Company: MATV
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001000623-25-000024
Chunk: 26

Company: Mativ Holdings, Inc.
Filing Date: 2025-05-08
Form: 10-Q
Item: Item 1
Chunk 26
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 million, respectively, for the three months ended March 31, 2025 and 2024.

Note 13. Income Taxes

The Company's effective tax rate from continuing operations was 5.5% and 7.9% for the three months ended March 31, 2025 and 2024, respectively. The net change was primarily due to mix of earnings, impact from a $48.2 million increase to our valuation allowance, and goodwill impairment not deductible for tax purposes in the current period. The Company has historically calculated the provision or benefit for income taxes during interim reporting periods, by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pre-tax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. The Company determined that since small changes in estimated “ordinary” income would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate for the three-month period ended March 31, 2025. Accordingly, Mativ used a discrete effective tax rate method to calculate taxes for the three-month period ended March 31, 2025. 

Prior to the passage of the Tax Cuts and Jobs Act of 2017 ("Tax Act"), the Company asserted that substantially all of the undistributed earnings of its foreign subsidiaries were considered indefinitely reinvested and accordingly, no deferred taxes were provided. Due to the Tax Act, the Company has significant previously taxed earnings and profits from its foreign subsidiaries, as a result of transition tax, that it is generally able to be repatriated free of U.S. federal tax. In addition, future earnings of foreign subsidiaries are generally expected to be able to be repatriated free of U.S. federal income tax because these earnings were taxed in the U.S. under the GILTI regime or would be eligible for a 100% dividends received deduction. As a result of the Company’s treasury policy to simplify and expediate its intercompany cash flows, as evidenced by the use of cash pooling, and in light of the Company’s demonstrated goal of driving growth though inorganic/acquisitional means, the Company does not assert indefinite reinvestment to the extent of each controlled foreign corporation's earnings and profits and to the extent of any foreign partnership’s U.S. tax capital accounts. As a result, the Company has provided for non-U.S. withholding taxes, U.S. federal tax related to currency movement on previously taxed earnings and profits,