GRAPHIC PACKAGING HOLDING COGPK
GRAPHIC PACKAGING HOLDING CO Income Taxes Disclosure
Income Taxes
The U.S. and international components of Income before Income Taxes and Equity Income of Unconsolidated Entity consisted of the following:
| Year Ended December 31, | |||||||||||
| In millions | 2025 | 2024 | 2023 | ||||||||
U.S. | $ | 504 | $ | 790 | $ | 852 | |||||
International | 78 | 96 | 80 | ||||||||
Income before Income Taxes and Equity Income of Unconsolidated Entity | $ | 582 | $ | 886 | $ | 932 | |||||
As described in Note 1. Nature of Business and Summary of Significant Accounting Policies, the Company has elected to prospectively adopt the guidance in ASU 2023-09. The provisions for Income Tax (Expense) Benefit on Income before Income Taxes and Equity Income of Unconsolidated Entity for the year ended December 31, 2025, presented in accordance with the guidance in ASU 2023-09, consisted of the following:
| Year Ended December 31, | |||||
| In millions | 2025 | ||||
| Current (Expense) Benefit: | |||||
| U.S. Federal | $ | 1 | |||
| State | (6) | ||||
Foreign | $ | (27) | |||
| Total Current | $ | (32) | |||
Deferred (Expense) Benefit: | |||||
U.S. Federal | $ | (102) | |||
| State | (17) | ||||
Foreign | 12 | ||||
| Total Deferred | (107) | ||||
| Income Tax Expense | $ | (139) | |||
The provisions for Income Tax (Expense) Benefit on Income before Income Taxes and Equity Income of Unconsolidated Entity for the years ended December 31, 2024 and 2023, presented in accordance with the guidance prior to the adoption of ASU 2023-09, consisted of the following:
| Year Ended December 31, | ||||||||
| In millions | 2024 | 2023 | ||||||
Current (Expense) Benefit: | ||||||||
U.S. Federal | $ | (306) | $ | (150) | ||||
Foreign | (42) | (38) | ||||||
| Total Current | $ | (348) | $ | (188) | ||||
| Deferred (Expense) Benefit: | ||||||||
| U.S. Federal | $ | 106 | $ | (49) | ||||
Foreign | 13 | 27 | ||||||
| Total Deferred | 119 | (22) | ||||||
| Income Tax Expense | $ | (229) | $ | (210) | ||||
The following table is a reconciliation of the U.S. federal statutory tax rate of 21% to the Company's effective tax rate for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09:
| Year Ended December 31, | ||||||||
| In millions | 2025 | Percent | ||||||
U.S. Federal Statutory Tax Rate | $ | (122) | 21.0 | % | ||||
State and Local Income Taxes, net of Federal Income Tax Effect (a) | (22) | 3.9 | % | |||||
Foreign Tax Effects | 1 | (0.2) | % | |||||
Tax Credits: | ||||||||
| Research Tax Credits | 8 | (1.3) | % | |||||
Nontaxable or Nondeductible Items | (1) | 0.1 | % | |||||
| Worldwide Changes in Unrecognized Tax Benefits | (1) | 0.1 | % | |||||
Other | (2) | 0.4 | % | |||||
Grand Total | $ | (139) | 24.0 | % | ||||
(a) State taxes in Illinois, California, Wisconsin, Pennsylvania, Michigan, New York, Georgia and Iowa made up the majority (greater than 50%) of the tax effect in this category.
The following table is a reconciliation of the U.S. federal statutory tax rate of 21% to the Company's effective tax rate for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:
| Year Ended December 31, | ||||||||||||||
| In millions | 2024 | Percent | 2023 | Percent | ||||||||||
Income Tax Expense at U. S. Statutory Rate | $ | (186) | 21.0 | % | $ | (196) | 21.0 | % | ||||||
U.S. State and Local Tax Expense | (38) | 4.2 | (34) | 3.6 | ||||||||||
Permanent Items | 3 | (0.3) | 2 | (0.3) | ||||||||||
| Provision to Return Adjustments | 2 | (0.2) | (3) | 0.3 | ||||||||||
Change in Valuation Allowance: | (10) | 1.1 | 19 | (2.1) | ||||||||||
| Foreign Exchange Impacts | 7 | (0.8) | (7) | 0.8 | ||||||||||
International Tax Rate Differences | (3) | 0.3 | (4) | 0.5 | ||||||||||
US Federal & State Research Credits | 16 | (1.8) | 22 | (2.3) | ||||||||||
| Russia Impairment | — | — | (3) | 0.3 | ||||||||||
| Goodwill Related to Dispositions | (14) | 1.6 | — | — | ||||||||||
Other | (6) | 0.7 | (6) | 0.7 | ||||||||||
| Income Tax Expense | $ | (229) | 25.8 | % | $ | (210) | 22.5 | % | ||||||
The effective tax rate for 2025 is different from the statutory rate primarily due to the impact of state taxes and non-deductible expenses, as well as tax benefits of $8 million related to U.S. federal income tax credits.
The effective tax rate for 2024 is different from the statutory rate primarily due to the write off of non-deductible book goodwill associated with the Augusta Divestiture as well as tax benefits of $16 million related to U.S. federal, state and foreign income tax credits, including purchased tax credits.
The effective tax rate for 2023 is different from the statutory rate primarily due to a decrease in the Company's valuation allowances in Sweden, Norway and the Netherlands of $22 million, the establishment of a valuation allowance against certain net deferred tax assets in Nigeria of $3 million, as well as tax benefits of $22 million related to U.S. federal, state and foreign income tax credits. The Company also recognized income tax expense of $7 million related to unrealized foreign currency activity for intercompany loans where the entity's functional currency and the loan denomination are different than the tax reporting currency (primarily in Sweden).
The tax effects of differences that give rise to significant portions of the deferred income tax assets and deferred income tax liabilities as of December 31 were as follows:
| In millions | 2025 | 2024 | ||||||
Deferred Income Tax Assets: | ||||||||
| Compensation Based Accruals | $ | 10 | $ | 18 | ||||
Net Operating Loss Carryforwards | 149 | 67 | ||||||
Postretirement Benefits | 20 | 23 | ||||||
Tax Credits | 24 | 8 | ||||||
| Capitalized Research & Development Costs | 3 | 89 | ||||||
| Other | 99 | 84 | ||||||
| Valuation Allowance | (62) | (45) | ||||||
| Total Deferred Income Tax Assets | $ | 243 | $ | 244 | ||||
Deferred Income Tax Liabilities: | ||||||||
| Property, Plant and Equipment | $ | (659) | $ | (568) | ||||
Goodwill & Other Intangibles | (248) | (241) | ||||||
Other | (2) | (3) | ||||||
Total Noncurrent Deferred Income Tax Liabilities | (909) | (812) | ||||||
Net Deferred Income Tax Liability | $ | (666) | $ | (568) | ||||
The Company has evaluated the need to maintain a valuation allowance for deferred tax assets based on its assessment of whether it is more likely than not that deferred tax assets will be realized through the generation of future taxable income. Appropriate consideration was given to all available evidence, both positive and negative, in assessing the need for a valuation allowance. The Company reviewed its deferred income tax assets as of December 31, 2025 and 2024, respectively, and determined that it is more likely than not that a portion will not be realized. A valuation allowance of $62 million and $45 million as of December 31, 2025 and 2024, respectively, is maintained on the deferred income tax assets for which the Company has determined that realization is not more likely than not. Of the total valuation allowance at December 31, 2025, $50 million relates to net deferred tax assets in various foreign jurisdictions and $12 million relates to credit carryforwards in certain U.S. states as well as U.S. foreign tax credit carryforwards. The need for a valuation allowance is made on a jurisdiction-by-jurisdiction basis. As of December 31, 2025, the Company concluded that due to cumulative pre-tax losses and the lack of sufficient future taxable income of the appropriate character, realization is not more likely than not on the net deferred income tax assets related to the Company's operations in Australia as well as certain operations in Germany, Nigeria, Spain and Sweden.
The following table represents a summary of the valuation allowances against deferred tax assets as of and for the three years ended December 31, 2025, 2024 and 2023:
| In millions | Additions | Deductions | ||||||||||||||||||
| December 31, | Balance at Beginning of Period | Charged to Costs and Expenses | Charged to Other Accounts | Credited to Costs and Expenses | Credited to Other Accounts | Balance at End of Period | ||||||||||||||
| 2025 | $ | 45 | $ | 20 | $ | 3 | $ | (6) | $ | — | $ | 62 | ||||||||
2024 | 37 | 12 | — | (2) | (2) | 45 | ||||||||||||||
2023 | 57 | 6 | 1 | (25) | (2) | 37 | ||||||||||||||
The Company has deferred tax assets related to U.S. federal net operating loss carryforwards of $67 million which carry forward indefinitely. The Company's deferred tax assets related to U.S. state net operating loss carryforwards total $4 million, a portion of which carry forward indefinitely and some of which expire in various years through 2045. Deferred tax assets related to foreign net operating loss carryforwards total $78 million, of which substantially all have no expiration date.
Deferred tax assets related to income tax credit carryforwards total $24 million which expire in various years through 2045.
Income Tax Payments
During 2025, the Company made income tax payments or received refunds in various U.S. federal state and foreign tax jurisdictions totaling $163 million, consisting of the following:
| Year Ended December 31, | |||||
| In millions | 2025 | ||||
U.S. Federal(a) | $ | 96 | |||
U.S. State & Local | 23 | ||||
Foreign: | |||||
| Canada | 9 | ||||
| Other | 35 | ||||
| Total - Foreign | 44 | ||||
Total Income Tax Payments | $ | 163 | |||
(a) U.S. federal tax payments include payments to purchase transferable tax credits used to offset prior year federal income tax liability.
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| In millions | 2025 | 2024 | 2023 | ||||||||
Balance at January 1, | $ | 32 | $ | 34 | $ | 26 | |||||
Additions for Tax Positions of Current Year | 2 | 1 | 2 | ||||||||
Additions for Tax Positions of Prior Years | 1 | 1 | 8 | ||||||||
Reductions for Tax Positions of Prior Years | (2) | (4) | (2) | ||||||||
Balance at December 31, | $ | 33 | $ | 32 | $ | 34 | |||||
At December 31, 2025, $33 million of the total gross unrecognized tax benefits, if recognized, would affect the annual effective income tax rate. As of December 31, 2025, none of the total gross unrecognized tax benefits recorded are related to indefinite lived deferred tax assets and did not have an impact on total tax expense.
The Company recognizes potential accrued interest and penalties related to unrecognized tax benefits within its global operations in Income Tax Expense. The Company had an immaterial accrual for the payment of interest and penalties at December 31, 2025.
The Company files a consolidated U.S. federal income tax return as well as income tax returns in various states and foreign jurisdictions. Its income tax filings are regularly examined by federal, state and non-U.S. tax authorities. The Company's 2018 U.S. federal corporate and partnership income tax filings are currently open for examination by the Internal Revenue Service. With few exceptions, the Company is no longer subject to U.S. federal, state and local tax examinations for years before 2018.
As of December 31, 2025, the Company has provided for deferred income taxes attributable to future foreign withholding tax expense related to the Company's equity investment in the joint venture, Rengo Riverwood Packaging, Ltd. In addition, the Company provides deferred income taxes for future Canadian withholding tax to the extent of excess cash available for distribution after consideration of working capital needs and other debt settlement of its Canadian subsidiary, Graphic Packaging International Canada, ULC. The Company continues to assert that it is permanently reinvested in the cumulative earnings of its Canadian subsidiary in excess of the amount of cash that is on hand and available for distribution after consideration of working capital needs and other debt settlement. The Company determined that no deferred tax liability should be recorded related to the outside basis difference of its Canadian subsidiary as of December 31, 2025.
The Company has not provided for deferred U.S. income taxes on its undistributed earnings in other international subsidiaries because of the Company's intention to indefinitely reinvest these earnings outside the U.S. The determination of the amount of the unrecognized deferred U.S. income tax liability (primarily withholding tax in certain jurisdictions) on the unremitted earnings or any other associated outside basis difference is not practicable because of the complexities associated with the calculation.
The Company has elected to recognize global intangible low-taxed income ("GILTI") as period cost as incurred, therefore there are no deferred taxes recognized for basis differences that are expected to impact the amount of the GILTI inclusion upon reversal.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted into law. The OBBBA makes permanent certain key elements of the Tax Cuts and Jobs Act, including 100% bonus depreciation for qualifying assets, expensing of domestic research costs, and modifications to the business interest expense limitation. The legislation has multiple effective dates, with certain provisions effective for the 2025 tax year and others implemented through 2027. The legislation did not have a material impact on the Company's 2025 effective tax rate but does result in net operating loss carryforwards and lower cash tax payments in 2025. The Company continues to review the OBBBA tax provisions to assess future impacts on the consolidated financial statements.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 2, 2026 | Showing above |
| 2024 | Feb 12, 2025 | |
| 2023 | Feb 21, 2024 | |
| 2022 | Feb 9, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 16, 2021 | |
| 2019 | Feb 11, 2020 | |
| 2018 | Feb 13, 2019 | |
| 2017 | Feb 7, 2018 | |
| 2016 | Feb 8, 2017 | |
| 2015 | Feb 12, 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.