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Income Taxes | 9 Months Ended
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Sep. 30, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes We determine the interim tax benefit (provision) by applying an estimate of the annual effective tax rate to the year-to-date pretax book income (loss) and adjusting for discrete items during the reporting period, if any. Tax jurisdictions with losses for which tax benefits cannot be realized, as well as significant unusual or infrequently occurring items that are separately reported, are excluded from the annual effective tax rate. Our tax rate for the three and nine months ended September 30, 2025 of 27% and 22%, respectively, differed from the federal statutory rate of 21% due to the impact of valuation allowances on deferred tax assets, the forecasted mix of earnings in domestic and international jurisdictions, the effect of cross-border tax laws, nondeductible executive compensation, a benefit related to stock-based compensation, tax credits, state taxes, and uncertain tax positions. Our tax rate for the three and nine months ended September 30, 2024 of 4% and 15%, respectively, differed from the federal statutory rate of 21% due to the impact of valuation allowances on deferred tax assets, the forecasted mix of earnings in domestic and international jurisdictions, U.S. taxation of foreign earnings including GILTI (Global Intangible Low-Taxed Income) tax, net of Section 250 deduction (largely driven by research and development capitalization), Subpart F income, a benefit related to stock-based compensation, tax credits, state taxes, and uncertain tax positions. Approximately $14 million in discrete tax benefits were recorded related to the favorable resolution of a foreign tax audit in the three months ended September 30, 2024. A sweeping legislative package formally titled "An act to provide for reconciliation pursuant to title II of H. Con. Res. 14" (the "Act"), and commonly referred to as the One Big Beautiful Bill Act, was signed into law on July 4, 2025. Since ASC 740 requires the income tax effects of a change in tax law to be recognized in the period of enactment, this Act is incorporated into our annual effective tax rate and current and expected cash taxes as of September 30, 2025. Included in our effective tax rate this quarter is an increase of approximately $4 million in full year tax expense, and a reduction in forecasted cash taxes of approximately $45 million from amounts calculated before passage of the Act. These results are driven by numerous changes to existing tax law that are retroactive to 2025, including provisions for the current deductibility of certain property additions and deductibility of current and previously capitalized domestic research and development costs. Additionally, multiple changes are effective beginning in 2026 and we are continuing to evaluate the impacts they will have on our subsequent consolidated financial statements and related disclosures. The Organization for Economic Cooperation and Development (OECD) guidance under the Base Erosion and Profit Shifting (BEPS) initiative aims to minimize perceived tax abuses and modernize global tax policy, including the implementation of a global minimum effective tax rate of 15%. In December 2022, the Council of the European Union adopted OECD Pillar 2 for implementation by European Union member states by December 31, 2023. The resulting legislation in most countries where Itron has significant operations took effect for calendar year 2024. The OECD continues to release more guidance on these rules and framework and we are evaluating the impact to our financial position. These enactments or amendments could adversely affect our tax rate and ultimately result in a negative impact on our operating results and cash flows. Consistent with calculations for calendar year 2024, the Company anticipates it will meet the safe harbors in most jurisdictions in 2025, and any remaining top-up tax should be immaterial. We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. The net interest and penalties expense recognized were as follows:
| Three Months Ended September 30, |  | Nine Months Ended September 30,
In thousands | 2025 |  | 2024 |  | 2025 |  | 2024
Net interest and penalties expense | $ | 1,498 |  |  | $ | (5,508) |  |  | $ | 3,548 |  |  | $ | (4,020) |
Accrued interest and penalties recognized were as follows:
In thousands | September 30, 2025 |  | December 31, 2024
Accrued interest | $ | 10,166 |  |  | $ | 6,418 |
Accrued penalties | 190 |  |  | 293 |
Unrecognized tax benefits related to uncertain tax positions and the amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate were as follows:
In thousands | September 30, 2025 |  | December 31, 2024
Unrecognized tax benefits related to uncertain tax positions | $ | 98,584 |  |  | $ | 106,132 |
The amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate | 98,572 |  |  | 106,122 |
Subsequent to quarter end, the statute of limitations expired on an uncertain tax position related to certain corporate transactions. As a result, we will recognize a tax benefit of approximately $39 million in the fourth quarter. At September 30, 2025, we are under examination by certain tax authorities. We believe we have appropriately accrued for the expected outcome of all tax matters and do not currently anticipate that the ultimate resolution of these examinations will have a material adverse effect on our financial condition, future results of operations, or cash flows. We file income tax returns in various jurisdictions. The material jurisdictions where we are subject to examination include, among others, the United States, France, Germany, India, Italy, Indonesia, and the United Kingdom.

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