Income Taxes (Tables)

12 Months Ended

Dec. 31, 2025

The income tax provisions were calculated based upon the following components of earnings before income tax for the years ended December 31, 2025, 2024 and 2023:


	Year Ended December 31,
	2025			2024			2023
(Loss) earnings before income tax:
Domestic	$	(104,058	)	$	(54,073	)	$	(37,222	)
Foreign		139,893			156,338			92,176
Earnings before income tax	$	35,835		$	102,265		$	54,954

Provision for Income Taxes

The components of the provision for income taxes for the years ended December 31, 2025, 2024 and 2023 are summarized as follows:


	Year Ended December 31,
	2025			2024			2023
Current income tax expense (benefit):
Federal	$	1,306		$	(1,181	)	$	3,510
State and local		(18	)		679			414
Foreign		38,598			27,240			23,759
Total current income tax expense		39,886			26,738			27,683
Deferred income tax (benefit) expense:
Federal		(10,155	)		(7,944	)		(7,495	)
State and local		2			66			444
Foreign		(12,183	)		18,458			(6,021	)
Total deferred income tax (benefit) expense		(22,336	)		10,580			(13,072	)
Total income tax expense	$	17,550		$	37,318		$	14,611

Deferred Tax Assets and Deferred Tax Liabilities

The deferred tax assets and deferred tax liabilities and related valuation allowance were comprised of the following as of December 31, 2025 and 2024:


	December 31,
	2025			2024
Deferred tax assets:
Net operating losses	$	25,967		$	35,966
Intangible assets		8,711			10,893
Research and development credits		5,920			5,475
Property and equipment		4,779			4,132
Valuation reserves and accrued liabilities		13,872			8,446
Capitalized research and development costs		26,548			28,318
Stock compensation		2,258			2,039
Defined benefit obligation		2,241			1,514
Inventory		1,198			717
Other credits		5,609			—
Unrealized foreign currency exchange losses		6,467			—
Other		14,921			8,707
Total deferred tax asset		118,491			106,207
Valuation allowance		(11,366	)		(25,272	)
Deferred tax liabilities:
Unrealized foreign currency exchange gains	$	(309	)	$	(1,092	)
Undistributed profits of subsidiary		(10,287	)		(5,016	)
Property and equipment		(6,820	)		(10,524	)
Intangible assets		(9,322	)		(8,720	)
Other		(6,663	)		(1,383	)
Total deferred tax liability		(33,401	)		(26,735	)
Net deferred tax asset	$	73,724		$	54,200

Reconciliations Between Statutory Federal Income Tax Rate and Effective Rate

A reconciliation between the statutory Federal income tax rate and the effective rate of income tax expense for the year ended December 31, 2025 is as follows:


	Year Ended December 31,
	2025			Percent of Pre-tax Income
Pre-tax book income	$	35,835
U.S. Federal statutory rate		7,525			21.0	%
State and local income taxes (net of Federal benefit)a		(52	)		(0.2	)%
Foreign tax effects
China
Statutory tax rate difference between China and United States		2,072			5.8	%
Tax rate holiday		(1,747	)		(4.9	)%
R&D super deduction		(2,074	)		(5.8	)%
Withholding taxes		1,650			4.6	%
Other		343			1.0	%
Germany
Statutory tax rate difference between Germany and United States		794			2.2	%
Local Income Taxes		(1,703	)		(4.8	)%
Provision to Return		(1,304	)		(3.6	)%
Tax on Intercompany Distributions		1,891			5.3	%
Other		243			0.7	%
Hungary
Statutory tax rate difference between Hungary and United States		(9,434	)		(26.3	)%
Qualified Domestic Minimum Top-up Tax (QDMTT)		3,319			9.3	%
Local Business Tax & Local Innovation Tax		2,244			6.3	%
Other		(12	)		0.0	%
Korea
Withholding taxes		1,952			5.4	%
Other		(290	)		(0.8	)%
Other foreign jurisdictions		700			2.0	%
Effect of changes in tax laws or rates enacted in the current period		-			0.0	%
Effect of cross-border tax laws
Global Intangible Low-Taxed Income (GILTI)		6,998			19.5	%
Subpart F Income		(401	)		(1.1	)%
Foreign Currency Gain		969			2.7	%
Tax credits - R&D		(1,430	)		(4.0	)%
Changes in valuation allowances		830			2.3	%
Non-taxable / non-deductible items
Stock Options / Executive Compensation		2,505			7.0	%
Transaction Costs		1,257			3.5	%
Changes in unrecognized tax benefits		178			0.5	%
Other adjustments		527			1.4	%
Effective tax rate	$	17,550			49.0	%

(a)

State taxes in Texas for 2025 made up the majority (greater than 50%) of the tax effect in this category.

Reconciliations between the statutory Federal income tax rate and the effective rate of income tax expense for the years ended December 31, 2024 and 2023 are as follows:


	Year Ended December 31,
	2024			2023
Statutory Federal income tax rate		21.0	%		21.0	%
Increase (decrease) resulting from:
Change in valuation allowance		(9.0	)%		(3.1	)%
Effect of different tax rates of foreign jurisdictions		(0.7	)%		0.9	%
Tax credits & deductions related to R&D		(3.7	)%		(8.5	)%
Goodwill impairment		—			4.1	%
Non-deductible expenses		15.7	%		6.8	%
Other foreign, state and local taxes		2.1	%		3.5	%
Tax impact of foreign income		7.5	%		3.6	%
Stock option compensation		1.0	%		—
Audit settlements and statute expirations		11.0	%		—
Incentive tax rates in foreign jurisdictions		(5.5	)%		(1.9	)%
Other		(2.9	)%		0.2	%
Effective rate		36.5	%		26.6	%

Net Operating Loss Carryforwards

The Company has Net Operating Loss (“NOL”) carryforwards as follows:


Jurisdiction	Amount as of December 31, 2025		Years of Expiration
U.S. state income tax	$	43,305	2026-2044
Foreign	$	183,419	Never

Reconciliation of Unrecognized Tax Benefits

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


	Year Ended December 31,
	2025			2024			2023
Balance at beginning of year	$	8,266		$	5,486		$	6,185
Additions based on tax position related to current year		797			78			87
Additions based on tax position related to prior year		40			4,587			347
Reductions from settlements and statute of limitation expiration		(2,132	)		(1,636	)		(1,266	)
Effect of foreign currency translation		749			(249	)		133
Balance at end of year	$	7,720		$	8,266		$	5,486

Schedule of Cash Paid (Received) for Income Taxes, Net of Refunds


	Year ended December 31, 2025
Cash paid (received) for income taxes, net of refunds
Federal	$	687
State and local
Other state and local jurisdictions		(110	)
Foreign
Canada		(2,003	)
China		11,903
Germany		3,337
Hungary		7,676
Korea		3,606
Malta		4,997
Mexico		3,296
Other foreign jurisdictions		3,820
Total Foreign		36,632
Total cash paid for income taxes, net of refunds	$	37,209

Gentherm Inc 10-K