v3.26.1
Income Taxes
 6 Months Ended
Jun. 30, 2026
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
We determine the interim tax benefit (provision) by applying an estimate of the annual effective tax rate to the year-to-date pretax book income (loss) and adjusting for discrete items during the reporting period, if any. Tax jurisdictions with losses for which tax benefits cannot be realized, as well as significant unusual or infrequently occurring items that are separately reported, are excluded from the annual effective tax rate.

Our tax rate for the three and six months ended June 30, 2026 of 33% and 27% differed from the federal statutory rate of 21% due to the impact of valuation allowances on deferred tax assets, the forecasted mix of earnings in domestic and international jurisdictions, an intra-entity asset transfer, the effect of cross-border tax laws, nondeductible executive compensation, a benefit related to stock-based compensation, tax credits, state taxes, and uncertain tax positions. During the second quarter we completed an intra-entity asset transfer, resulting in an increase in our tax rate compared with the first quarter.

Our tax rate for the three and six months ended June 30, 2025 of 18% and 19% differed from with the federal statutory rate of 21% and overall was impacted by the effect of valuation allowances on deferred tax assets, the forecasted mix of earnings in domestic and international jurisdictions, the effect of cross-border tax laws, nondeductible executive compensation, a benefit related to stock-based compensation, tax credits, state taxes, and uncertain tax positions.

A sweeping legislative package formally titled "An act to provide for reconciliation pursuant to title II of H. Con. Res. 14" (the "Act"), and commonly referred to as the One Big Beautiful Bill Act, was signed into law on July 4, 2025. The legislation included numerous changes to existing tax law that took effect in 2026. There were also changes that were retroactive to the beginning of 2025, including the deductibility of current and previously capitalized domestic research and development costs. These changes did not have a significant impact on our consolidated financial statements.

The Organization for Economic Cooperation and Development (OECD) guidance under the Base Erosion and Profit Shifting (BEPS) initiative aims to minimize perceived tax abuses and modernize global tax policy, including the implementation of a global minimum effective tax rate of 15%. In December 2022, the Council of the European Union adopted OECD Pillar 2 for implementation by European Union member states by December 31, 2023. The resulting legislation in most countries where Itron has significant operations took effect for calendar year 2024. We filed our Global Information Return relating to tax year 2024, which resulted in no material top-up taxes. The OECD released further guidance on January 6, 2026, which included new and revised safe harbor rules, including a new permanent safe harbor, and the framework for a "side-by-side" agreement that would exempt US-based multinational companies from all top-up taxes, other than qualified domestic top-up taxes imposed on subsidiaries in their countries of residence. Enactment through legislation will be required in order for this additional guidance to be effective and is expected to only be effective for years after 2025. These enactments or amendments could adversely affect our tax rate and ultimately result in a negative impact on our operating results and cash flows. Consistent with calculations for calendar years 2024 and 2025, the Company anticipates it will meet the safe harbors in most jurisdictions in 2026, and any remaining top-up tax should be immaterial.

We classify interest expense and penalties related to unrecognized tax benefits and interest income on tax overpayments as components of income tax expense. The net interest and penalties expense recognized were as follows:
Three Months Ended June 30,Six Months Ended June 30,
In thousands2026202520262025
Net interest and penalties expense$656 $907 $1,297 $2,050 
Accrued interest and penalties recognized were as follows:
In thousandsJune 30, 2026December 31, 2025
Accrued interest$5,188 $3,909 
Accrued penalties131 137 

Unrecognized tax benefits related to uncertain tax positions and the amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate were as follows:
In thousandsJune 30, 2026December 31, 2025
Unrecognized tax benefits related to uncertain tax positions$69,021 $68,926 
The amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate
69,008 68,913 

At June 30, 2026, we are under examination by certain tax authorities. We believe we have appropriately accrued for the expected outcome of all tax matters and do not currently anticipate that the ultimate resolution of these examinations will have a material adverse effect on our financial condition, future results of operations, or cash flows.
We file income tax returns in various jurisdictions. The material jurisdictions where we are subject to examination include, among others, the United States, Canada, France, Germany, India, Italy, Indonesia, Israel, and the United Kingdom.