Gen Digital Inc.GEN
Gen Digital Inc. Income Taxes Disclosure
Income Taxes
The components of our income (loss) before income taxes are as follows:
| Year Ended | |||||||||||||||||
| (In millions) | April 3, 2026 | March 28, 2025 | March 29, 2024 | ||||||||||||||
| Domestic | $ | 941 | $ | 514 | $ | 70 | |||||||||||
| International | 570 | 515 | 377 | ||||||||||||||
Total income (loss) before income taxes | $ | 1,511 | $ | 1,029 | $ | 447 | |||||||||||
The components of income tax expense (benefit) are as follows:
| Year Ended | |||||||||||||||||
| (In millions) | April 3, 2026 | March 28, 2025 | March 29, 2024 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 155 | $ | 246 | $ | 201 | |||||||||||
| State | 35 | 21 | 43 | ||||||||||||||
| International | 248 | 149 | 579 | ||||||||||||||
| Total current income tax expense (benefit) | 438 | 416 | 823 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 92 | (33) | (729) | ||||||||||||||
| State | 22 | 13 | (134) | ||||||||||||||
| International | (14) | (10) | (120) | ||||||||||||||
| Total deferred income tax expense (benefit) | 100 | (30) | (983) | ||||||||||||||
| Total income tax expense (benefit) | $ | 538 | $ | 386 | $ | (160) | |||||||||||
The difference between our effective income tax rate and the federal statutory income tax rate, following the adoption of ASU 2023-09, is as follows:
Year Ended April 3, 2026 | |||||||||||
(In millions, except for percentages) | $ | % | |||||||||
| Federal statutory tax rate | $ | 317 | 21 | % | |||||||
State and local income taxes, net of federal income tax effect (1) | 49 | 3 | % | ||||||||
| Foreign tax effects: | |||||||||||
| Ireland | |||||||||||
| Statutory rate difference between Ireland and United States | (35) | (2) | % | ||||||||
| Nondeductible interest | 13 | 1 | % | ||||||||
| Other | 11 | 1 | % | ||||||||
| Czech Republic | 19 | 1 | % | ||||||||
| Other foreign jurisdictions | 1 | 0 | % | ||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | % | ||||||||
| Effect of cross-border tax laws: | |||||||||||
| Global intangible low-taxed income | 35 | 2 | % | ||||||||
| Subpart F income | (21) | (1) | % | ||||||||
| Other | 8 | 1 | % | ||||||||
| Tax credits | |||||||||||
| Foreign Tax Credits | (20) | (1) | % | ||||||||
| Other Tax Credits | (4) | 0 | % | ||||||||
| Changes in valuation allowances | 17 | 1 | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Stock-based compensation expense | 18 | 1 | % | ||||||||
| Other | 2 | 0 | % | ||||||||
| Changes in unrecognized tax benefits | 139 | 9 | % | ||||||||
| Other adjustments | (11) | (1) | % | ||||||||
| Income tax expense (benefit) | $ | 538 | 36 | % | |||||||
(1) The states and local jurisdictions that contribute to the majority (greater than 50%) of the tax effect in this category include California, Virginia, Illinois, New Jersey, New York, Pennsylvania, and Georgia.
As previously disclosed for fiscal 2025 and 2024, prior to the adoption of ASU 2023-09, the difference between our effective income tax and the U.S. federal statutory income tax based on the 21% rate is as follows:
| Year Ended | |||||||||||
| (In millions) | March 28, 2025 | March 29, 2024 | |||||||||
| Federal statutory tax expense (benefit) | $ | 216 | $ | 93 | |||||||
| State taxes, net of federal benefit | 41 | — | |||||||||
| Foreign earnings taxed at other than the federal rate | (30) | (22) | |||||||||
| Nondeductible expenses | 31 | 48 | |||||||||
| Federal research and development credit | (4) | (6) | |||||||||
| Valuation allowance increase (decrease) | 10 | (4) | |||||||||
| Change in unrecognized tax benefits | (37) | 338 | |||||||||
| Tax interest and penalties | 84 | 129 | |||||||||
| Stock-based compensation | 12 | 17 | |||||||||
| US tax on foreign earnings | 55 | 20 | |||||||||
| Return to provision adjustment | 4 | — | |||||||||
| Foreign exchange loss (gain) | 10 | (28) | |||||||||
| Capital loss | — | (44) | |||||||||
| Legal entity restructuring | — | (719) | |||||||||
| Other, net | (6) | 18 | |||||||||
| Income tax expense (benefit) | $ | 386 | $ | (160) | |||||||
The principal components of deferred tax assets and liabilities are as follows:
| (In millions) | April 3, 2026 | March 28, 2025 | |||||||||
| Deferred tax assets: | |||||||||||
| Tax credit carryforwards | $ | 61 | $ | 17 | |||||||
| Net operating loss carryforwards of acquired companies | 133 | 51 | |||||||||
| Interest | 88 | 71 | |||||||||
| Other accruals and reserves not currently tax deductible | 325 | 358 | |||||||||
| Goodwill | 404 | 463 | |||||||||
| Capitalized research and experimental expenditures | 48 | 112 | |||||||||
| Loss on investments not currently tax deductible | 123 | 74 | |||||||||
| Other | 77 | 61 | |||||||||
| Gross deferred tax assets | 1,259 | 1,207 | |||||||||
| Valuation allowance | (184) | (107) | |||||||||
| Deferred tax assets, net of valuation allowance | 1,075 | 1,100 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets | (104) | (91) | |||||||||
| Unremitted earnings of foreign subsidiaries | (4) | (4) | |||||||||
| Other | (12) | (9) | |||||||||
| Deferred tax liabilities | (120) | (104) | |||||||||
| Net deferred tax assets (liabilities) | $ | 955 | $ | 996 | |||||||
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their basis for income tax purposes and the tax effects of net operating losses and tax credit carryforwards.
The valuation allowance provided against our deferred tax assets as of April 3, 2026 of $184 million is provided primarily against state and foreign capital loss carryforwards and certain tax credits.
As of April 3, 2026, we have U.S. federal net operating losses attributable to various acquired companies of approximately $535 million, of which $23 million begins to expire in fiscal 2027 and $512 million has an indefinite life. The net operating loss carryforwards are subject to an annual limitation under U.S. federal tax regulations but are expected to be fully realized. Furthermore, we have U.S. state net operating loss carryforwards attributable to various acquired companies of approximately $76 million. If not used, our U.S. state net operating losses will expire between fiscal 2028 and 2033. In addition, we have foreign net operating loss carryforwards of approximately $8 million.
In assessing the realizability of our gross deferred tax assets, we consider both the positive and negative evidence of future taxable income to support utilization. We considered the following: historical cumulative book income, as measured by the current and prior two years; historical taxable income; and future reversals of taxable temporary differences. The valuation allowance for deferred tax assets as of April 3, 2026 was $184 million. The valuation allowance was primarily related to tax attribute carryforwards that, in the judgment of management, are not more likely than not to be realized.
In the second quarter of fiscal 2024, as part of the Avast integration plan, which geographically realigned and simplified our business, we undertook a legal entity and operational restructuring. As part of that process, we distributed certain assets within the legal entity operating structure and as a result, we recorded a net tax benefit of $285 million in fiscal 2024. Differences between the final outcome and recorded amounts will impact the provision for income taxes in the period in which such a determination is made and could have a material impact on our Consolidated Balance Sheets and Statements of Operations in future years.
The aggregate changes in the balance of gross unrecognized tax benefits were as follows:
| Year Ended | |||||||||||||||||
| (In millions) | April 3, 2026 | March 28, 2025 | March 29, 2024 | ||||||||||||||
| Balance at beginning of year | $ | 1,153 | $ | 1,163 | $ | 710 | |||||||||||
| Settlements with tax authorities | (2) | — | (8) | ||||||||||||||
| Lapse of statute of limitations | (3) | (27) | (14) | ||||||||||||||
| Increase related to prior period tax positions | 8 | 14 | 47 | ||||||||||||||
| Decrease related to prior period tax positions | (3) | (13) | (9) | ||||||||||||||
| Increase related to current year tax positions | 5 | 9 | 467 | ||||||||||||||
| Increase (decrease) related to foreign currency exchange rates | 41 | 7 | (30) | ||||||||||||||
| Balance at end of year | $ | 1,199 | $ | 1,153 | $ | 1,163 | |||||||||||
There was a change of $46 million in gross unrecognized tax benefits during the year ended April 3, 2026, as disclosed above. This gross liability does not include offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, interest deductions and state income taxes.
Of the total unrecognized tax benefits at April 3, 2026, $994 million, if recognized, would affect our effective tax rate.
We recognize interest and/or penalties related to unrecognized tax benefits in income tax expense. At April 3, 2026, before any tax benefits, we had $433 million of accrued interest and penalties on unrecognized tax benefits. Interest included in our provision for income taxes was an expense of approximately $115 million for fiscal 2026. If the accrued interest and penalties do not ultimately become payable, amounts accrued will be reduced in the period that such determination is made and reflected as a reduction of the overall income tax provision.
We file income tax returns in the U.S. and in many U.S. state and foreign jurisdictions. Our most significant tax jurisdictions are U.S. federal, Ireland, and the Czech Republic. Our tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. Our fiscal years 2018 through 2025 remain subject to examination by the IRS for U.S. federal tax purposes. Our 2022 through 2025 fiscal years remain subject to examination by the appropriate governmental agencies for Irish tax purposes. Our 2017 through 2025 fiscal years remain subject to examination by the Czech tax authorities.
We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the anticipated tolling of applicable statutes of limitations across various taxing jurisdictions.
We provide U.S. income taxes on the earnings of foreign subsidiaries unless the subsidiaries’ earnings are considered permanently reinvested outside the U.S. or are exempted from further taxation. As of April 3, 2026, the tax liability recorded on the undistributed earnings is approximately $4 million.
The components of income taxes paid (received), net, is as follows:
| (In millions) | Year Ended April 3, 2026 | ||||
| U.S. federal | $ | 323 | |||
| U.S. state and local | 34 | ||||
| Foreign | |||||
| Ireland | 31 | ||||
| Czech Republic | 45 | ||||
| Other | 12 | ||||
| Total income taxes paid (received), net | $ | 445 | |||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | May 21, 2026 | Showing above |
| 2025 | May 15, 2025 | |
| 2024 | May 16, 2024 | |
| 2023 | May 25, 2023 | |
| 2022 | May 20, 2022 | |
| 2021 | May 21, 2021 | |
| 2020 | May 28, 2020 | |
| 2019 | May 24, 2019 | |
| 2018 | Oct 26, 2018 | |
| 2017 | May 19, 2017 | |
| 2016 | May 20, 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.