HENRY SCHEIN INCHSIC
HENRY SCHEIN INC Income Taxes Disclosure
Note 15 – Income Taxes
Income before taxes and equity in earnings of affiliates was as follows:
Years ended
December 27,
December 28,
December 30,
2025
2024
2023
Domestic
$
384
$
338
$
424
Foreign
149
175
118
Total
$
533
$
513
$
542
The provisions for income taxes were as follows:
Years ended
December 27,
December 28,
December 30,
2025
2024
2023
Current income tax expense:
U.S. Federal
$
42
$
100
$
72
State and local
15
33
28
Foreign
64
56
40
Total current
121
189
140
Deferred income tax expense (benefit):
U.S. Federal
33
(29)
9
State and local
3
(12)
(3)
Foreign
(31)
(20)
(26)
Total deferred
5
(61)
(20)
Total provision
$
126
$
128
$
120
The tax effects of temporary differences that give rise to our deferred income tax asset (liability) were as follows:
Years Ended
December 27,
December 28,
2025
2024
Deferred income tax asset:
Net operating losses
$
105
$
91
Other carryforwards
52
37
Inventory, premium coupon redemptions and accounts receivable
valuation allowances
38
37
Operating lease liability
75
76
Capitalization of research and development costs
10
27
Other asset
62
49
Total deferred income tax asset
342
317
Valuation allowance for deferred tax assets
(1)
(53)
(38)
Net deferred income tax asset
289
279
Deferred income tax liability
Intangibles amortization
(266)
(260)
Operating lease right-of-use asset
(70)
(67)
Property and equipment
(7)
(7)
Total deferred tax liability
(343)
(334)
Net deferred income tax asset (liability)
$
(54)
$
(55)
(1)
Primarily relates to operating losses, the benefits of which are uncertain. Any future reductions of such valuation allowances will be
reflected as a reduction of income tax expense.
The assessment of the amount of value assigned to our deferred tax assets under the applicable accounting rules is
judgmental.
We
are required to consider all available positive and negative evidence in evaluating the likelihood
that we will be able to realize the benefit of our deferred tax assets in the future. Such evidence includes reversals
of deferred tax liabilities and projected future taxable income. Since this evaluation requires consideration of
events that may occur some years into the future, there is an element of judgment involved. Realization of our
deferred tax assets is dependent on generating sufficient taxable income in future periods.
We
believe that it is
more likely than not that future taxable income will be sufficient to allow us to recover substantially all of the value
assigned to our deferred tax assets. However, if future events cause us to conclude that it is not more likely than
not that we will be able to recover the value assigned to our deferred tax assets, we will be required to adjust our
valuation allowance accordingly.
As of December 27, 2025, we had federal, state and foreign net operating loss carryforwards of approximately $
86
million, $
62
366
will begin to expire in various years from 2026 through 2045. The amounts of federal, state and foreign net
operating losses that can be carried-forward indefinitely are $
86
21
358
respectively.
The effective income tax rate for the year ended December 27, 2025 differs from the statutory federal income tax
rate as follows:
Year ended December 27, 2025
$
%
Income tax provision at federal statutory rate
$
112
21.0
%
State income tax provision, net of federal income tax effect
10
2.0
Foreign Tax effects
Cayman Islands:
Foreign partnership loss
8
1.5
Other
(1)
(0.1)
Other foreign jurisdictions:
Equity investment remeasurement gain
(6)
(1.1)
Notional interest deduction
(6)
(1.1)
Other
19
3.5
Effects of changes in tax laws or rates enacted in current period
-
-
Cross-border tax laws
1
0.1
Tax credits
(2)
(0.4)
Changes in valuation allowance
3
0.6
Nontaxable and nondeductible items
3
0.5
Worldwide changes in unrecognized tax benefits
4
0.7
Other adjustments:
Previously held non-controlling equity investment
(9)
(1.7)
Other
(10)
(1.8)
Effective tax rate
$
126
23.7
%
State taxes in California, Illinois, Massachusetts, New Jersey, and New York make up the majority (greater than 50%) of the tax effect
in this category.
As previously disclosed for the years ended December 28, 2024 and December 20, 2023, prior to the adoption of
ASU 2023-09, the tax provisions differ from the amount computed using the federal statutory income tax rate as
follows:
Years ended
December 28,
December 30,
2024
2023
Income tax provision at federal statutory rate
$
108
$
114
State income tax provision, net of federal income tax effect
11
15
Foreign income tax provision
10
5
Pass-through noncontrolling interest
1
(8)
Valuation allowance
6
(3)
Unrecognized tax benefits and audit settlements
5
9
Interest expense related to loans
(14)
(13)
Effect of cross border tax laws
12
7
Other
(11)
(6)
Total income tax provision
$
128
$
120
For the year ended December 27, 2025 our effective tax rate was
23.7
%, compared to
24.9
% for the prior year
period. In 2023, our effective tax rate was
22.1
%. The difference between our effective and federal statutory tax
rates primarily relates to state and foreign income taxes and interest expense, as well as the tax treatment associated
with the acquisition of a controlling interest of a previously held non-controlling equity investment.
On July 4, 2025, President Trump signed the reconciliation tax bill, commonly known as the “One Big Beautiful
Bill Act” (OBBBA), into law. Corporate provisions in the OBBBA include immediate expensing of domestic
research and experimental expenditures, limitations on certain deductions and modifications to international tax
provisions. The changes resulting from the OBBBA did not have a significant impact to the total tax provision.
The OECD issued technical and administrative guidance on Pillar Two rules in December 2021, which provides for
a global minimum tax rate on the earnings of large multinational businesses on a country-by-country basis.
Effective January 1, 2024, the minimum global tax rate is 15% for various jurisdictions pursuant to the Pillar Two
rules. Future tax reform resulting from these developments may result in changes to long-standing tax principles,
which may adversely impact our effective tax rate going forward or result in higher cash tax liabilities. As of
December 27, 2025, the impact of the Pillar Two rules to our financial statements was immaterial.
Due to the one-time transition tax and the imposition of the GILTI provisions, all previously unremitted earnings
will no longer be subject to U.S. federal income tax; however, there could be U.S., state and/or foreign withholding
taxes upon distribution of such unremitted earnings. Determination of the amount of unrecognized deferred tax
liability with respect to such earnings is not practicable.
ASC Topic 740 prescribes the accounting for uncertainty in income taxes recognized in accordance with other
provisions contained within its guidance. This topic prescribes a recognition threshold and a measurement attribute
for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax
return. For those benefits to be recognized, a tax position must be more likely than not to be sustained upon
examination by the taxing authorities. The amount recognized is measured as the largest amount of benefit that has
a greater than 50% likelihood of being realized upon ultimate audit settlement. In the normal course of business,
our tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax
and interest assessments by these taxing authorities for uncertain tax positions taken in respect of certain tax
matters.
The total amount of unrecognized tax benefits, which are included in “other liabilities” within our consolidated
balance sheets, as of December 27, 2025 and December 28, 2024 was $
112
108
of which $
104
100
All tax returns audited by the IRS are officially closed through 2021. The tax years subject to examination by the
IRS include years 2022 and forward. In addition, limited positions reported in the 2017 tax year are subject to IRS
examination.
The amount of tax interest expense included as a component of the provision for taxes was $
4
2
and $
4
respectively. The total amount of accrued interest is included in other liabilities within our consolidated balance
sheets, and was $
22
18
penalties accrued for during the periods presented was not material to our consolidated financial statements.
The following table provides a reconciliation of unrecognized tax benefits:
December 27,
December 28,
December 30,
2025
2024
2023
Balance, beginning of period
$
89
$
98
$
82
Additions based on current year tax positions
5
5
9
Additions based on prior year tax positions
5
10
26
Reductions based on prior year tax positions
(2)
(14)
(2)
Reductions resulting from settlements with taxing authorities
-
-
(3)
Reductions resulting from lapse in statutes of limitations
(7)
(10)
(14)
Balance, end of period
$
90
$
89
$
98
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 21, 2023 | |
| 2021 | Feb 15, 2022 | |
| 2020 | Feb 17, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 21, 2018 | |
| 2016 | Feb 21, 2017 | |
| 2015 | Feb 10, 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.