GXO Logistics, Inc.GXO
GXO Logistics, Inc. Income Taxes Disclosure
17. Income Taxes
Income (loss) before taxes related to the Company’s domestic and foreign operations was as follows:
Year Ended December 31, | ||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| U.S. | $ | 11 | $ | (88) | $ | 97 | ||||||||||||||
| Foreign | 93 | 234 | 169 | |||||||||||||||||
| Income before income taxes | $ | 104 | $ | 146 | $ | 266 | ||||||||||||||
The components of income tax expense (benefit) are presented in the following table:
Year Ended December 31, | ||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Current: | ||||||||||||||||||||
| U.S. federal | $ | 7 | $ | (2) | $ | 24 | ||||||||||||||
| U.S. state and local | 1 | — | 7 | |||||||||||||||||
| Foreign | 89 | 48 | 43 | |||||||||||||||||
| Total current income tax expense | $ | 97 | $ | 46 | $ | 74 | ||||||||||||||
| Deferred: | ||||||||||||||||||||
| U.S. federal | $ | (11) | $ | (12) | $ | (3) | ||||||||||||||
| U.S. state and local | 1 | (1) | (2) | |||||||||||||||||
| Foreign | (19) | (25) | (36) | |||||||||||||||||
| Total deferred income tax benefit | $ | (29) | $ | (38) | $ | (41) | ||||||||||||||
| Total: | ||||||||||||||||||||
| U.S. federal | $ | (4) | $ | (14) | $ | 21 | ||||||||||||||
| U.S. state and local | 2 | (1) | 5 | |||||||||||||||||
| Foreign | 70 | 23 | 7 | |||||||||||||||||
| Total income tax expense | $ | 68 | $ | 8 | $ | 33 | ||||||||||||||
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The legislation includes reinstatement of favorable tax treatment for certain business provisions, including 100% bonus depreciation for qualified property placed in service after January 19, 2025, immediate expensing of domestic research and experimental costs, and revisions to the business interest expense limitations. The impact of OBBBA was limited to the current and deferred provision and did not have a material impact on the Company’s income tax expenses for the year ended December 31, 2025.
The Organisation for Economic Co-operation and Development (“OECD”) has introduced the Pillar Two Global Anti-Base Erosion rules (“Pillar Two”), which generally imposes a 15% global minimum tax on multinational companies. While the Company expects to meet transitional safe harbor requirements in most jurisdictions, there are a limited number of jurisdictions where the Company expects Pillar Two taxes to apply. The income tax provision for the year ended December 31, 2025, includes the effects of Pillar Two taxes. The Company continues to monitor Pillar Two developments, including the impact of the Side-by-Side Package published by the OECD on January 5, 2026 as it relates to the interplay between the U.S. international tax system and Pillar Two for the U.S. headquartered companies.
Income tax expense (benefit) for 2025, 2024 and 2023 varied from the amount computed by applying the statutory income tax rate to income (loss) before income taxes. The Company’s U.S. federal statutory tax rate was 21% for 2025, 2024 and 2023. A reconciliation of the expected U.S. federal income tax expense (benefit), calculated by applying the federal statutory rate to the Company’s actual income tax expense (benefit) is presented in the following table:
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| (In millions, except percentages) | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||||
| U.S. Federal Statutory Tax Rate | $ | 22 | 21 | % | $ | 31 | 21 | % | $ | 56 | 21 | % | ||||||||||||||||||||||||||
State and Local Taxes, Net of Federal Tax Effect (1) | 2 | 2 | % | (1) | (1) | % | 4 | 2 | % | |||||||||||||||||||||||||||||
| Foreign Tax Effects | ||||||||||||||||||||||||||||||||||||||
| Belgium | ||||||||||||||||||||||||||||||||||||||
| Changes in valuation allowances | 2 | 2 | % | — | — | % | (5) | (2) | % | |||||||||||||||||||||||||||||
| Other | — | — | % | 2 | 1 | % | — | — | % | |||||||||||||||||||||||||||||
| Cyprus | ||||||||||||||||||||||||||||||||||||||
| Intangible assets | — | — | % | — | — | % | 33 | 13 | % | |||||||||||||||||||||||||||||
| Other | (1) | (1) | % | (3) | (2) | % | (4) | (2) | % | |||||||||||||||||||||||||||||
| France | ||||||||||||||||||||||||||||||||||||||
| Changes in valuation allowances | — | — | % | (22) | (15) | % | 2 | 1 | % | |||||||||||||||||||||||||||||
| Other | 4 | 4 | % | — | — | % | 2 | 1 | % | |||||||||||||||||||||||||||||
| Germany | ||||||||||||||||||||||||||||||||||||||
| Changes in valuation allowances | 7 | 7 | % | 5 | 3 | % | 1 | — | % | |||||||||||||||||||||||||||||
| Other | (3) | (3) | % | (1) | (1) | % | (1) | — | % | |||||||||||||||||||||||||||||
| Ireland | ||||||||||||||||||||||||||||||||||||||
| Intangible assets | — | — | % | — | — | % | (51) | (19) | % | |||||||||||||||||||||||||||||
| Italy | ||||||||||||||||||||||||||||||||||||||
| Litigation | 14 | 14 | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
| Other | 1 | 1 | % | 4 | 3 | % | 2 | 1 | % | |||||||||||||||||||||||||||||
| Malta | ||||||||||||||||||||||||||||||||||||||
| Notional interest deduction | (8) | (8) | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
| Other | 1 | 1 | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
| Singapore | ||||||||||||||||||||||||||||||||||||||
| Changes in valuation allowances | — | — | % | — | — | % | (5) | (2) | % | |||||||||||||||||||||||||||||
| Foreign rate difference | (6) | (6) | % | (15) | (10) | % | (15) | (5) | % | |||||||||||||||||||||||||||||
| Other | 4 | 4 | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
Year Ended December 31, | ||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||||||||||||||
| (In millions, except percentages) | Amount | Percent | Amount | Percent | Amount | Percent | ||||||||||||||||||||||||||||||||
| Switzerland | ||||||||||||||||||||||||||||||||||||||
| Cantonal | 7 | 7 | % | 1 | 1 | % | — | — | % | |||||||||||||||||||||||||||||
| Other | 1 | 1 | % | (3) | (2) | % | — | — | % | |||||||||||||||||||||||||||||
| United Kingdom | ||||||||||||||||||||||||||||||||||||||
| Changes in valuation allowances | (8) | (8) | % | 1 | 1 | % | — | — | % | |||||||||||||||||||||||||||||
| Non-deductible transaction costs | 7 | 7 | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
| Return to provision | 5 | 5 | % | (8) | (6) | % | — | — | % | |||||||||||||||||||||||||||||
| Other | 8 | 7 | % | 3 | 2 | % | 2 | 1 | % | |||||||||||||||||||||||||||||
| Other Foreign Jurisdictions | 8 | 7 | % | 10 | 6 | % | 10 | 4 | % | |||||||||||||||||||||||||||||
| Effect of Cross-Border Tax Laws | (1) | (1) | % | — | — | % | 3 | 1 | % | |||||||||||||||||||||||||||||
| Tax Credits | ||||||||||||||||||||||||||||||||||||||
| Foreign tax credits | (9) | (9) | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
| Other | — | — | % | (1) | (1) | % | (1) | — | % | |||||||||||||||||||||||||||||
| Changes in Valuation Allowances | — | — | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
| Nontaxable or Nondeductible Items | ||||||||||||||||||||||||||||||||||||||
| Non-deductible transaction costs | 6 | 6 | % | 8 | 5 | % | — | — | % | |||||||||||||||||||||||||||||
| Other | 3 | 3 | % | 2 | 1 | % | 1 | — | % | |||||||||||||||||||||||||||||
| Changes in Unrecognized Tax Benefits | 7 | 7 | % | — | — | % | — | — | % | |||||||||||||||||||||||||||||
| Other Adjustments | ||||||||||||||||||||||||||||||||||||||
| Return to provision | (5) | (5) | % | (5) | (3) | % | (1) | (1) | % | |||||||||||||||||||||||||||||
| Effective Tax Rate | $ | 68 | 65 | % | $ | 8 | 6 | % | $ | 33 | 12 | % | ||||||||||||||||||||||||||
(1) State taxes in California and Mississippi made up the majority (greater than 50 percent) of the tax effect in this category.
Income Taxes Paid
Cash paid (received) for income taxes is comprised of the following:
Year Ended December 31, | ||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| U.S. federal | $ | (2) | $ | — | $ | 45 | ||||||||||||||
| U.S. state and local | — | — | 3 | |||||||||||||||||
| Foreign | ||||||||||||||||||||
| France | * | * | 6 | |||||||||||||||||
| Italy | * | 8 | * | |||||||||||||||||
| Netherlands | 14 | 19 | 15 | |||||||||||||||||
| Spain | 8 | 9 | 8 | |||||||||||||||||
| Swiss Cantonal - Ticino | 11 | * | * | |||||||||||||||||
| United Kingdom | 13 | * | (7) | |||||||||||||||||
| Other | 15 | 7 | 14 | |||||||||||||||||
| Foreign subtotal | 61 | 43 | 36 | |||||||||||||||||
| Total | $ | 59 | $ | 43 | $ | 84 | ||||||||||||||
*The amount of income taxes paid (net of refunds) during the year did not meet the disaggregation threshold.
Components of the Net Deferred Tax Asset or Liability
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are presented in the following table:
December 31, | ||||||||||||||
| (In millions) | 2025 | 2024 | ||||||||||||
| Deferred tax assets | ||||||||||||||
| Net operating loss and other tax attribute carryforwards | $ | 84 | $ | 92 | ||||||||||
| Accrued expenses | 112 | 122 | ||||||||||||
Net unrealized losses(1) | 48 | — | ||||||||||||
| Other | 7 | 22 | ||||||||||||
| Gross deferred tax assets | 251 | 236 | ||||||||||||
| Valuation allowances | (44) | (26) | ||||||||||||
| Total deferred tax assets, net of valuation allowance | 207 | 210 | ||||||||||||
| Deferred tax liabilities | ||||||||||||||
| Intangible assets | (195) | (213) | ||||||||||||
| Property and equipment | (73) | (118) | ||||||||||||
| Pension and other retirement obligations | (23) | (28) | ||||||||||||
| Other | (12) | (18) | ||||||||||||
| Gross deferred tax liabilities | (303) | (377) | ||||||||||||
| Net deferred tax liability | $ | (96) | $ | (167) | ||||||||||
(1) Deferred taxes related to net unrealized gains (losses) on net investment hedge and cash flow hedge are recorded in accumulated OCI. See Note 13 – Stockholders’ Equity for additional information.
The deferred tax asset and deferred tax liability above are reflected in the Consolidated Balance Sheets as follows:
| December 31, | ||||||||||||||
| (In millions) | 2025 | 2024 | ||||||||||||
| Other long-term assets | $ | 128 | $ | 89 | ||||||||||
| Other long-term liabilities | (224) | (256) | ||||||||||||
| Net deferred tax liability | $ | (96) | $ | (167) | ||||||||||
Investments in Foreign Subsidiaries
As of December 31, 2025, the Company maintained a partial indefinite reinvestment assertion on its post- 2017 undistributed foreign earnings.
Operating Loss and Tax Credit Carryforwards
The Company’s operating loss and tax credit carryforwards were as follows:
| December 31, | ||||||||||||||||||||
| (In millions) | Expiration Date (1) | 2025 | 2024 | |||||||||||||||||
Federal net operating losses for all U.S. operations | N/A | $ | — | $ | 17 | |||||||||||||||
Tax effect (before federal benefit) of state net operating losses | Various times starting in 2026 | 4 | 3 | |||||||||||||||||
Federal tax credit carryforwards | Various times starting in 2035 | 4 | — | |||||||||||||||||
State tax credit carryforwards | Various times starting in 2026 | 8 | 8 | |||||||||||||||||
Foreign net operating losses available to offset future taxable income | Various times starting in 2026 | 274 | 326 | |||||||||||||||||
(1) Some credits and losses have unlimited carryforward periods.
Valuation Allowances
The Company established valuation allowances for some of its deferred tax assets, as it is more likely than not that these assets will not be realized in the foreseeable future. The Company concluded that the remaining deferred tax assets will more likely than not be realized, though this is not assured, and as such no valuation allowances have been provided on these assets.
The balances and activity related to the Company’s valuation allowances were as follows:
| (In millions) | Beginning Balance | Additions | Reductions | Ending Balance | ||||||||||||||||||||||
2025(1) | $ | 26 | 29 | (11) | $ | 44 | ||||||||||||||||||||
2024(2) | $ | 50 | 5 | (29) | $ | 26 | ||||||||||||||||||||
2023(3) | $ | 44 | 16 | (10) | $ | 50 | ||||||||||||||||||||
(1) In 2025, the additions primarily consisted of $14 million due to an increase in foreign net operating loss carryforward and $10 million due to the final purchase price allocation for the Wincanton Acquisition.
(2) In 2024, the Company released $22 million of valuation allowance in France.
(3) In 2023, concurrent with an acquisition, the Company acquired $8 million of valuation allowance.
Unrecognized Tax Benefits
A reconciliation of the beginning unrecognized tax benefits balance to the ending balance is presented in the following table:
Year Ended December 31, | ||||||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
Beginning balance | $ | 3 | $ | 4 | $ | 3 | ||||||||||||||
Increases related to positions taken during current year | 7 | — | — | |||||||||||||||||
Increases related to positions taken during prior year | — | — | 1 | |||||||||||||||||
| Settlements with tax authorities | — | (1) | — | |||||||||||||||||
Gross unrecognized tax benefits | $ | 10 | $ | 3 | $ | 4 | ||||||||||||||
Total unrecognized tax benefits that, if recognized, would impact the effective income tax rate as of the end of the year | $ | 10 | $ | 3 | $ | 4 | ||||||||||||||
The Company is subject to taxation in the U.S. and foreign jurisdictions. As of December 31, 2025, there are no ongoing examinations in the United States. Various foreign tax returns for years after 2009 are open under relevant statutes of limitations and are subject to audit.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
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.