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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes

13. Income Taxes

 

The components of Loss from continuing operations before income taxes consisted of the following (in thousands):

 

 

 

For the Years Ended December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

U.S. operations

 

$

(55,498

)

 

$

(60,674

)

 

$

(96,110

)

Foreign operations

 

 

31,905

 

 

 

9,827

 

 

 

41,610

 

Total

 

$

(23,593

)

 

$

(50,847

)

 

$

(54,500

)

 

The provision (benefit) for income taxes and the income taxes paid consisted of the following (in thousands):

 

 

 

For the Years Ended December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

Current:

 

 

 

 

 

 

 

 

 

Federal

 

$

766

 

 

$

1,616

 

 

$

(2,556

)

State

 

 

945

 

 

 

(875

)

 

 

483

 

Foreign

 

 

10,381

 

 

 

5,875

 

 

 

16,407

 

Total current taxes

 

 

12,092

 

 

 

6,616

 

 

 

14,334

 

Deferred:

 

 

 

 

 

 

 

 

 

Federal

 

 

—

 

 

 

—

 

 

 

(11,464

)

State

 

 

—

 

 

 

—

 

 

 

(5,127

)

Foreign

 

 

(1,855

)

 

 

(1,414

)

 

 

(5,339

)

Total deferred taxes

 

 

(1,855

)

 

 

(1,414

)

 

 

(21,930

)

Provision (benefit) for income taxes

 

$

10,237

 

 

$

5,202

 

 

$

(7,596

)

Net income taxes paid

 

$

8,278

 

 

$

20,152

 

 

$

25,627

 

 

A reconciliation of the income tax provision (benefit) at the U.S. statutory income tax rate to our income tax benefit is as follows (in thousands):

 

 

 

For the Years Ended December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

Income tax (benefit) provision at the U.S. statutory rate

 

$

(4,955

)

 

$

(10,678

)

 

$

(11,445

)

State taxes, net of federal deduction

 

 

(277

)

 

 

(1,739

)

 

 

(1,651

)

Change in valuation allowance

 

 

10,238

 

 

 

6,467

 

 

 

1,033

 

Tax impact of foreign operations, including U.S. taxes on international income and foreign tax credits

 

 

1,761

 

 

 

3,547

 

 

 

2,344

 

GILTI

 

 

1,652

 

 

 

2,474

 

 

 

2,406

 

Share-based compensation

 

 

1,278

 

 

 

1,652

 

 

 

667

 

Non-deductible executive compensation

 

 

1,050

 

 

 

1,349

 

 

 

1,157

 

Base Erosion Anti-Abuse Tax

 

 

1,013

 

 

 

—

 

 

 

—

 

Subpart F Income

 

 

566

 

 

 

20

 

 

 

—

 

Non-deductible expenses

 

 

255

 

 

 

—

 

 

 

—

 

Non-deductible transaction cost

 

 

89

 

 

 

1,001

 

 

 

—

 

Pre-spin tax expense

 

 

—

 

 

 

—

 

 

 

877

 

Return to provision adjustments

 

 

(1,363

)

 

 

24

 

 

 

(228

)

R&D tax credit

 

 

(975

)

 

 

(79

)

 

 

(622

)

Other

 

 

(95

)

 

 

1,164

 

 

 

(2,134

)

Income tax provision (benefit)

 

$

10,237

 

 

$

5,202

 

 

$

(7,596

)

 

The components of deferred taxes consisted of the following (in thousands):

 

 

 

As of December 31,

 

 

 

2024

 

 

2023

 

Deferred tax assets:

 

 

 

 

 

 

Capitalized research and development

 

$

23,688

 

 

$

21,749

 

Net operating loss carryover

 

 

15,654

 

 

 

10,408

 

Disallowed business interest expense

 

 

11,776

 

 

 

6,518

 

Share-based compensation

 

 

6,834

 

 

 

8,228

 

Deferred market closing loss deferral

 

 

4,004

 

 

 

—

 

Inventory

 

 

3,961

 

 

 

25,092

 

Capital loss carryover

 

 

2,714

 

 

 

—

 

Leases - right of use liability

 

 

2,336

 

 

 

3,578

 

Accrued liabilities

 

 

1,844

 

 

 

4,069

 

Accounts receivable

 

 

758

 

 

 

3,264

 

Tax credit carryover

 

 

428

 

 

 

—

 

Product liability and litigation

 

 

216

 

 

 

576

 

Fixed assets

 

 

58

 

 

 

1,357

 

Other

 

 

909

 

 

 

1,900

 

Total deferred tax assets

 

 

75,180

 

 

 

86,739

 

Less: Valuation allowances

 

 

(49,181

)

 

 

(49,084

)

Total deferred tax assets after valuation allowances

 

 

25,999

 

 

 

37,655

 

Deferred tax liabilities:

 

 

 

 

 

 

Intangible assets

 

 

13,880

 

 

 

27,647

 

Leases - right of use asset

 

 

2,294

 

 

 

2,574

 

Unremitted earnings of foreign subs

 

 

1,152

 

 

 

1,703

 

Other

 

 

84

 

 

 

683

 

Total deferred tax liabilities

 

 

17,410

 

 

 

32,607

 

Total net deferred income taxes

 

$

8,589

 

 

$

5,048

 

 

We establish valuation allowances when necessary to reduce the deferred tax assets to amounts we expect to realize. As of December 31, 2024, 2023 and 2022, we had a valuation allowance of $49.2 million, $49.1 million and $10.7 million, respectively, against deferred tax assets in select jurisdictions as we believe it is more likely than not that these assets will not be realized.

 

The increase to the valuation allowance of $0.1 million during 2024 was primarily driven by additional deferred tax assets generated in the U.S., partially offset by the release of the valuation allowance on sold assets. The increase to the valuation allowance of $38.4 million during 2023 was primarily driven by additional deferred tax assets generated in the U.S. The increase to the valuation allowance of $2.4 million during 2022 was primarily driven by the reserve set against the U.S. group, offset by the release of the allowance on the German group.

 

At December 31, 2024, net operating loss and tax credit carryovers available to reduce future federal, state and foreign taxable earnings consisted of the following (in millions):

 

Expiration Period

 

Net operating
loss carryover

 

 

Tax credit
carryover

 

 

Capital loss carryover

 

2025 - 2029

 

$

3.5

 

 

$

—

 

 

$

2.7

 

2030 - 2034

 

2.1

 

 

 

—

 

 

 

—

 

2035 - 2044

 

 

6.0

 

 

 

0.4

 

 

 

—

 

Indefinite

 

 

4.1

 

 

 

—

 

 

 

—

 

Total

 

$

15.7

 

 

$

0.4

 

 

$

2.7

 

Valuation allowances

 

$

14.7

 

 

$

0.4

 

 

$

2.7

 

 

We intend to repatriate cash when the additional tax related to remitting earnings is deemed immaterial, as a portion of these earnings has already been taxed as toll tax or GILTI and is not subject to further U.S. federal tax. Portions of the additional tax would also be offset by allowable foreign tax credits. No deferred tax liability has been recorded on earnings overseas that are expected to be

permanently reinvested outside of the U.S. If we decide at a later date to repatriate these earnings to the U.S., we would be required to provide for the net tax effects on these amounts. We expect the majority of these unremitted earnings would be subject to federal tax and state tax, in addition to withholding tax in many jurisdictions. The exact amount of the tax cost to remit these earnings is not determinable. For 2024, we have a deferred tax asset of $0.6 million recorded related to entities held for sale on which we could no longer assert indefinite reinvestment.

 

The following is a tabular reconciliation of the total amounts of unrecognized tax benefits (in thousands):

 

 

 

For the Years Ended December 31,

 

 

 

2024

 

 

2023

 

 

2022

 

Balance at January 1

 

$

304

 

 

$

105

 

 

$

—

 

Increases related to current period

 

$

96

 

 

$

168

 

 

$

105

 

Increases related to prior periods

 

$

6

 

 

$

31

 

 

$

—

 

Balance at December 31

 

$

406

 

 

$

304

 

 

$

105

 

Amounts impacting effective tax rate, if balance at December 31 recognized

 

$

406

 

 

$

105

 

 

$

—

 

 

 

 

 

 

 

 

 

 

 

Interest and penalty expense related to unrecognized tax benefits

 

$

8

 

 

$

3

 

 

$

—

 

Total accrued interest and penalties balance at December 31

 

$

11

 

 

$

3

 

 

$

—

 

 

We operate on a global basis and are subject to numerous and complex tax laws and regulations. Our income tax filings are subject to examinations by taxing authorities throughout the world. Currently, we are not under any material tax audits or have any pending tax litigations. We do not expect a material change in unrecognized tax benefits over the next twelve months based on the current examination status.

 

The ZimVie U.S. group filed its first U.S. federal tax return for the year ended December 31, 2022, in 2023; therefore, the only open years subject to Internal Revenue Service (“IRS”) audit are 2022 and 2023. However, our entities historically filed consolidated under the Zimmer Biomet U.S. group, which is under continuous audit by the IRS and other taxing authorities. During the course of these audits, Zimmer Biomet receives proposed adjustments from taxing authorities that may be material. ZimVie does not bear any financial liability with regards to these U.S. federal consolidated returns; however, certain states require amended returns as a result of federal audit changes and ZimVie would be responsible for any liabilities arising in ZimVie's separate liability states. We do not anticipate any material adverse outcomes in these audits that would have a material effect on our results of operation or financial condition. The Zimmer Biomet U.S. federal income tax returns have been audited through 2019, and the 2020-2022 returns are currently under audit.

 

State income tax returns are generally subject to examination for a period of three to five years after filing of the respective return. The state impact of any federal changes generally remains subject to examination by various states for a period of up to one year after formal notification to the states. We do not currently have any state income tax return positions in the process of examination, administrative appeals or litigation.

 

In other major jurisdictions, open years are generally 2017 or later.