Hilton Worldwide Holdings Inc.HLT
Hilton Worldwide Holdings Inc. Income Taxes Disclosure
Income Taxes
We recognize interest and penalties accrued related to uncertain tax positions in income tax benefit (expense) in our consolidated statement of operations. During the years ended December 31, 2025, 2024 and 2023, we recognized income tax expense related to interest and penalties of $47 million, $35 million and $72 million, respectively. As of December 31, 2025 and 2024, we had accrued approximately $232 million and $182 million, respectively, for interest and penalties related to our unrecognized tax benefits in our consolidated balance sheets. Included in the balances of unrecognized tax benefits as of December 31, 2025 and 2024 were $600 million and $597 million, respectively, associated with positions that, if favorably resolved, would provide a benefit to our effective income tax rate.
Income Tax Provision
The domestic and foreign components of income before income taxes were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
U.S. income before income taxes | $ | 1,477 | $ | 1,237 | $ | 1,301 | |||||||||||
Foreign income before income taxes | 595 | 546 | 391 | ||||||||||||||
Income before income taxes | $ | 2,072 | $ | 1,783 | $ | 1,692 | |||||||||||
The components of our provision for income taxes were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 329 | $ | 357 | $ | 586 | |||||||||||
| State | 99 | 82 | 136 | ||||||||||||||
| Foreign | 119 | 52 | 83 | ||||||||||||||
| Total current | 547 | 491 | 805 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (8) | (51) | (250) | ||||||||||||||
| State | (2) | (15) | (83) | ||||||||||||||
Foreign(1) | 74 | (181) | 69 | ||||||||||||||
| Total deferred | 64 | (247) | (264) | ||||||||||||||
Total provision for income taxes | $ | 611 | $ | 244 | $ | 541 | |||||||||||
____________
(1)Includes a $29 million tax benefit for the year ended December 31, 2024, from the release of valuation allowances as the Company concluded it is more likely than not to realize the benefit of certain foreign deferred tax assets.
Reconciliation of the U.S. federal statutory income tax rate to the Company's effective tax rate for the year ended December 31, 2025 in accordance with the amendments in ASU 2023-09 was as follows:
| Year Ended December 31, 2025 | |||||||||||
Amount | Percent | ||||||||||
| (in millions) | |||||||||||
Provision for income taxes at U.S. federal statutory tax rate | $ | 435 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax effect(1) | 68 | 3.3 | % | ||||||||
| Foreign tax effects | |||||||||||
| U.K. | |||||||||||
Tax credits(2) | (30) | (1.5) | % | ||||||||
| Statutory tax rate difference between U.K. and U.S. | 21 | 1.0 | % | ||||||||
| Other | (5) | (0.2) | % | ||||||||
| Other foreign jurisdictions | 81 | 3.9 | % | ||||||||
Effect of cross-border tax laws(3) | 11 | 0.5 | % | ||||||||
| Tax credits | (16) | (0.8) | % | ||||||||
| Changes in valuation allowances | 19 | 0.9 | % | ||||||||
| Nontaxable or nondeductible items | (5) | (0.2) | % | ||||||||
| Changes in unrecognized tax benefits | 35 | 1.7 | % | ||||||||
| Other adjustments | (3) | (0.1) | % | ||||||||
Total tax provision and effective tax rate | $ | 611 | 29.5 | % | |||||||
____________
(1)State and local taxes in California, New York, New York City, Florida and Illinois made up the majority (greater than 50 percent) of the tax effect in this category.
(2)The company receives double tax relief, in the form of tax credits against its U.K. current income tax, for withholding taxes imposed by various other foreign jurisdictions.
(3)The tax effect of cross-border taxes is presented net of related foreign tax credits.
Reconciliations of the provision for income taxes at the U.S. statutory rate to the provision for income taxes for the years ended December 31, 2024 and 2023 were as follows:
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
Statutory U.S. federal income tax provision | $ | 375 | $ | 355 | |||||||
| State income taxes, net of U.S. federal income tax benefit | 55 | 45 | |||||||||
| Impact of foreign operations | 90 | 33 | |||||||||
| Changes in deferred tax asset valuation allowances | (24) | 40 | |||||||||
Income tax rate changes | — | (9) | |||||||||
| Provision for uncertain tax positions | 26 | 69 | |||||||||
Claim for increased foreign tax basis(1) | (270) | — | |||||||||
| Excess tax benefits related to share-based compensation | (22) | (6) | |||||||||
| Other, net | 14 | 14 | |||||||||
Provision for income taxes | $ | 244 | $ | 541 | |||||||
____________
(1)Includes tax benefit for claim for increased foreign tax basis, net of $547 million tax expense for related valuation allowance increase as of December 31, 2024.
Income Tax Payments
Income taxes paid, net of refunds received, were as follows:
| Year Ended December 31, 2025 | |||||
| (in millions) | |||||
U.S. federal | $ | 316 | |||
U.S. state and local | 97 | ||||
Foreign | 110 | ||||
Total | $ | 523 | |||
Income tax payments, net of refunds received, were $492 million and $478 million for the years ended December 31, 2024 and 2023, respectively.
Deferred Income Taxes
Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities plus carryforward items. The tax effects of the temporary differences and carryforwards that give rise to our net deferred taxes were as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Deferred tax assets: | |||||||||||
| Net tax loss carryforwards and carrybacks | $ | 493 | $ | 525 | |||||||
Foreign brands | 742 | 763 | |||||||||
| Compensation | 115 | 118 | |||||||||
| Reserves | 51 | 57 | |||||||||
| Operating and finance lease liabilities | 337 | 282 | |||||||||
| Deferred income | 753 | 659 | |||||||||
| Foreign tax credit carryforwards | 79 | 70 | |||||||||
| Other | 140 | 127 | |||||||||
| Total gross deferred tax assets | 2,710 | 2,601 | |||||||||
| Less: valuation allowance | (1,230) | (1,200) | |||||||||
| Deferred tax assets | 1,480 | 1,401 | |||||||||
| Deferred tax liabilities: | |||||||||||
U.S. brands | (1,126) | (1,124) | |||||||||
| Operating and finance lease ROU assets | (264) | (200) | |||||||||
| Other | (160) | (81) | |||||||||
| Deferred tax liabilities | (1,550) | (1,405) | |||||||||
| Net deferred taxes | $ | (70) | $ | (4) | |||||||
As of December 31, 2025, we had gross U.S. separate return limitation year loss carryforwards and foreign operating loss carryforwards of $2.1 billion, resulting in deferred tax assets of $493 million. Approximately $32 million of our deferred tax assets as of December 31, 2025 related to loss carryforwards that will expire between 2026 and 2045 with less than $1 million of that amount expiring in 2026. Approximately $461 million of our deferred tax assets as of December 31, 2025 related to loss carryforwards that are not subject to expiration. We believe that it is more likely than not that the benefit from certain U.S. and foreign loss carryforwards will not be realized. In recognition of this assessment, we provided valuation allowances totaling $490 million as of December 31, 2025 on the deferred tax assets relating to these loss carryforwards. As of December 31, 2025, we also had deferred tax assets for U.S. tax credit carryforwards of $79 million that will expire between 2029 and 2035, for which we have provided full valuation allowances.
Tax Uncertainties
We file income tax returns, including returns for our subsidiaries, with federal, state, local and foreign tax jurisdictions. We are under regular and recurring audit by the Internal Revenue Service ("IRS") and other taxing authorities on open tax positions. The timing of the resolution of tax audits is highly uncertain, as are the amounts, if any, that may ultimately be paid upon such resolution. Changes may result from the conclusion of ongoing audits, appeals or litigation in federal, state, local and foreign tax jurisdictions or from the resolution of various proceedings between the U.S. and foreign tax authorities. As of December 31, 2025, the Company's federal income tax returns remain subject to examination by the IRS for tax years from 2011 through 2025. Various income tax returns filed with state, local and foreign jurisdictions remain subject to examination by the applicable taxing authorities.
Reconciliations of the beginning and ending amounts of unrecognized tax benefits were as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Balance at beginning of year | $ | 849 | $ | 555 | $ | 337 | |||||||||||
| Additions for tax positions related to prior years | 2 | 288 | 268 | ||||||||||||||
| Additions for tax positions related to the current year | — | 19 | 4 | ||||||||||||||
| Reductions for tax positions related to prior years | (53) | (4) | (2) | ||||||||||||||
| Settlements | — | (1) | (48) | ||||||||||||||
| Lapse of statute of limitations | (2) | (4) | (4) | ||||||||||||||
| Currency translation adjustment | 4 | (4) | — | ||||||||||||||
| Balance at end of year | $ | 800 | $ | 849 | $ | 555 | |||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 11, 2026 | Showing above |
| 2024 | Feb 6, 2025 | |
| 2023 | Feb 7, 2024 | |
| 2022 | Feb 9, 2023 | |
| 2021 | Feb 16, 2022 | |
| 2020 | Feb 17, 2021 | |
| 2019 | Feb 11, 2020 | |
| 2018 | Feb 13, 2019 | |
| 2017 | Feb 14, 2018 | |
| 2016 | Feb 15, 2017 | |
| 2015 | Feb 26, 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.