INCOME TAXES |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2026 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| INCOME TAXES | INCOME TAXES Provision (Benefit) for Income Taxes The Provision (benefit) for income taxes for interim periods is calculated using an estimate of the annual effective income tax rate for the full year to be applied to the respective interim period, taking into account year-to-date results and projected full year results as well as separate consideration for the effect of significant, infrequent or unusual items. Estimating the Provision (benefit) for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which the Company operates. Future changes in applicable laws, projected levels of taxable income and tax planning could change the effective tax rate and tax balances recorded by the Company. In addition, tax authorities periodically review income tax returns filed by the Company and can raise issues regarding its filing positions, timing and amount of income or deductions, and the allocation of income among the jurisdictions in which the Company operates. Changes in any of these estimates could have a material impact on the Company’s Provision (benefit) for income taxes. For the three months ended June 30, 2026 and 2025, the effective tax rate was 5% and 22%, respectively. For the six months ended June 30, 2026 and 2025, the effective tax rate was 4% and 21%, respectively. The difference between the effective tax rate and the statutory tax rate primarily relates to the non-deductible nature of the Company’s goodwill impairment charge taken during the period as well as jurisdictional mix of earnings and effects of cross-border transactions in preparation for the Distribution. Tax Legislation In July 2025, Public Law 119-21, commonly referred to as the One Big Beautiful Bill Act (“OBBBA”), was enacted in the United States. The OBBBA introduces several significant changes, including the permanent extension and modification of certain expiring provisions of the Tax Cuts and Jobs Act. The legislation has multiple effective dates, with certain provisions taking effect in tax year 2025 and others phased in through 2027. There were no material impacts of this legislation on the Company's Condensed Consolidated Financial Statements to date; however, management will continue to evaluate the full impact of these legislative changes as more guidance becomes available. Other Items The Company is currently under examination by the Internal Revenue Service (the “IRS”) for the years 2014 through 2020. In May 2026, the Company received draft notices of proposed adjustment (“NOPA”) from the IRS for the years 2019 and 2020, which relate primarily to tax method changes, net operating loss carryback claims, and Base Erosion and Anti-Abuse Tax (BEAT) liability on sales-based royalties. In June 2026, the Company received a final Revenue Agent Report (“RAR”) which assessed an adjustment to the refund requested of $31.0 million. The Company disagrees with the final assessment, has informed the IRS audit team of its intent to contest the RAR, and has been in communication with its advisors to begin the rebuttal process. This matter is subject to an agreed-upon cost-sharing arrangement with Hexagon pursuant to the Tax Disaffiliation Agreement entered into in connection with the Distribution. During the second quarter of 2026, the Company identified an error in the calculation of the income tax provision, including the split between current and deferred income taxes. Management determined the error was not material to any previously issued or current period financial statements. Accordingly, the Company recorded a correction in the current quarter to Deferred tax liabilities of $33.4 million with a corresponding offset in Net transfers (to) from Hexagon in the Condensed Consolidated Statements of Equity. Supplemental cash flow information related to taxes is as follows:
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