POPULAR, INC.BPOP
POPULAR, INC. Income Taxes Disclosure
Note 34 – Income taxes
The income before income tax and the components of income tax expense disaggregated between domestic (Puerto Rico) and
foreign (including Unites States federal and state) for the years ended December 31, 2025, 2024 and 2023 are summarized in the
following tables:
(In thousands)
2025
2024
2023
Income before income tax
Puerto Rico
$
730,740
$
545,298
$
468,001
Foreign
276,053
251,320
207,538
Total income before tax
$
1,006,793
$
796,618
$
675,539
Current income tax expense:
Puerto Rico
$
107,055
$
107,405
$
168,001
Foreign
60,197
51,291
9,335
Total current income tax expense
$
167,252
$
158,696
$
177,336
Deferred income tax (benefit) expense:
Puerto Rico
$
(7,473)
$
(6,982)
$
(50,871)
Foreign
13,855
30,692
7,732
Total deferred income tax expense (benefit)
$
6,382
$
23,710
$
(43,139)
Total income tax expense
$
173,634
$
182,406
$
134,197
The following table represents income taxes paid (net of refunds) for the year ended December 31, 2025:
(In thousands)
2025
Income Taxes Paid
Puerto Rico [1]
$
148,043
Foreign income tax paid
United States Federal
40,820
United States - States and Local
15,077
Other Foreign
234
Total foreign income tax paid
56,131
Total income tax paid
$
204,174
[1] Includes $
141.8
The tables below present a reconciliation of the statutory income tax rate to the effective income tax rate. The Company uses the
Puerto Rico statutory tax rate as the national tax rate, since Popular, Inc. is based in Puerto Rico.
2025
(In thousands)
Amount
% of pre-tax
income
Computed income tax at Puerto Rico statutory tax rate
$
377,547
37.5
%
Foreign Tax Effects
Statutory Tax Rate difference between United States and Puerto Rico
(21,337)
(2.1)
BPPR U.S. Branch Federal and State Taxes
30,789
3.1
State and Local Taxes
14,821
1.5
Other adjustments
1,050
0.1
Other foreign jurisdictions
(89)
-
Total foreign tax effects
25,234
2.6
Effect of Cross Borders Tax Laws
P.R. Tax on Intercompany Distributions
(980)
(0.1)
P.R. foreign tax credit
(30,789)
(3.1)
Total effect of cross borders tax laws
(31,769)
(3.2)
Tax Credits
Discount on Tax Credits Purchased
(8,443)
(0.8)
Total tax credits
(8,443)
(0.8)
Change in Valuation Allowance
11,512
1.1
Non taxable or Non deductible Items
Net benefit of tax-exempt interest income
(152,774)
(15.2)
International banking entity exempt income
(36,484)
(3.6)
Other
(5,729)
(0.6)
Total non-taxable or non-deductible items
(194,987)
(19.4)
Effect of Other Adjustments
(5,460)
(0.5)
Income tax expense
$
173,634
17.3
%
2024
2023
(In thousands)
Amount
% of pre-tax
income
Amount
% of pre-tax
income
Computed income tax at statutory states
$
298,732
37.5
%
253,327
37.5
%
Net benefit of tax-exempt interest income
(125,732)
(15.8)
(95,222)
(14.1)
Effect of income subject to preferential tax rate
(29)
-
(1,854)
(0.3)
Deferred tax asset valuation allowance
3,390
0.4
2,304
0.3
Difference in tax rates due to multiple jurisdictions
(17,111)
(2.1)
(12,857)
(1.9)
Change in tax rates
Unrecognized tax benefits
-
-
(1,529)
(0.2)
Other tax benefits
(4,500)
(0.6)
(2,925)
(0.4)
Tax on intercompany distributions
24,325
3.1
-
-
States and local taxes
9,634
1.2
6,687
1.0
Others
(6,303)
(0.8)
(13,734)
(2.0)
Income tax expense
$
182,406
22.9
%
134,197
19.9
%
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and their tax bases. Significant components of the Corporation’s deferred tax assets and liabilities at
2025 and 2024 were as follows:
December 31, 2025
PR
US
Total
Deferred tax assets:
Tax credits available for carryforward
$
7,318
$
46,632
$
53,950
Net operating loss and other carryforward available
59,578
568,156
627,734
Postretirement and pension benefits
29,453
-
29,453
Allowance for credit losses
255,017
28,465
283,482
Deferred loan origination fees/cost
7,205
(2,474)
4,731
Depreciation
8,422
7,899
16,321
FDIC-assisted transaction
152,665
-
152,665
Lease liability
27,382
17,758
45,140
Unrealized net loss on investment securities
160,809
12,850
173,659
Difference in outside basis from pass-through entities
54,457
-
54,457
Mortgage Servicing Rights
15,375
-
15,375
Other temporary differences
26,347
7,586
33,933
Total gross deferred tax assets
804,028
686,872
1,490,900
Deferred tax liabilities:
Intangibles
92,797
55,760
148,557
Right of use assets
24,846
15,875
40,721
Loans acquired
17,053
-
17,053
Other temporary differences
7,082
429
7,511
Total gross deferred tax liabilities
141,778
72,064
213,842
Valuation allowance
78,153
386,587
464,740
Net deferred tax asset
$
584,097
$
228,221
$
812,318
PR
US
Total
Deferred tax assets:
Tax credits available for carryforward
$
4,861
$
24,728
$
29,589
Net operating loss and other carryforward available
52,211
610,279
662,490
Postretirement and pension benefits
27,786
-
27,786
Allowance for credit losses
247,153
24,415
271,568
Depreciation
7,700
7,229
14,929
FDIC-assisted transaction
152,665
-
152,665
Lease liability
25,167
16,451
41,618
Unrealized net loss on investment securities
252,411
20,996
273,407
Difference in outside basis from pass-through entities
50,144
-
50,144
Mortgage Servicing Rights
14,475
-
14,475
Other temporary differences
41,127
9,072
50,199
Total gross deferred tax assets
875,700
713,170
1,588,870
Deferred tax liabilities:
Intangibles
88,351
55,926
144,277
Right of use assets
22,784
14,454
37,238
Deferred loan origination fees/cost
(1,880)
2,085
205
Loans acquired
18,415
-
18,415
Other temporary differences
6,799
429
7,228
Total gross deferred tax liabilities
134,469
72,894
207,363
Valuation allowance
69,837
386,914
456,751
Net deferred tax asset
$
671,394
$
253,362
$
924,756
The net deferred tax asset shown in the table above at December 31, 2025, is reflected in the consolidated statements of financial
condition as $
814.2
926.3
1.9
million in deferred tax liabilities (in the “other liabilities” caption) (December 31, 2024- $
1.6
tax assets or liabilities of individual tax-paying subsidiaries of the Corporation in their respective tax jurisdiction, Puerto Rico or the
United States. During the year ended December 31, 2025, the net valuation allowance increased by approximately $
8.0
The deferred tax asset related to the NOLs and other carryforwards as of December 31, 2025, expires as follows:
(In thousands)
2027
406
2028
196,569
2029
118,594
2030
127,136
2031
103,555
2032
15,872
2033
21,032
2034
-
2035
44,570
$
627,734
At December 31, 2025, the net deferred tax asset of the U.S. operations amounted to $
614.8
$
386.6
228.2
taxing jurisdiction, on a quarterly basis. The U.S. Operations have generated taxable income each of the last three years, with 2025
having the highest taxable income. These financial results are objectively verifiable positive evidence. Additionally, the Corporation
considered as negative evidence, inconsistency in performance trends, including lower than anticipated results in recent periods.
changes in macroeconomic conditions, geopolitical issues, and shifts in monetary policy. In addition, management evaluated the
expiration period of the NOLs carried forward which begin to expire in 2028.
As of December 31, 2025, after weighting all positive and negative evidence, the Corporation concluded that it is more likely than
not that approximately $
228.2
will be realized. The Corporation based this determination on its estimated taxable income available to realize the deferred tax
assets for the remaining carryforward periods, together with the historical level of book income adjusted by permanent differences
and taxable income. Management will continue to monitor and review the U.S. operation’s results, including recent earnings trends,
pre-tax earnings forecasts, new tax initiatives, and performance indicators such as net income versus forecast, targeted loan
growth, net interest income margin, changes in deposit costs, allowance for credit losses, charge-offs, NPLs inflows, and NPA
balances. Significant changes, or a combination of changes, could positively or negatively impact the amount of deferred tax assets
to be realized in the future.
At December 31, 2025, the Corporation’s net deferred tax assets related to its Puerto Rico operations amounted to $
662.3
The Corporation’s Puerto Rico Banking operation has strong historical record of profitability. This is considered a strong piece of
objectively verifiable positive evidence that outweighs any negative evidence considered by Management in the evaluation of the
realization of the deferred tax assets. Based on this evidence and Management’s estimate of future taxable income, the Corporation
has concluded that it is more likely than not that such net deferred tax assets of the Puerto Rico Banking operations will be realized.
The Holding Company operation has been in a cumulative loss position in recent years. Management expects these losses will be a
trend in future years. This objectively verifiable negative evidence is considered by Management strong negative evidence that
suggests that income in future years will be insufficient to support the realization of all deferred tax assets. After weighting of all
positive and negative evidence, Management concluded as of the reporting date, that it is more likely than not that the Holding
Company will not be able to realize any portion of the deferred tax assets. Accordingly, the Corporation has maintained a valuation
allowance on the deferred tax assets of $
78.2
The Corporation’s subsidiaries in the United States file a consolidated federal income tax return. The intercompany settlement of
taxes paid is based on tax sharing agreements which generally allocate taxes to each entity based on a separate return basis.
The following table presents a reconciliation of unrecognized tax benefits.
(In millions)
Balance at January 1, 2024
$
1.5
Balance at December 31, 2024
$
1.5
Balance at December 31, 2025
$
1.5
At December 31, 2025, the total amount of interest recognized in the statement of financial condition approximated $
2.5
(2024 - $
2.4
110
110
determined that, as of December 31, 2025 and 2024, there was
no
policy is to report interest related to unrecognized tax benefits in income tax expense, while the penalties, if any, are reported in
other operating expenses in the consolidated statements of operations.
After consideration of the effect on U.S. federal tax of unrecognized U.S. state tax benefits, the total amount of unrecognized tax
benefits, including U.S. and Puerto Rico that, if recognized, would affect the Corporation’s effective tax rate, was approximately $
3.0
million at December 31, 2025 (2024 - $
3.0
The amount of unrecognized tax benefits may increase or decrease in the future for various reasons including adding amounts for
current tax year positions, expiration of open income tax returns due to the statute of limitations, changes in management’s
judgment about the level of uncertainty, status of examinations, litigation and legislative activity, and the addition or elimination of
uncertain tax positions. The Corporation does not anticipate a reduction in the total amount of unrecognized tax benefits within the
next 12 months.
The Corporation and its subsidiaries file income tax returns in Puerto Rico, the U.S. federal jurisdiction, various U.S. states and
political subdivisions, and foreign jurisdictions. As of December 31, 2025, the following years remain subject to examination in the
U.S. Federal jurisdiction – 2022 and thereafter and in the Puerto Rico jurisdiction – 2019 and thereafter.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 29, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Mar 1, 2021 | |
| 2019 | Mar 2, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 29, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.