COLGATE PALMOLIVE COCL
COLGATE PALMOLIVE CO Income Taxes Disclosure
Income Taxes
The components of Income before income taxes are as follows for the years ended December 31:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| United States | $ | 1,419 | $ | 1,084 | $ | 692 | ||||||||||||||
| International | 1,640 | 2,872 | 2,700 | |||||||||||||||||
| Total Income before income taxes | $ | 3,059 | $ | 3,956 | $ | 3,392 | ||||||||||||||
The Provision for income taxes consists of the following for the years ended December 31:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| U.S. federal | $ | 168 | $ | 169 | $ | 77 | ||||||||||||||
| U.S. state and local | 42 | 19 | (5) | |||||||||||||||||
| International | 588 | 719 | 865 | |||||||||||||||||
| Total Provision for income taxes | $ | 798 | $ | 907 | $ | 937 | ||||||||||||||
Temporary differences between accounting for financial statement purposes and accounting for tax purposes result in the current provision for taxes being higher (lower) than the total provision for income taxes as follows:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Goodwill and intangible assets | $ | 129 | $ | 3 | $ | 1 | ||||||||||||||
| Property, plant and equipment | 23 | 12 | (13) | |||||||||||||||||
| Pension and other retiree benefits | (22) | (6) | 68 | |||||||||||||||||
| Stock-based compensation | — | (14) | 2 | |||||||||||||||||
| Right-of-use assets/lease liabilities | — | 2 | 1 | |||||||||||||||||
| Tax credits and tax loss carryforwards, net of valuation allowance | (42) | 37 | 29 | |||||||||||||||||
| Deferred withholding tax | (4) | (14) | 7 | |||||||||||||||||
| Research and experimentation capitalization | 23 | 21 | 29 | |||||||||||||||||
| Other, net | 49 | (8) | 11 | |||||||||||||||||
| Total deferred tax benefit (provision) | $ | 156 | $ | 33 | $ | 135 | ||||||||||||||
The difference between the statutory U.S. federal income tax rate and the Company's global effective tax rate as reflected in the Consolidated Statements of Income is as follows:
| 2025 | |||||||||||
| Amount | Percent | ||||||||||
| U.S. federal statutory tax rate | $ | 642 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect(a) | 42 | 1.4 | |||||||||
| Foreign tax effects | |||||||||||
| Brazil | 38 | 1.2 | |||||||||
| Switzerland | |||||||||||
| Statutory income tax rate differential | (82) | (2.7) | |||||||||
| Local income tax | 35 | 1.1 | |||||||||
| Other | 12 | 0.4 | |||||||||
| France | |||||||||||
| Nondeductible goodwill impairment | 59 | 1.9 | |||||||||
| Other | (13) | (0.4) | |||||||||
| Other foreign jurisdictions | 168 | 5.5 | |||||||||
| Effect of cross-border tax laws | |||||||||||
| Foreign-derived intangible income benefit | (88) | (2.9) | |||||||||
| Foreign tax credits | (83) | (2.7) | |||||||||
| Branch U.S. tax, net of foreign tax credit | (49) | (1.6) | |||||||||
| Other | (15) | (0.5) | |||||||||
| Tax credits | (10) | (0.3) | |||||||||
| Changes in valuation allowances | |||||||||||
| Branch U.S. tax | 65 | 2.1 | |||||||||
| Other | 5 | 0.2 | |||||||||
| Nontaxable or nondeductible items | |||||||||||
| Nondeductible goodwill impairment | 37 | 1.2 | |||||||||
| Other | 19 | 0.6 | |||||||||
| Changes in unrecognized tax benefits | 23 | 0.7 | |||||||||
| Other | (7) | (0.1) | |||||||||
| Global effective tax rate | $ | 798 | 26.1 | % | |||||||
(a) State taxes in Kansas, California and Illinois made up the majority (greater than 50 percent) of this category.
| 2024 | 2023 | |||||||||||||
| Percentage of Income before income taxes | ||||||||||||||
| U.S. federal statutory rate | 21.0 | % | 21.0 | % | ||||||||||
| State and local income taxes, net of federal benefit | 0.5 | (0.1) | ||||||||||||
| Earnings taxed at other than U.S. federal statutory rate | 4.1 | 5.4 | ||||||||||||
| Non-deductible goodwill impairment charges | — | — | ||||||||||||
| Foreign-derived intangible income benefit | (2.6) | (2.4) | ||||||||||||
| Foreign tax matter | — | 3.7 | ||||||||||||
| Other, net | (0.1) | — | ||||||||||||
| Global effective tax rate | 22.9 | % | 27.6 | % | ||||||||||
A summary of income taxes paid in 2025 is as follows:
| 2025 | ||||||||
| U.S. federal | $ | 268 | ||||||
| U.S. state and local | 33 | |||||||
| Foreign | ||||||||
| Brazil | 76 | |||||||
| India | 68 | |||||||
| Mexico | 70 | |||||||
| Switzerland | 48 | |||||||
| Other foreign jurisdictions | 350 | |||||||
| Total | $ | 913 | ||||||
The components of deferred tax assets (liabilities) are as follows at December 31:
| 2025 | 2024 | |||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Goodwill and intangible assets | $ | (283) | $ | (389) | ||||||||||
| Property, plant and equipment | (384) | (397) | ||||||||||||
| Right-of-use assets | (124) | (126) | ||||||||||||
| Deferred withholding tax | (114) | (110) | ||||||||||||
| Other | (71) | (130) | ||||||||||||
| Total deferred tax liabilities | (976) | (1,152) | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Pension and other retiree benefits | 245 | 272 | ||||||||||||
| Tax credits and tax loss carryforwards | 493 | 430 | ||||||||||||
| Lease liabilities | 134 | 137 | ||||||||||||
| Accrued liabilities | 266 | 223 | ||||||||||||
| Stock-based compensation | 61 | 61 | ||||||||||||
| Research and experimentation capitalization | 132 | 108 | ||||||||||||
| Other | 99 | 101 | ||||||||||||
| Total deferred tax assets | 1,430 | 1,332 | ||||||||||||
| Valuation allowance | $ | (430) | $ | (328) | ||||||||||
| Net deferred tax assets | $ | 1,000 | $ | 1,004 | ||||||||||
| Net deferred income taxes | $ | 24 | $ | (148) | ||||||||||
The changes in valuation allowance for deferred tax assets are as follows:
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance, January 1 | $ | 328 | $ | 287 | $ | 129 | |||||||||||
| Additions | |||||||||||||||||
| Charged to costs and expenses | 102 | 56 | 158 | ||||||||||||||
| Deductions | — | 15 | — | ||||||||||||||
| Balance, December 31 | $ | 430 | $ | 328 | $ | 287 | |||||||||||
The Company has made an accounting policy election to treat Global Intangible Low-Taxed Income taxes as a current period expense rather than including these amounts in the measurement of deferred taxes.
As of December 31, 2025, the Company had net operating losses (“NOLs”) and capital loss carryforwards of $38. Of this amount, capital loss and NOL carryforwards of $4 will begin to expire in 2026 and NOLs of $6 can be carried forward indefinitely. The Company believes that it will be able to utilize these capital loss and NOL carryforwards. There is an additional NOL of $28 which has a full valuation allowance.
As of December 31, 2025, the Company has $455 of tax credits, of which $36 will begin to expire in 2031 and $17 can be carried forward indefinitely. The Company believes that it will be able to utilize these tax credits. The remaining credits of $402 have a full valuation allowance.
Applicable U.S. income and foreign withholding taxes have been provided on substantially all of the Company’s accumulated earnings of foreign subsidiaries.
Net tax benefit of $76, net tax expense of $55 and net tax benefit of $19 were recorded directly through equity in 2025, 2024 and 2023 respectively. The net tax expense or benefit in each year predominantly includes current and future tax impacts related to benefit plans and the impact of currency translation adjustments.
The Company uses a comprehensive model to recognize, measure, present and disclose in its financial statements uncertain tax positions that the Company has taken or expects to take on an income tax return.
Unrecognized tax benefits activity for the years ended December 31, 2025, 2024 and 2023 is summarized below:
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Unrecognized tax benefits: | ||||||||||||||||||||
| Balance, January 1 | $ | 296 | $ | 314 | $ | 298 | ||||||||||||||
| Increases as a result of tax positions taken during the current year | 25 | 37 | 73 | |||||||||||||||||
| Decreases of tax positions taken during prior years | (22) | (53) | (61) | |||||||||||||||||
| Increases of tax positions taken during prior years | 10 | 10 | 6 | |||||||||||||||||
Decreases as a result of settlements with taxing authorities and the expiration of statutes of limitations | (1) | (3) | (2) | |||||||||||||||||
Effect of foreign currency rate movements | 11 | (9) | — | |||||||||||||||||
| Balance, December 31 | $ | 319 | $ | 296 | $ | 314 | ||||||||||||||
If all of the unrecognized tax benefits for 2025 above were recognized, approximately $308 would impact the effective tax rate.
The Company recognized expenses of approximately $26, $22 and $10 for interest and penalties related to the above unrecognized tax benefits within income tax expense in 2025, 2024 and 2023, respectively. The Company had accrued interest and penalties of approximately $95, $68 and $45 as of December 31, 2025, 2024 and 2023, respectively.
The Company has ongoing federal, state and international income tax audits in various jurisdictions and evaluates uncertain tax positions that may be challenged by local tax authorities and not fully sustained. All U.S. federal income tax returns through December 31, 2013 have been audited by the IRS and there are limited matters which the Company plans to appeal for years 2010 through 2013. One such matter relates to the IRS assessment of taxes on the Company by imputing income on certain activities within one of our international operations, which is also under audit for the years 2014 through 2018. There were U.S. Tax Court rulings during 2023 in favor of the IRS against two unrelated third parties on similar matters. In October 2025, in one of those cases, the relevant U.S. Court of Appeals reversed the U.S. Tax Court’s decision and ruled in favor of the taxpayer. The case involving the other third party is still pending. The Company continues to believe that the tax assessment against the Company is without merit. While there can be no assurances, the Company believes this matter will ultimately be decided in favor of the Company.
The amount of tax plus interest for the years 2010 through 2018 is estimated to be approximately $165, which is not included in the Company’s uncertain tax positions. In May 2024, the IRS initiated an audit for the years 2019 through 2021 which is still ongoing.
On July 4, 2025, U.S. tax legislation was signed into law (known as the “One Big Beautiful Bill Act” or “OBBBA”) which makes permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. In addition, the OBBBA makes changes to certain U.S. corporate tax provisions, many of which are generally not effective until January 1, 2026. The OBBBA did not have a material effect on the Company’s Consolidated Financial Statements for the fiscal year ended December 31, 2025. The Company is currently evaluating the future impact of the OBBBA, but does not expect it will have a material impact on its Consolidated Financial Statements.
In the third quarter of 2023, the Internal Revenue Service (the “IRS”) issued a notice giving taxpayers temporary relief from the effects of certain U.S. tax regulations that were issued in December 2021 which place greater restrictions on foreign taxes that are creditable against U.S. taxes on foreign source income. This notice allowed taxpayers to defer the application of these new regulations through the end of 2023. In December 2023, the IRS issued further guidance modifying this temporary relief period to the date that a notice or other guidance withdrawing or modifying the temporary relief is issued. The Company will recognize the impact, if any, in the period in which the temporary relief is withdrawn or modified.
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted, which among other things, implements a 15% minimum tax on book income of certain large corporations effective for years beginning after December 31, 2022. Subsequent to the IRA’s enactment, the U.S. Treasury Department and the IRS released proposed regulations relating principally to this 15% minimum tax. Based on the Company’s analysis, these proposed regulations have not had and, if finalized in their current form, are not expected to have an impact on its Consolidated Financial Statements. The IRS has announced its intent to partially withdraw and revise the proposed regulations. The Company will continue to evaluate any additional guidance and clarification that becomes available.
On December 15, 2022, the 27 member states of the European Union (“EU”) reached an agreement to establish a minimum level of taxation for certain large corporations by paying a minimum corporate tax rate of 15% in every jurisdiction in which they operate. This agreement, which is part of the Pillar II Model Rules initiative (“Pillar II”) agreed by all members of the Organization for Economic Cooperation and Development (“OECD”) and its Inclusive Framework (“IF”), was transposed into the laws of most EU member states by December 31, 2023. Subsequently, many other jurisdictions outside the EU have enacted similar minimum tax regimes consistent with the policy of Pillar II.
Based on current legislation and available guidance, apart from the significant additional time and resources required to comply, Pillar II did not have a material impact to the Company’s Consolidated Financial Statements for the fiscal year ended December 31, 2025 and the Company does not believe it will have a material impact going forward on its business, results of operations, cash flows and financial condition.
On January 5, 2026, IF reached an agreement known as the “Side-by-Side Package” that modifies key aspects of Pillar II and is effective from January 1, 2026. The Company is currently evaluating the potential impact of the Side-by-Side Package on its future tax liability and compliance burden. The Side-by-Side Package introduces various new safe harbors that the Company is expected to be eligible for and that, when fully enacted, should result in a reduction of compliance costs of Pillar II, among other benefits. However, as these rules and related regulations are revised and implemented, the Company will evaluate the impact, if any, on its Consolidated Financial Statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 23, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 18, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 15, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 18, 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.