Income Taxes

12 Months Ended

Feb. 28, 2025

Income taxes have been provided for based upon the tax laws and rates in countries in which our operations are conducted and income is earned. In December 2023, the Government of Bermuda enacted the Bermuda Corporate Income Tax Act (“CIT Act”) which imposes a 15% corporate income tax effective for tax years beginning on or after January 1, 2025. The Company will be subject to Bermuda corporate income tax with respect to its fiscal year beginning March 1, 2025 and in subsequent years. The provision for income taxes relates to income earned by certain subsidiaries of the Company which are located in, or earn income in, jurisdictions that currently impose income taxes, primarily the United States and Ireland.

The sources of income from continuing operations before income taxes and earnings of unconsolidated equity method investment for the years ended February 28, 2025, February 29, 2024 and February 28, 2023, were as follows:


	Year Ended February 28/29,
	2025		2024		2023
U.S. operations	$	27,253	$	25,029	$	21,172
Non-U.S. operations	115,205		79,347		64,865
Income from continuing operations before income taxes and earnings of unconsolidated equity method investment	$	142,458	$	104,376	$	86,037

The components of the income tax provision for the years ended February 28, 2025, February 29, 2024 and February 28, 2023, consisted of the following:


	Year Ended February 28/29,
	2025		2024		2023
Current:
United States:
Federal	$	2,069	$	2,484	$	5,671
State	771		2,249		1,667
Non-U.S.	1,558		(1,521)		4,438

Current income tax provision	4,398		3,212		11,776

Deferred:
United States:
Federal	3,536		5,415		(728)
State	12		1,120		(341)
Non-U.S.	14,002		13,518		14,759

Deferred income tax	17,550		20,053		13,690

Total	$	21,948	$	23,265	$	25,466

Significant components of the Company’s deferred tax assets and liabilities at February 28, 2025 and February 29, 2024, consisted of the following:


	Year Ended February 28/29,
	2025		2024
Deferred tax assets:

Net operating loss carry forwards	$	282,103	$	239,306
Interest expense carry forwards	2,648		2,085
Other	21,369		23,426
Valuation allowance	(45,641)		(53,408)

Total deferred tax assets	260,479		211,409
Deferred tax liabilities:
Accelerated depreciation	(370,989)		(299,957)
Other	(8,124)		(11,809)
Total deferred tax liabilities	(379,113)		(311,766)

Net deferred tax liabilities	$	(118,634)	$	(100,357)

The Company had $283.1 million of federal net operating loss (“NOL”) carry forwards available at February 28, 2025 with no expiration date to offset future taxable income subject to U.S. graduated tax rates. The Company also had NOL carry forwards of $1.3 billion with no expiration date to offset future Irish taxable income. The CIT Act includes a provision which would allow the Company to carry forward losses incurred in Bermuda for the year ended February 28, 2021 and subsequent fiscal years. The Company has NOL carryforwards of $302.3 million with no expiration date to offset future Bermuda taxable income. A full valuation allowance of $302.3 million has been recognized against the Bermuda tax loss carry forwards based on all available information, including projections of future taxable income.

Deferred tax assets and liabilities are included in other assets and accounts payable, accrued expenses and other liabilities, respectively.

We do not expect to incur income taxes on future distributions of undistributed earnings of non-U.S. subsidiaries and accordingly, no deferred income taxes have been provided for the distributions of such earnings. As of February 28, 2025, we have elected to permanently reinvest our accumulated undistributed U.S. earnings of $44.6 million. Accordingly, no U.S. withholding taxes have been provided. Withholding tax of $2.2 million would be due if such earnings were remitted.

Our aircraft-owning subsidiaries generally earn income from sources outside the United States and typically are not subject to U.S. federal, state or local income taxes. The aircraft owning subsidiaries resident in Ireland and the U.S. are currently subject to tax in those respective jurisdictions.

We have a U.S.-based subsidiary which provides management services to our subsidiaries and is subject to U.S. federal, state and local income taxes. We also have Ireland and Singapore based subsidiaries which provide management services to our non-U.S. subsidiaries and are subject to tax in those respective jurisdictions.

Differences between statutory income tax rates and our effective income tax rates applied to pre-tax income from continuing operations for the years ended February 28, 2025, February 29, 2024 and February 28, 2023, consisted of the following:


	Year Ended February 28/29,
	2025		2024		2023
Notional U.S. federal income tax expense at the statutory rate:	$	29,916	$	21,919	$	18,068
U.S. state and local income tax, net	1,086		1,098		928
Non-U.S. operations:
Bermuda	(11,233)		(6,659)		(12,039)
Ireland	2,531		5,709		19,279
Singapore	(10)		(2)		27
Other low tax jurisdictions	54		64		152
Non-deductible expenses in the U.S.	37		29		19
Other	(433)		1,107		(968)

Provision for income taxes	$	21,948	$	23,265	$	25,466

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities. We did not have any unrecognized tax benefits.

We conduct business globally and, as a result, the Company and its subsidiaries or branches are subject to foreign, U.S. federal and various state and local income taxes, as well as withholding taxes. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Ireland and the United States.

Our policy is that we will recognize interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense. We did not accrue interest or penalties associated with any unrecognized tax benefits, nor was any interest expense or penalty recognized during the year.

Ireland and Bermuda Tax Law Changes

On December 18, 2023, Ireland enacted Finance (No. 2) Bill 2023 (the “Finance Bill”) which includes legislative changes for new tax measures and amendments to the Irish tax code, such as provisions to implement the Pillar Two GloBE rules, new outbound payment rules, and a dividend withholding tax, among other changes. The Finance Bill requires a 20% withholding tax be applied to certain payments, such as interest payments, from Irish companies to recipients in no-tax and zero-tax jurisdictions, effective April 1, 2024. The Finance Bill also requires a 25% withholding tax be applied to dividends and distributions, subject to certain exemptions, as well as introduces new interest deduction rules for a qualifying finance company. The Finance Bill did not have a significant impact on our consolidated financial statements for the year ended February 28, 2025.

On December 18, 2023, Bermuda enacted a 15% corporate income tax regime, the CIT Act, that applies to Bermuda businesses that are part of multinational enterprise groups with annual revenue of €750 million or more and is effective for tax years beginning on or after January 1, 2025. As a result of the Bermuda CIT, the Company’s exemption from Bermuda corporate income, withholding and capital gains taxes ceased on February 28, 2025. The Company has appropriately considered the impact of the Bermuda CIT and its impact on current and deferred income taxes.

- Definition

The entire disclosure for income tax.

+ References

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+ Details

Aircastle LTD 10-K