Income Tax Provision

12 Months Ended

Dec. 31, 2025

Note 7 - Income Tax Provision

Income (loss) from operations before income taxes, based on geographic location of the operations to which such earnings are attributable, is provided below.


	Years Ended December 31,
	2025			2024		2023
United States	$	3.6		$	4.5	$	103.2
Non-United States		(1.7	)		0.1		(6.8	)
Income (loss) from operations before income taxes	$	1.9		$	4.6	$	96.4

The provision (benefit) for income taxes consisted of the following:


	Years Ended December 31,
	2025			2024			2023
Current:
Federal	$	(0.8	)	$	2.6		$	30.4
State and local		—			(0.1	)		6.1
Foreign		0.2			0.3			0.2
Total current tax expense (benefit)	$	(0.6	)	$	2.8		$	36.7
Deferred:
Federal	$	3.5		$	0.4		$	(9.2	)
State and local		0.2			0.1			(0.5	)
Foreign		—			—			—
Total deferred tax expense (benefit)		3.7			0.5			(9.7	)
Provision (benefit) for incomes taxes	$	3.1		$	3.3		$	27.0

The reconciliation between Metallus' effective tax rate on income (loss) from continuing operations and the statutory tax rate is as follows:


	Years Ended December 31,
		2025			Tax Rate				2024			Tax Rate				2023			Tax Rate
U.S. federal income tax provision (benefit) at statutory rate		$	0.4			21.0		%	$	1.0			21.0		%	$	20.2			21.0		%
Nontaxable or Nondeductible Items:
Meals and Entertainment		0.4				21.0		%		0.4			8.4		%		0.3			0.3		%
Lobbying Expenses		0.1				5.3		%		0.1			1.1		%		—			—		%
Stock Options		0.7				36.8		%		(5.6	)		(123.7	)	%		(2.0	)		(2.1	)	%
Extinguishment of Debt		0.7				36.8		%		2.0			43.2		%		2.4			2.5		%
Excess Compensation		0.5				26.3		%		5.5			121.0		%		0.6			0.6		%
State and local income taxes, net of federal tax benefit			0.1			5.3		%		(0.1	)		(0.2	)	%		4.3			4.4		%
Tax Credits:
Research and Development Credit			(0.3	)		(15.8	)	%		(0.1	)		(0.1	)	%		(0.3	)		(0.3	)	%
Changes in Valuation Allowance:
United Kingdom			0.5			26.3		%		(0.5	)		(11.2	)	%		1.6			1.7		%
Other Reconciling Adjustment			0.3			15.9		%		0.2			4.6		%		0.1			0.1		%
Foreign Tax Effects:
United Kingdom			(0.4	)		(21.0	)	%		0.3			6.5		%		(0.2	)		(0.2	)	%
Mexico			0.1			5.3		%		0.1			1.6		%		—			—		%
Provision (benefit) for income taxes		$	3.1						$	3.3						$	27.0
Effective tax rate						163.2	%						72.2	%						28.0	%

Income tax expense includes U.S. and international income taxes. Except as required under U.S. tax law, U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that is indefinitely reinvested outside the U.S. This amount becomes taxable upon a repatriation of assets from the subsidiary or a sale or liquidation of the subsidiary.

The permanent differences for the year ended December 31, 2025 are primarily due to the non-deductible loss on settlement of Convertible Senior Notes due 2025 and non-deductible compensation.

Cash taxes paid by (refunded to) Metallus for the periods ended December 31, 2025, 2024 and 2023 were $(7.1) million, $27.9 million, and $25.3 million, respectively. Income taxes paid exceeds 5% of total income taxes paid, net of refunds, in the following jurisdictions:


	Years Ended December 31,
	2025			2024		2023
Federal	$	(6.5	)	$	21.5	$	19.0
State:
Illinois		—			2.0		1.7
Michigan		(0.7	)		0.9		0.5
Canton, Ohio		—			1.7		1.3
All other states		(0.1	)		1.5		1.4
Foreign:
Mexico		0.2			0.3		1.4
Total income tax payments (refunds)	$	(7.1	)	$	27.9	$	25.3

The effect of temporary differences giving rise to deferred tax assets and liabilities at December 31, 2025 and 2024 was as follows:


	Years Ended December 31,
	2025			2024
Deferred tax liabilities:
Depreciation	$	(60.3	)	$	(69.5	)
Long‑term contract adjustments (IRC §460)		(6.0	)		—
Prepaid insurance		(1.5	)		(1.3	)
Leases - right-of-use asset		(2.8	)		(2.8	)
Deferred tax liabilities	$	(70.6	)	$	(73.6	)
Deferred tax assets:
Tax loss carryforwards	$	23.4		$	15.6
Pension and postretirement benefits		29.4			41.2
Other employee benefit accruals		9.2			8.4
Lease liability		2.8			2.8
State decoupling		0.9			1.2
Capital loss carryforward		0.8			0.8
Capitalized R&D		1.7			3.0
Other, net		1.5			1.3
Deferred tax assets subtotal	$	69.7		$	74.3
Valuation allowances		(16.0	)		(15.0	)
Deferred tax assets		53.7			59.3
Net deferred tax assets (liabilities)	$	(16.9	)	$	(14.3	)

As of December 31, 2025 and 2024, the Company had a net deferred tax liability of $16.9 million and $14.3 million, respectively, on the Consolidated Balance Sheets. As of December 31, 2025, the Company had loss carryforwards in the UK totaling $64.0 million with various expiration dates. There are $25.2 million federal loss carryforwards in the U.S and there are $109.9 million in state and certain local loss carryforwards with various expiration dates.

During 2016, operating losses generated in the U.S. resulted in a decrease in the carrying value of the Company’s U.S. deferred tax liability to the point that would result in a net U.S. deferred tax asset at December 31, 2016. In light of the Company's operating performance in the U.S. and current industry conditions, the Company assessed, based upon all available evidence at the time, and concluded that it was more likely than not that it would not realize a portion of its U.S. deferred tax assets. As such, the Company recorded a valuation allowance in 2016.

Each reporting period we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize the Company’s deferred tax assets. Due to Metallus' historical operating performance in the U.S., we have historically been limited in our ability to rely on other subjective evidence such as projections of our future profitability. However, as of December 31, 2022, based on consecutive years of profitability, utilization of the majority of previously generated loss carryforwards in the U.S., and forecasted future profitability, the Company released a portion of its U.S. valuation allowance. The Company maintained a domestic partial valuation allowance on a capital loss carryforward and certain state loss carryforwards that are expected to expire unused. Metallus has provided a valuation allowance on the aforementioned UK loss carryforward.

The need to maintain valuation allowances against deferred tax assets in the U.S. and other affected countries may cause variability in the Company’s effective tax rate. The majority of Metallus' income taxes are derived from federal, domestic state and local taxes.

As of December 31, 2025 and 2024, the Company had no total gross unrecognized tax benefits, and no amounts which represented unrecognized tax benefits that would favorably impact Metallus' effective income tax rate in any future periods if such benefits were recognized. As of December 31, 2025, Metallus does not anticipate a change in its unrecognized tax positions

during the next 12 months. Metallus had no accrued interest and penalties related to uncertain tax positions as of December 31, 2025 and 2024.

As of December 31, 2025, the tax years 2022 to the present remain open to examination by the IRS.

On July 4, 2025, the reconciliation bill, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was signed into law, which includes a broad range of tax reform provisions, including provisions related to fixed asset bonus depreciation and research and development expenditures, that may affect the Company's financial results. These provisions did not have a material impact on the annual effective tax rate in 2025. The Company is currently evaluating the impact of provisions taking effect in future years, which could affect the Company’s effective tax rate, deferred tax assets, and cash taxes in future periods.

- Definition

The entire disclosure for income tax.

+ References

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+ Details

Metallus Inc. 10-K