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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes
11. Income Taxes
Income Tax Provision (Benefit)
U.S. and foreign income before income taxes consist of the following (in millions):
Year Ended December 31,
202420232022
United States$(20.5)$(34.8)$(90.3)
Foreign116.1 101.5 235.4 
Income (loss) before income taxes$95.5 $66.7 $145.1 
Our total income tax provision (benefit) related to income before income taxes consists of the following components (in millions):
Year Ended December 31,
202420232022
Current:
U.S. federal statutory tax$8.4 $8.9 $4.2 
State1.8 2.4 2.2 
Foreign40.1 23.4 42.9 
Current income tax expense (benefit)50.2 34.8 49.2 
Deferred:
U.S. federal statutory tax(3.3)(12.7)(4.6)
State(1.3)(1.1)0.6 
Foreign(10.6)(16.9)(14.5)
Deferred income tax expense (benefit)(15.3)(30.7)(18.5)
Non-current tax expense (income) (1)
(7.4)8.9 (1.5)
Total provision for income taxes$27.6 $13.0 $29.2 
(1)Non-current tax expense (income) is primarily related to income tax associated with the reserve for uncertain tax positions, including associated interest and penalties.
Income Tax Rate Reconciliation
A reconciliation of the tax provision calculated using the U.S. federal statutory income tax rate to our tax provision is as follows (in millions):
Year Ended December 31,
202420232022
Tax provision based on U.S. federal statutory tax rate$20.1 $14.0 $30.5 
Foreign rates varying from federal statutory tax rate(0.2)(1.5)(5.4)
State income taxes, net of U.S. federal income tax benefit2.2 7.5 0.7 
U.S. taxes on foreign earnings and other tax reform impacts10.3 9.4 29.7 
Uncertain tax positions(7.4)8.9 (1.5)
Statutory adjustments, including foreign currency and tax rate changes4.9 (9.2)(3.8)
Non-taxable interest income & non-deductible interest expense0.5 (3.3)2.1 
Valuation allowances4.0 (10.9)(13.3)
Non-deductible officer compensation1.2 1.8 1.0 
Withholding tax
10.0 8.0 7.8 
Foreign tax credit(18.6)(13.2)(25.0)
Sale of Avinode business
12.4 — — 
Sale of Brazil business
(6.0)— — 
Worthless stock deduction
(6.2)— — 
Other
0.6 1.5 6.6 
Total provision for income taxes$27.6 $13.0 $29.2 
For the year ended December 31, 2024, our income tax provision was $27.6 million and our effective income tax rate was 28.9%. Our income tax provision for the year ended December 31, 2024 includes a net discrete income tax expense of $3.2 million, of which a net tax expense of $12.4 million relates to the tax on gain from the Avinode sale and a net tax expense of $3.0 million relates to worldwide return-to-provision adjustments, partially offset by a net tax benefit of $8.4 million related to remeasurement of uncertain tax positions as well as a net tax benefit of $4.4 million related to the tax loss from the Brazil sale.
For the year ended December 31, 2023, our income tax provision was $13.0 million and our effective income tax rate was 19.5%. Our income tax provision for the year ended December 31, 2023 included a net discrete income tax benefit of $5.4 million, of which a benefit of $7.5 million related to the reversal of valuation allowances previously recorded against the deferred tax assets of certain foreign subsidiaries and states and a benefit of $4.8 million related to return-to-provision adjustments, partially offset by a net expense of $6.9 million related to the remeasurement of uncertain tax positions and other worldwide tax adjustments.
We have analyzed our global working capital and cash requirements and the potential tax liabilities attributable to repatriation and have determined that we intend to continue our assertion that the earnings of certain of our non-U.S. subsidiaries are indefinitely reinvested. At December 31, 2024, $1.1 billion of our foreign earnings were permanently reinvested in non-US business operations. For these investments, if not reinvested indefinitely, we could potentially owe approximately $234.2 million in foreign withholding tax. We also have $817.9 million of accumulated foreign earnings that are actually or deemed repatriated, for which we have estimated the associated foreign withholding and state income tax effects to be $10.1 million for the year ended December 31, 2024.
Deferred Tax Assets and Liabilities
The temporary differences which comprise our net deferred tax liabilities are as follows (in millions):
As of December 31,
20242023
Gross Deferred Tax Assets:
Bad debt reserve and accrued expenses$10.1 $15.8 
Net operating loss62.5 69.1 
Accrued and other share-based compensation22.7 26.0 
U.S. foreign income tax credits29.3 15.8 
Interest expense limitations75.2 45.8 
Other9.0 7.1 
Total gross deferred tax assets208.9 179.6 
Less: Valuation allowance (1)
16.8 15.2 
Gross deferred tax assets, net of valuation allowance192.0 164.5 
Gross Deferred Tax Liabilities:  
Depreciation(33.6)(32.2)
Goodwill and intangible assets(108.1)(84.4)
Unrealized foreign exchange, derivatives, and cash flow hedges(1.8)(6.7)
Deferred tax costs on foreign unrepatriated earnings(10.1)(12.0)
Other(5.2)(4.9)
Total gross deferred tax liabilities(158.8)(140.3)
Net deferred tax liability$— $— 
Net deferred tax asset$33.2 $24.2 
Reported on the Consolidated Balance Sheets as:  
Other non-current assets for deferred tax assets, non-current$78.8 $83.4 
Other long-term liabilities, net for deferred tax liabilities, non-current$45.6 $59.2 
(1)During the year ended December 31, 2024, we recognized additional valuation allowances of $4.0 million relating primarily to the establishment of a valuation allowance on foreign branch tax credits and the 2024 results of certain of our worldwide entities. We also released valuation allowances totaling $2.3 million primarily as a result of divesting our Brazil entities.
As of December 31, 2024 and 2023, we had gross net operating losses ("NOLs") of approximately $417.6 million and $451.2 million, respectively. The NOLs as of December 31, 2024 originated in various U.S. states and non-U.S. countries. We have recorded a deferred tax asset of $62.5 million reflecting the benefit of the NOL carryforward as of December 31, 2024. This deferred tax asset expires as follows (in millions):
Net Operating LossExpiration DateDeferred Tax Asset
US States2026-2044$9.3 
US StatesIndefinite5.3 
Foreign2025-20448.7 
ForeignIndefinite39.3 
Total$62.5 
We assessed the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. On the basis of this evaluation, as of December 31, 2024, a valuation allowance of $16.8 million exists on the deferred tax assets that are not expected to be realized, $7.3 million of which relates to the deferred tax asset for NOLs. The amount of the deferred tax asset considered realizable could be adjusted if estimates of future taxable income during the carryforward period change or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as growth projections.
Singapore Tax Concession
We have operated under a special income tax concession in Singapore since 2008, which is subject to renewal. Our current five-year income tax concession period began January 1, 2023. It remains conditional upon our meeting certain employment and investment thresholds which, if not met in accordance with our agreement, may eliminate the benefit beginning with the first year in which the conditions are not satisfied. The income tax concession reduces the income tax rate on qualified sales and derivative gains and losses.
The decrease to our foreign income taxes from the Singapore tax concession was as follows (in millions, except per share amounts):
Year Ended December 31,
202420232022
Singapore tax concession impact on foreign income tax$(2.5)$(2.1)$(3.3)
Impact on basic earnings per share$(0.04)$(0.03)$(0.05)
Impact on diluted earnings per share$(0.04)$(0.03)$(0.05)
Income Tax Contingencies
We record gross assets and liabilities for unrecognized income tax benefits ("Unrecognized Tax Assets" and "Unrecognized Tax Liabilities", respectively) in our Consolidated Balance Sheets.
During the year ended December 31, 2024, we recorded a net decrease of Unrecognized Tax Liabilities of $11.2 million and a net decrease to Unrecognized Tax Assets of $3.8 million. In addition, during the year ended December 31, 2024, we recorded a decrease of $3.7 million to our Unrecognized Tax Liabilities related to a foreign currency translation loss, which is included in Other income (expense), net in the accompanying Consolidated Statements of Income and Comprehensive Income. As of December 31, 2024, our Unrecognized Tax Liabilities, including penalties and interest, were $90.8 million and our Unrecognized Tax Assets were $17.2 million.
During the year ended December 31, 2023, we recorded a net increase of Unrecognized Tax Liabilities of $5.0 million and a net increase to Unrecognized Tax Assets of $2.8 million. In addition, during the year ended December 31, 2023, we recorded an increase of $1.9 million to our Unrecognized Tax Liabilities related to a foreign currency translation loss, which is included in Other income (expense), net in the accompanying Consolidated Statements of Income and Comprehensive Income. As of December 31, 2023, our Unrecognized Tax Liabilities, including penalties and interest, were $106.4 million and our Unrecognized Tax Assets were $21.1 million.
The following is a tabular reconciliation of the total amounts of gross Unrecognized Tax Liabilities for the year (in millions):
 202420232022
Gross Unrecognized Tax Liabilities – opening balance$73.1 $68.1 $75.1 
Gross increases – tax positions in prior period1.5 7.7 2.2 
Gross decreases – tax positions in prior period(8.8)(0.4)(8.0)
Gross increases – tax positions in current period2.2 1.4 2.0 
Settlements(3.0)(0.5)(1.6)
Payments— — 1.6 
Lapse of statute of limitations(3.1)(3.2)(3.3)
Gross Unrecognized Tax Liabilities – ending balance$61.8 $73.1 $68.1 
If our gross Unrecognized Tax Liabilities, net of our Unrecognized Tax Assets of $17.2 million, as of December 31, 2024, are settled by the taxing authorities in our favor or otherwise resolved, our income tax expense would be reduced by $44.6 million (exclusive of interest and penalties) in the period the matter is considered settled or resolved in accordance with ASC 740. This would have the impact of reducing our 2024 effective income tax rate by 46.7%. As of December 31, 2024, it is reasonably possible that approximately $6.4 million of our unrecognized income tax liabilities may decrease within the next twelve months primarily due to the expiration of statutes of limitations and resolution of various tax matters.
We record accrued interest and penalties related to unrecognized income tax benefits as income tax expense. Related to the uncertain income tax benefits noted above, for interest we recorded income of $1.3 million, expense of $5.1 million and expense of $2.0 million during the years ended December 31, 2024, 2023, and 2022,
respectively. For penalties, we recorded income of $3.1 million, expense of $2.8 million, and expense of $0.3 million during the years ended December 31, 2024, 2023, and 2022, respectively. As of December 31, 2024 and 2023, we had recognized liabilities of $24.5 million and $25.9 million for interest and $4.4 million and $7.5 million for penalties, respectively.
We have various tax returns under examination both in the U.S. and foreign jurisdictions. The most material of these is in Denmark, where one of our subsidiaries has been under audit since 2018. Through December 31, 2024, we have received final tax assessments for the 2013 and 2014 tax years that were immaterial, and proposed tax assessments for the 2015 through 2021 tax years of approximately $132.1 million (DKK 951.5 million), excluding interest, which could be material. We believe we have substantial defenses to these assessments and expect to continue to pursue available administrative and judicial remedies to resolve this matter.
During the year ended December 31, 2022, we agreed to a settlement for the 2011 to 2014 tax years of the Korean branch of one of our subsidiaries for approximately $1.6 million (KRW 2.0 billion), including tax, interest, and penalties. The income tax examination for these years is now closed.
An unfavorable resolution of one or more of the above matters could have a material adverse effect on our operating results or cash flows in the quarter or year in which the adjustments are recorded, or the tax is due or paid. As examinations are still in process or have not yet reached the final stages of the appeals process, the timing of the ultimate resolution or payments that may be required cannot be determined at this time.
In many cases, our uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. The following table summarizes open tax years by major jurisdiction:
Open Tax Year
JurisdictionExamination
in progress		Examination not
yet initiated
Denmark2013-20212020-2024
United StatesNone2020-2024
United KingdomNone2020-2024
SingaporeNone2021-2024
Other non-U.S.None2014-2024
On October 4, 2021, 136 members of the Organisation for Economic Co-operation and Development ("OECD") agreed to a global minimum tax rate of 15%. On December 20, 2021, OECD published its model rules on the agreed minimum tax known as the Global Anti-Base Erosion ("GloBE") rules. The GloBE rules provide a framework for a coordinated multi-country system of taxation intended to ensure large multinational enterprise groups pay a minimum level of tax on the income arising in each of the jurisdictions where they operate. On December 14, 2022, the European Council approved its directive to implement Pillar Two of the GloBE rules regarding a 15% global minimum tax rate. Many G20 nations have also indicated their plan to follow the OECD guidance as early as January 1, 2024. Pillar Two legislation has been enacted or substantively enacted in several jurisdictions in which the Company operates. The legislation is effective for the Company’s financial year beginning January 1, 2024.
The Company has completed its assessment and identified potential exposure to Pillar Two income taxes on profits earned in jurisdictions where the effective tax rate is lower than 15%. The estimated Pillar Two taxes do not have a material impact on the estimated annual effective tax rate for 2024 or the income tax provision for the year ended December 31, 2024.