  |  | 15.1 |
State and local | 18.4 |  |  | 15.8 |  |  | 21.9 |
Deferred: |  |  |  |  |
Federal U.S. | 7.9 |  |  | (24.9) |  |  | (25.3) |
Non-U.S. | (2.2) |  |  | (5.9) |  |  | (13.9) |
State and local | (1.1) |  |  | (3.3) |  |  | (0.5) |
Income tax provision | $ | 102.1 |  |  | $ | 75.4 |  |  | $ | 106.6 |
Deferred Tax Assets and Liabilities All deferred tax assets and liabilities have been classified as noncurrent and are included in Other assets and Other long-term liabilities in the accompanying Consolidated Balance Sheets, respectively. Deferred tax assets and liabilities as of December 31 were as follows:
($ in millions) | 2025 |  | 2024
Deferred tax assets: |  |  |
Allowance for credit losses | $ | 20.4 |  |  | $ | 21.5 |
Operating lease liabilities | 9.3 |  |  | 10.8 |
Inventories | 11.9 |  |  | 11.9 |
Pension benefits | 1.9 |  |  | 2.2 |
Other accruals and prepayments | 35.9 |  |  | 36.6 |
Deferred revenue | 15.6 |  |  | 15.4 |
Warranty services | 5.4 |  |  | 3.9 |
Stock-based compensation expense | 8.2 |  |  | 8.6 |
Tax credit and loss carryforwards | 75.4 |  |  | 64.7 |
Capitalized research and development | 49.5 |  |  | 68.9 |
Other | 8.5 |  |  | 4.7 |
Valuation allowances | (32.7) |  |  | (26.0) |
Total deferred tax assets | 209.3 |  |  | 223.2 |
Deferred tax liabilities: |  |  |
Property, plant and equipment | (0.5) |  |  | (1.4) |
Operating lease right-of-use assets | (8.2) |  |  | (9.7) |
Goodwill and other intangibles | (89.8) |  |  | (95.2) |
Other | (14.8) |  |  | (13.7) |
Total deferred tax liabilities | (113.3) |  |  | (120.0) |
Net deferred tax asset | $ | 96.0 |  |  | $ | 103.2 |
Applying the valuation allowance methodology discussed in Note 2. Basis of Presentation and Summary of Significant Accounting Policies, valuation allowances have been established for certain deferred income tax assets to the extent they are not expected to be realized within the particular tax carryforward period. The Company’s valuation allowance increased by $6.7 million during the current year. As of December 31, 2025, the Company has federal, various state, and foreign net operating losses in the amounts of $9.8 million, $79.7 million, and $248.4 million, respectively. These net operating loss carryforwards have various expiration periods beginning in 2026, including some with no expiration. Effective Tax Rate The effective tax rate for the years ended December 31 varies from the U.S. statutory federal tax rate as follows:
($ in millions) | 2025 |  | 2024 |  | 2023
Statutory federal income tax rate | $ | 106.7 |  |  | 21.0 | % |  | $ | 104.6 |  |  | 21.0 | % |  | $ | 101.5 |  |  | 21.0 | %
Increase (decrease) in tax rate resulting from: |  |  |  |  |  |  |  |  |  |  |
Domestic federal |  |  |  |  |  |  |  |  |  |  |
Effects of cross-border tax laws |  |  |  |  |  |  |  |  |  |  |
Subpart F Income | 5.7 |  |  | 1.1 | % |  | 6.1 |  |  | 1.2 | % |  | — |  |  | — | %
Foreign Derived Intangible Income | (10.6) |  |  | (2.1) | % |  | (7.4) |  |  | (1.5) | % |  | — |  |  | — | %
Foreign Branch Income | — |  |  | — | % |  | — |  |  | — | % |  | (5.8) |  |  | (1.2) | %
Other | (3.3) |  |  | (0.7) | % |  | (3.2) |  |  | (0.6) | % |  | — |  |  | — | %
Tax credits |  |  |  |  |  |  |  |  |  |  |
Research Credits | (5.5) |  |  | (1.1) | % |  | (7.5) |  |  | (1.5) | % |  | (8.5) |  |  | (1.8) | %
Other | (7.8) |  |  | (1.6) | % |  | (4.5) |  |  | (0.9) | % |  | (4.8) |  |  | (1.0) | %
Changes in valuation allowances | — |  |  | — | % |  | — |  |  | — | % |  | (2.4) |  |  | (0.5) | %
Nontaxable or non-deductible items | (2.1) |  |  | (0.4) | % |  | 0.6 |  |  | 0.1 | % |  | 0.1 |  |  | — | %
Business reorganizations and divestitures | 0.3 |  |  | 0.1 | % |  | (18.1) |  |  | (3.6) | % |  | (6.0) |  |  | (1.2) | %
Other | (1.1) |  |  | (0.2) | % |  | 1.5 |  |  | 0.3 | % |  | (3.0) |  |  | (0.6) | %
Domestic state and local income tax, net of federal effect(1) | 13.6 |  |  | 2.7 | % |  | 9.8 |  |  | 2.0 | % |  | 16.9 |  |  | 3.4 | %
Foreign tax effects |  |  |  |  |  |  |  |  |  |  |
Israel |  |  |  |  |  |  |  |  |  |  |
Changes in valuation allowances | 5.5 |  |  | 1.1 | % |  | — |  |  | — | % |  | — |  |  | — | %
Other | (0.6) |  |  | (0.1) | % |  | — |  |  | — | % |  | — |  |  | — | %
Other foreign jurisdictions | 3.8 |  |  | 0.8 | % |  | 0.4 |  |  | 0.1 | % |  | 2.8 |  |  | 0.6 | %
Worldwide changes in unrecognized tax benefits | (2.5) |  |  | (0.5) | % |  | (6.9) |  |  | (1.4) | % |  | 15.8 |  |  | 3.3 | %
Effective income tax rate | $ | 102.1 |  |  | 20.1 | % |  | $ | 75.4 |  |  | 15.2 | % |  | $ | 106.6 |  |  | 22.0 | %
(1)State taxes in California, Pennsylvania, Illinois, Wisconsin, Texas, Iowa, Minnesota, and Georgia made up the majority (greater than 50 percent) of the tax effect in this category. Our effective tax rate for the years ended December 31, 2025, 2024 and 2023 differs from the U.S. federal statutory rate of 21.0% due primarily to the effect of state taxes, non-U.S. income taxed at different rates that the U.S. federal statutory rate, foreign derived intangible income, and tax credits. For the year ended December 31, 2024, there were also favorable impacts related to business reorganizations and divestitures and uncertain tax positions. For the year ended December 31, 2023, there were also favorable impacts related to business reorganization and divestitures and unfavorable impacts related to uncertain tax positions. The following is a summary of the Company’s income tax payments made (refunds received) for the periods indicated:
($ in millions) | 2025 |  | 2024 |  | 2023
Federal U.S.(a) | $ | 82.1 |  |  | $ | 60.4 |  |  | $ | 91.7 |
Non-U.S. |  |  |  |  |
Germany | * |  | (5.0) |  |  | *
India | 5.4 |  |  | 4.9 |  |  | *
Italy | 8.5 |  |  | * |  | *
Other | 16.6 |  |  | 14.3 |  |  | 14.1 |
State and local | 13.2 |  |  | 18.9 |  |  | 20.2 |
Total cash paid, net of refunds received | $ | 125.8 |  |  | $ | 93.5 |  |  | $ | 126.0 |
* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.
(a) Includes $18.7 million paid to acquire investment tax credits during the year ended December 31, 2025.
Unrecognized Tax Benefits Gross unrecognized tax benefits were $13.5 million ($16.0 million total, including $3.0 million associated with interest and penalties, and net of the impact of $0.5 million of indirect tax benefits) and $19.9 million ($22.6 million total, including $3.4 million associated with interest and penalties, and net of the impact of $0.7 million of indirect tax benefits) as of December 31, 2025 and 2024, respectively. The Company recognized a benefit of $0.3 million, benefit of $1.7 million, and expense of $3.2 million in potential interest and penalties associated with uncertain tax positions during the years ended December 31, 2025, 2024, and 2023, respectively. To the extent taxes are not assessed with respect to uncertain tax positions, substantially all amounts accrued (including interest and penalties and net of indirect offsets) will be reduced and reflected as a reduction of the overall income tax provision. Unrecognized tax benefits and associated accrued interest and penalties are included in the income tax provision. A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding amounts accrued for potential interest and penalties, is as follows as of December 31:
($ in millions) | 2025 |  | 2024 |  | 2023
Unrecognized tax benefits, beginning of year | $ | 19.9 |  |  | $ | 27.0 |  |  | $ | 14.0 |
Additions based on tax positions related to the current year | 1.1 |  |  | 0.8 |  |  | 11.8 |
Additions for tax positions of prior years | — |  |  | 4.6 |  |  | 2.9 |
Reductions for tax positions of prior years | — |  |  | (5.3) |  |  | (0.5) |
Lapse of statute of limitations | (3.4) |  |  | (0.6) |  |  | (0.4) |
Settlements | (5.2) |  |  | (6.3) |  |  | (0.9) |
Effect of foreign currency translation | 1.1 |  |  | (0.3) |  |  | 0.1 |
Unrecognized tax benefits, end of year | $ | 13.5 |  |  | $ | 19.9 |  |  | $ | 27.0 |
The Company is routinely examined by various domestic and international taxing authorities. The amount of income taxes paid is subject to audit by federal, state and foreign tax authorities, which may result in proposed assessments. The Company is subject to examination in the United States, various states and foreign jurisdictions. Prior to the Separation, the Company’s operating results were included in Fortive’s various consolidated U.S. federal and certain state income tax returns, as well as certain non-U.S. returns. In connection with the Separation, the Company entered into a Tax Matters Agreement with Fortive. In accordance with the Tax Matters Agreement with Fortive, the Company is liable for taxes arising from examinations of the following: (i) the Company’s initial U.S. federal taxable year which includes the post-separation period; (ii) separate company state tax returns for all periods; (iii) joint state tax returns for the post-separation period; (iv) international separate company returns for all periods; and (v) joint international tax returns that include only Vontier legal entities for all periods. Global tax positions are reviewed on a quarterly basis. Based on these reviews, the results of discussions and resolutions of matters with certain tax authorities, tax rulings and court decisions and the expiration of statutes of limitations reserves for contingent tax liabilities are accrued or adjusted as necessary. The Company does not believe that the total amount of unrecognized tax benefits will change by a material amount within the next 12 months due to the settlement of audits and expirations of statutes of limitations. The Company remains subject to U.S. Federal income tax audit for the tax years 2022 to 2024. The Company is subject to tax audits for its state income tax returns for the tax years 2021 to 2024. Our operations in certain foreign jurisdictions remain subject to routine examinations for the tax years 2018 to 2024. One Big Beautiful Bill On July 4, 2025, the One Big Beautiful Bill (“OBBB”) was signed into law. The OBBB includes several changes to corporate taxation, notably modifications to capitalization of research and development expenses and accelerated depreciation of fixed assets. The Company has reflected the impact of the enacted changes in its financial statements for year ended December 31, 2025. The OBBB has reduced cash tax payments by $30.0 million during the year ended December 31, 2025 due to the accelerated deduction for previously capitalized research and development expense. The other provisions within the OBBB have not and are not expected to have a material impact. Repatriation and Unremitted Earnings As of December 31, 2025, the Company’s undistributed earnings of its foreign subsidiaries are intended to be permanently reinvested in non-U.S. operations. The operating plans, budgets and forecasts, and long-term and short-term financial requirements of the parent company and the subsidiaries indicate that there is no current or known future need to distribute cash from foreign subsidiaries for any purpose. Therefore, no deferred taxes have been recorded. A determination of the amount of the unrecognized deferred tax liability related to these undistributed earnings is not practicable due to the complexity and variety of assumptions necessary based on the manner in which the undistributed earnings would be repatriated.

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