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Income Taxes | 6 Months Ended
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Jun. 30, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | 11. Income Taxes For the three months ended June 30, 2025, we recorded an income tax benefit of $6.5 million on income before taxes of $22.7 million. For the three months ended June 30, 2024, we recorded income tax benefit of $2.2 million on a loss before taxes of $127.4 million. The $4.3 million increase in income tax benefit for the three months ended June 30, 2025, was primarily attributable to the net tax benefit from settling the Brazil Tax Assessments (as defined below). This was partially offset by higher tax expense resulting from increased earnings before tax, compared to same period in 2024, which included a non-cash goodwill impairment charge that carried no associated tax benefit. For the six months ended June 30, 2025, we recorded an income tax benefit of $9.8 million on income before taxes of $6.2 million. For the six months ended June 30, 2024, we recorded income tax benefit of $1.2 million on a loss before taxes of $132.7 million. The $8.6 million increase in income tax benefit for the six months ended June 30, 2025, was primarily attributable to the net tax benefit from settling the Brazil Tax Assessments. This was partially offset by higher tax expense resulting from increased earnings before tax, compared to same period in 2024, which included a non-cash goodwill impairment charge that carried no associated tax benefit. The U.S. federal statute of limitations remains open for the years 2021 and forward. Foreign and U.S. state jurisdictions have statutes of limitations generally ranging from 2 to 6 years. Years still open to examination by foreign tax authorities in major jurisdictions include Australia (2020 forward), Brazil (2020 forward), Canada (2020 forward), Germany (2020 forward), Sweden (2023 forward) and the U.K. (2023 forward). We are currently under examination in certain foreign and U.S. jurisdictions. On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. The OBBBA includes significant provisions, such as allowing for accelerated tax deductions for qualified property and research expenditures, and reinstating the use of earnings before interest, taxes, depreciation, and amortization in determining tax deductions related to business interest expense. In addition to the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, the OBBBA also modifies the international tax framework and restores favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing its impact on our consolidated financial statements. Organisation for Economic Co-operation and Development (“OECD”) Global Anti-Base Erosion Model Rules (Pillar Two) Legislatures and taxing authorities in many jurisdictions in which we operate may enact changes to, or seek to enforce, novel interpretations of their tax rules. These changes may include modifications that can be temporary or permanent. For example, the Organisation for Economic Cooperation and Development (the "OECD"), the European Union and other countries (including countries in which we operate) have committed to enacting substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed. In particular, the OECD's Pillar Two initiative introduces a 15% global minimum tax (the "Global Minimum Tax") applied on a country-by-country basis and some jurisdictions have enacted a Global Minimum Tax effective January 1, 2024 while others are still evaluating the situation. As of June 30, 2025, there was no impact to our effective tax rate resulting from the enactment of a Global Minimum Tax in the jurisdictions in which we operate. Management will continue to assess the impact and materiality of these potential new rules as well as any other changes in domestic and international tax rules and regulations. Brazil Tax Assessments In connection with our May 1, 2012, acquisition of the Mead Consumer and Office Products business ("Mead C&OP"), we assumed all of the tax liabilities for the acquired foreign operations including its operating entity in Brazil ("ACCO Brazil"). In December of 2012, the Federal Revenue Department of the Ministry of Finance of Brazil ("FRD") issued a tax assessment against ACCO Brazil, challenging the tax deduction of goodwill from ACCO Brazil's taxable income for the year 2007 (the "First Assessment"). A second assessment challenging the deduction of goodwill from ACCO Brazil's taxable income for the years 2008, 2009 and 2010 was issued by the FRD in October 2013 (the "Second Assessment" and together with the First Assessment, the "Brazil Tax Assessments"). ACCO Brazil challenged both the foregoing assessments at the administrative level in the Brazilian Administrative Court of Tax Appeals ("BACTA"). Following adverse decisions from the BACTA concerning the deductibility of goodwill, ACCO Brazil appealed the decisions to the Brazilian judicial courts. Although we believed we had meritorious defenses, because there is no settled legal precedent on which to base a definitive opinion as to whether we would ultimately prevail, we considered the outcome of these disputes to be uncertain. Since it was not more likely than not that we would prevail, in 2012 we recorded an initial reserve in the amount of $44.5 million (at December 31, 2012 exchange rates) in consideration of this contingency, of which $43.3 million was recorded as an adjustment to the purchase price, and which included the 2007-2012 tax years plus penalties and interest through December 2012. Between the time we recorded this initial reserve and June 13, 2025, we adjusted the reserve for various developments affecting the contingency, and on that date, we had reserved $20.5 million in tax, penalties and interest (at June 13, 2025 exchange rates and reported in "Other non-current liabilities"). While the judicial appeals were pending, in January 2025, the Attorney General's Office of the Brazilian National Treasury ("Brazilian Treasury") offered an amnesty program in which it agreed to dismiss with prejudice any pending goodwill cases in exchange for the payment of at least 35% of the outstanding assessment principal, interest and legal fees on or before June 30, 2025. After considering this offer and to avoid further expense and uncertainty, ACCO Brazil decided to participate in the amnesty program. The total amount of the settlement under this program was determined to be $7.1 million. In June 2025, the Brazilian Treasury accepted ACCO Brazil's intent to participate in the amnesty program, and on June 30, 2025, the Company paid an initial installment of $2.0 million. Under the terms of the settlement, the remaining $5.1 million will be paid in monthly installments, including interest, through June 2026. Upon completion of these payments, the pending cases will be dismissed with prejudice, thereby resolving the matter. Following the payment of the initial installment, the Company recorded a current income tax payable of $5.1 million for the future installments and released the remaining reserve of $20.5 million, resulting in a net tax benefit of $13.4 million.

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