INCOME TAXES

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

INCOME TAXES

12. INCOME TAXES

2017 Tax Cuts and Jobs Act

In conjunction with the enactment of the 2017 Tax Cuts and Jobs Act (the Tax Act), the Corporation recorded provisional income tax expense of $18.2 million for the year ended December 31, 2017 related to the one-time transition tax on certain foreign earnings. The finalized transition tax of $23.6 million was to be paid over 8 years pursuant to the Tax Act. The transition tax liability, which is expected to be paid in 2025, was $6.1 million and $7.8 million as of December 31, 2024 and December 31, 2023, respectively.

As of December 31, 2024, the Corporation reassessed its assertion around whether foreign undistributed earnings should continue to no longer be considered permanently reinvested. The Corporation remains no longer permanently reinvested with the exception of three foreign subsidiaries. The Corporation has recorded a liability for withholding taxes that would arise upon distribution of the Corporation’s foreign undistributed earnings.

Except as noted above, the Corporation remains permanently reinvested to the extent of any outside basis differences in its foreign subsidiaries in excess of the amount of undistributed earnings, as it is not practicable to determine the provision impact, if any, due to the complexities associated with this calculation.

Earnings before income taxes for the years ended December 31 consist of:

(In thousands)	2024		2023		2022
Domestic	$	323,898	$	300,200	$	239,356
Foreign(1)	198,158		162,870		149,839
	$	522,056	$	463,070	$	389,195

(1) The Corporation recognized a pre-tax loss of $5 million during the first quarter of 2022 pertaining to the sale of its industrial valve business in Germany.

The provision for income taxes for the years ended December 31 consists of:

(In thousands)	2024		2023		2022
Current:
Federal	$	62,165	$	58,629	$	65,047
State	18,272		13,098		12,717
Foreign	43,200		36,791		34,520
Total current	123,637		108,518		112,284
Deferred:
Federal	(5,507)		(180)		(11,413)
State	950		507		(4,442)
Foreign	(2,002)		(284)		(1,582)
Total deferred	(6,559)		43		(17,437)
Provision for income taxes	$	117,078	$	108,561	$	94,847

The effective tax rate varies from the U.S. federal statutory tax rate for the years ended December 31, principally:

	2024		2023		2022
U.S. federal statutory tax rate	21.0	%	21.0	%	21.0	%
Add (deduct):
State and local taxes, net of federal benefit	3.0		2.3		1.7
Foreign earnings(1)	1.1		1.3		0.7
Foreign loss on sale	—		—		0.2
Financing arrangement(2)	(1.0)		—		—
R&D tax credits	(1.3)		(1.1)		(1.1)
Foreign-derived intangible income	(1.4)		(1.2)		(1.2)
All other, net	1.0		1.1		3.1
Effective tax rate	22.4	%	23.4	%	24.4	%

(1) Foreign earnings primarily include the net impact of differences between local statutory rates and the U.S. Federal statutory rate, the cost of repatriating foreign earnings, and the impact of changes to foreign valuation allowances.

(2) In an effort to simplify its organizational structure and facilitate repatriation, the Corporation underwent a substantial internal reorganization of its foreign ownership structure in 2024 that included the establishment of financing arrangements.

The components of the Corporation’s deferred tax assets and liabilities as of December 31 are as follows:

(In thousands)	2024		2023
Deferred tax assets:
Capitalized R&D expenses	$	60,818	$	39,463
Operating lease liabilities	40,840		32,041
Inventories, net	23,926		24,282
Incentive compensation	11,011		9,314
Environmental reserves	9,324		8,949
Net operating loss	6,431		8,348
Other	34,264		30,417
Total deferred tax assets	186,614		152,814
Deferred tax liabilities:
Goodwill amortization	117,340		110,543
Other intangible amortization	62,277		53,551
Pension and other postretirement assets	46,828		37,870
Operating lease right-of-use assets, net	38,741		30,327
Withholding taxes	13,017		16,120
Depreciation	14,880		15,339
Contract revenue recognition	15,256		5,297
Other	3,776		2,863
Total deferred tax liabilities	312,115		271,910
Valuation allowance	4,988		4,892
Net deferred tax liabilities	$	130,489	$	123,988

Deferred tax assets and liabilities are reflected on the Corporation’s Consolidated Balance Sheets as of December 31 as follows:

(In thousands)	2024		2023
Net noncurrent deferred tax assets(1)	$	10,170	$	8,331
Net noncurrent deferred tax liabilities	140,659		132,319
Net deferred tax liabilities	$	130,489	$	123,988

(1)Amount is classified within the "Other Assets" caption in the Corporation's Consolidated Balance Sheets as of December 31, 2024 and December 31, 2023, respectively.

The Corporation has income tax net operating loss carryforwards related to international operations of $21.0 million, of which $17.9 million have an indefinite life and $3.1 million which expire through 2029. The Corporation has federal and state income tax net loss carryforwards of $18.5 million, all of which are net operating losses that expire through 2041. The Corporation has recorded a deferred tax asset of $6.4 million, reflecting the benefit of the loss carryforwards related to international and domestic operations.

Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to utilize the existing deferred tax assets. As of December 31, 2024, the Corporation decreased its valuation allowance to $5.0 million, in order to measure only the portion of deferred tax assets that more likely than not will be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced 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 projections for growth.

Income tax payments, net of refunds, of $135.7 million, $136.4 million, and $61.1 million were made in 2024, 2023, and 2022, respectively.

The Corporation has recorded a liability in Other liabilities for interest of $4.9 million and penalties of $2.5 million as of December 31, 2024.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

(In thousands)	2024		2023		2022
Balance as of January 1,	$	17,888	$	17,371	$	17,018
Additions for tax positions of prior periods	1,805		2,387		3,004
Reductions for tax positions of prior periods	(2,213)		(2,419)		(1,732)
Additions for tax positions related to the current year	1,747		1,744		1,068
Settlements	(215)		(1,195)		(1,987)
Balance as of December 31,	$	19,012	$	17,888	$	17,371

In many cases, the Corporation’s uncertain tax positions are related to tax years that remain subject to examination by tax authorities.

The following describes the open tax years, by major tax jurisdiction, as of December 31, 2024:

United States (Federal)	2020	-	present
United States (Various states)	2013	-	present
United Kingdom	2023	-	present
Canada	2020	-	present

The Corporation does not expect any significant changes to the estimated amount of liability associated with its uncertain tax positions through the next twelve months. Included in total unrecognized tax benefits as of December 31, 2024, 2023, and 2022 is $16.2 million, $15.3 million, and $15.1 million, respectively, which if recognized, would favorably impact the effective income tax rate.