CENTENE CORPCNC
CENTENE CORP Income Taxes Disclosure
Income Taxes
The consolidated income tax expense consists of the following ($ in millions):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Income (loss) from continuing operations before income tax expense (benefit) | ||||||||||||||||||||
| U.S. Federal | $ | (6,727) | $ | 3,529 | $ | 3,686 | ||||||||||||||
Foreign (1) | (1) | 728 | (88) | |||||||||||||||||
| Total | $ | (6,728) | $ | 4,257 | $ | 3,598 | ||||||||||||||
| Income tax expense (benefit) from continuing operations | ||||||||||||||||||||
| Current tax expense (benefit) | ||||||||||||||||||||
| Federal | $ | 77 | $ | 798 | $ | 833 | ||||||||||||||
| State and local | (69) | 142 | 132 | |||||||||||||||||
| Foreign | — | — | 1 | |||||||||||||||||
| Total current tax expense | $ | 8 | $ | 940 | $ | 966 | ||||||||||||||
| Deferred tax expense (benefit) | ||||||||||||||||||||
| Federal | $ | (29) | $ | 8 | $ | (71) | ||||||||||||||
| State and local | (30) | 7 | 33 | |||||||||||||||||
| Foreign | — | 8 | (29) | |||||||||||||||||
| Total deferred tax expense (benefit) | $ | (59) | $ | 23 | $ | (67) | ||||||||||||||
| Total income tax expense (benefit) | ||||||||||||||||||||
| Federal | $ | 48 | $ | 806 | $ | 762 | ||||||||||||||
| State and local | (99) | 149 | 165 | |||||||||||||||||
| Foreign | — | 8 | (28) | |||||||||||||||||
| Total income tax expense (benefit) | $ | (51) | $ | 963 | $ | 899 | ||||||||||||||
(1) | Foreign income from continuing operations includes the Company's Cayman Islands reinsurance entity. The Company has elected for its Cayman Islands entity to be taxed as a U.S. corporation and pays U.S. tax at the 21% tax rate. The U.S. tax resulting from this entity is included in Federal income tax expense. This entity ceased operations in 2025. | |||||||||||||||||||
The reconciliation of the tax provision at the U.S. federal statutory rate to income tax expense (benefit) is as follows ($ in millions):
| Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| Total | % | Total | % | Total | % | |||||||||||||||||||||||||||||||||
| Earnings (loss) from continuing operations, before income tax expense | $ | (6,728) | $ | 4,257 | $ | 3,598 | ||||||||||||||||||||||||||||||||
| Tax provision at the U.S. federal statutory rate | (1,413) | 21.0 | % | 894 | 21.0 | % | 756 | 21.0 | % | |||||||||||||||||||||||||||||
| Federal | ||||||||||||||||||||||||||||||||||||||
| Effect of cross-border tax laws | ||||||||||||||||||||||||||||||||||||||
| Global Intangible Low-Taxed Income (GILTI) | (2) | — | % | 44 | 1.0 | % | 4 | 0.1 | % | |||||||||||||||||||||||||||||
| Cayman Islands | ||||||||||||||||||||||||||||||||||||||
Statutory income tax rate differential (1) | — | — | % | 142 | 3.3 | % | 62 | 1.7 | % | |||||||||||||||||||||||||||||
| Other | 2 | — | % | 2 | — | % | (21) | (0.6) | % | |||||||||||||||||||||||||||||
| Tax credits | — | — | % | (14) | (0.3) | % | (5) | (0.1) | % | |||||||||||||||||||||||||||||
| Changes in valuation allowances | (1) | — | % | (12) | (0.3) | % | (2) | (0.1) | % | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible items | ||||||||||||||||||||||||||||||||||||||
| Nondeductible compensation | 31 | (0.5) | % | 37 | 0.9 | % | 29 | 0.8 | % | |||||||||||||||||||||||||||||
| Nondeductible goodwill | 1,409 | (20.9) | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
| Nontaxable or nondeductible divestiture (gains) losses | 3 | — | % | (97) | (2.3) | % | (9) | (0.3) | % | |||||||||||||||||||||||||||||
| Other nontaxable or nondeductible items | 19 | (0.3) | % | (1) | — | % | (6) | (0.2) | % | |||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||||||||
| Excess tax detriment (benefit) on stock awards | 4 | (0.1) | % | (3) | (0.1) | % | (59) | (1.6) | % | |||||||||||||||||||||||||||||
| Other | (24) | 0.4 | % | 9 | 0.2 | % | 26 | 0.7 | % | |||||||||||||||||||||||||||||
| Foreign tax effects | ||||||||||||||||||||||||||||||||||||||
| United Kingdom | ||||||||||||||||||||||||||||||||||||||
| Nondeductible goodwill | — | — | % | (34) | (0.8) | % | 83 | 2.3 | % | |||||||||||||||||||||||||||||
| Other | — | — | % | 12 | 0.3 | % | (26) | (0.7) | % | |||||||||||||||||||||||||||||
| Cayman Islands | ||||||||||||||||||||||||||||||||||||||
Statutory income tax rate differential (1) | — | — | % | (142) | (3.3) | % | (62) | (1.7) | % | |||||||||||||||||||||||||||||
| Other jurisdictions | — | — | % | 7 | 0.2 | % | (16) | (0.4) | % | |||||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | (92) | 1.4 | % | 24 | 0.6 | % | 27 | 0.8 | % | |||||||||||||||||||||||||||||
State income taxes, net of federal income tax benefit (2) | 13 | (0.2) | % | 95 | 2.2 | % | 118 | 3.3 | % | |||||||||||||||||||||||||||||
| Income tax (benefit) expense | $ | (51) | 0.8 | % | $ | 963 | 22.6 | % | $ | 899 | 25.0 | % | ||||||||||||||||||||||||||
(1) | The Company has elected for its Cayman Islands reinsurance entity to be taxed as a U.S. corporation and pays U.S. tax at the 21% tax rate. The taxability of this entity does not represent a reconciling item between the U.S. federal rate and the Company's effective tax rate. This entity ceased operations in 2025. | |||||||||||||||||||||||||||||||||||||
(2) | During the year ended December 31, 2025, state taxes in Pennsylvania comprised greater than 50% of the tax effect in this category. During the year ended December 31, 2024, state taxes in California, Florida and Illinois comprised greater than 50% of the tax effect in this category. During the year ended December 31, 2023, state taxes in California and Florida comprised greater than 50% of the tax effect in this category. | |||||||||||||||||||||||||||||||||||||
Income taxes paid are as follows ($ in millions):
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
U.S. Federal (1) | $ | 364 | $ | 930 | $ | 698 | ||||||||||||||
| California | 27 | * | * | |||||||||||||||||
| Florida | 23 | * | * | |||||||||||||||||
| Pennsylvania | * | * | 53 | |||||||||||||||||
Other (2) | 34 | 71 | 138 | |||||||||||||||||
| Total U.S. State and Local | 84 | 71 | 191 | |||||||||||||||||
| Foreign | — | 1 | (2) | |||||||||||||||||
| Total income taxes paid, net | $ | 448 | $ | 1,002 | $ | 887 | ||||||||||||||
(1) | Includes amounts paid to purchase transferable tax credits of $78 million, $100 million and $49 million during the years ended December 31, 2025, 2024 and 2023, respectively. | |||||||||||||||||||
(2) | Includes amounts paid to purchase transferable tax credits of $23 million, $15 million and $10 million during the years ended December 31, 2025, 2024 and 2023, respectively. | |||||||||||||||||||
* | The amount of income taxes paid to these jurisdictions during the year does not meet the 5% disaggregation threshold. | |||||||||||||||||||
The tax effects of temporary differences which give rise to deferred tax assets and liabilities are presented below ($ in millions):
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Medical claims liability | $ | 178 | $ | 178 | |||||||
| Nondeductible liabilities | 69 | 81 | |||||||||
| Net operating loss and other carryforwards | 106 | 70 | |||||||||
| Compensation accruals | 105 | 93 | |||||||||
| Premium and trade receivables | 88 | 72 | |||||||||
| Operating lease liability | 196 | 231 | |||||||||
| Unrealized gain/loss | 13 | 153 | |||||||||
| Software development costs | 178 | 246 | |||||||||
| Other | 48 | 92 | |||||||||
| Deferred tax assets | 981 | 1,216 | |||||||||
| Valuation allowance | (67) | (77) | |||||||||
| Net deferred tax assets | $ | 914 | $ | 1,139 | |||||||
| Deferred tax liabilities: | |||||||||||
| Goodwill and intangible assets | $ | 1,376 | $ | 1,518 | |||||||
| Fixed assets | 198 | 135 | |||||||||
| Investments in subsidiaries and joint ventures (outside basis) | 68 | — | |||||||||
| Right-of-use asset | 78 | 88 | |||||||||
| Other | 27 | 82 | |||||||||
| Deferred tax liabilities | 1,747 | 1,823 | |||||||||
| Net deferred tax liabilities | $ | (833) | $ | (684) | |||||||
Valuation allowances are provided when it is considered more likely than not that deferred tax assets will not be realized. The valuation allowances primarily relate to future tax benefits on certain state net operating loss and capital loss carryforwards and federal and state tax credit carryforwards.
State net operating loss and tax credit carryforwards of $45 million expire beginning in 2026 through 2044, while the remaining $16 million have indefinite carryforward periods.
The Company maintains a reserve for uncertain tax positions that may be challenged by a tax authority. A rollforward of the beginning and ending amount of uncertain tax positions, exclusive of related interest and penalties, is as follows ($ in millions):
| Year Ended December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Gross unrecognized tax benefits, January 1 | $ | 340 | $ | 439 | ||||||||||
| Gross increases: | ||||||||||||||
| Current year tax positions | 12 | 16 | ||||||||||||
| Prior year tax positions | 4 | 31 | ||||||||||||
| Gross decreases: | ||||||||||||||
Settlements (1) | (8) | (133) | ||||||||||||
| Prior year tax positions | (8) | (6) | ||||||||||||
| Statute of limitation lapses | (110) | (7) | ||||||||||||
| Gross unrecognized tax benefits, December 31 | $ | 230 | $ | 340 | ||||||||||
(1) | Settlements for the year ended December 31, 2024 primarily reflected the resolution of an item that had no net impact on the Consolidated Statement of Operations. | |||||||||||||
As of December 31, 2025, $120 million of unrecognized tax benefits would impact the Company's effective tax rate in future periods, if recognized.
The table above excludes interest and penalties, net of related tax benefits, which are treated as income tax expense (benefit) under the Company's accounting policy. The Company recognized a net reduction of interest expense and penalties related to uncertain positions of $37 million for the year ended December 31, 2025. For the year ended December 31, 2024, the Company recognized net interest expense and penalties related to uncertain positions of $13 million. The Company had $61 million and $98 million of accrued interest and penalties for uncertain tax positions as of December 31, 2025 and 2024, respectively.
The Company files federal tax returns as well as returns for numerous state tax jurisdictions and is engaged in multiple audit proceedings for its state filings. Generally, no further state audit activity is expected for years prior to 2016. Additionally, the Company's tax returns are under federal examination for tax years 2021 through 2022.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 17, 2026 | Showing above |
| 2017 | Feb 20, 2018 | |
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.