HERTZ GLOBAL HOLDINGS, INCHTZ
HERTZ GLOBAL HOLDINGS, INC Income Taxes Disclosure
Income Tax (Provision) Benefit
The components of income (loss) before income taxes for the Company's operations are as follows:
Hertz Global
| As of December 31, | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Domestic | $ | (788) | $ | (2,876) | $ | 180 | |||||||||||
| Foreign | (42) | (361) | 106 | ||||||||||||||
| Total income (loss) before income taxes | $ | (830) | $ | (3,237) | $ | 286 | |||||||||||
Hertz
| As of December 31, | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Domestic | $ | (744) | $ | (3,151) | $ | 17 | |||||||||||
| Foreign | (42) | (361) | 106 | ||||||||||||||
| Total income (loss) before income taxes | $ | (786) | $ | (3,512) | $ | 123 | |||||||||||
The total income tax provision (benefit) consists of the following:
Hertz Global and Hertz
| As of December 31, | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | (3) | $ | 11 | $ | 1 | |||||||||||
| Foreign | 51 | 60 | 42 | ||||||||||||||
| State and local | 1 | 13 | 7 | ||||||||||||||
| Total current | 49 | 84 | 50 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | (109) | (551) | (348) | ||||||||||||||
| Foreign | (26) | 42 | (33) | ||||||||||||||
| State and local | 3 | 50 | 1 | ||||||||||||||
| Total deferred | (132) | (459) | (380) | ||||||||||||||
| Total provision (benefit) - Hertz Global | (83) | (375) | (330) | ||||||||||||||
| Federal deferred tax (provision) benefit applicable to Hertz Holdings | — | — | 1 | ||||||||||||||
| Total provision (benefit) - Hertz | $ | (83) | $ | (375) | $ | (329) | |||||||||||
Starting with its 2025 Annual Report, the Company adopted ASU 2023-09 prospectively. For further details on this adoption, refer to Note 2, "Significant Accounting Policies—Recently Issued Accounting Pronouncements." A reconciliation of the U.S. federal statutory income tax rate to our effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 consists of the following items in the table below. Percentages are calculated from the underlying numbers in thousands, and as a result, may not agree to the amount when calculated in millions.
Hertz Global and Hertz
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| (In millions, except rate percentage data) | Amount | Percent | |||||||||
| U.S. federal statutory tax rate | $ | (174) | 21 | % | |||||||
State and local income taxes, net of federal income tax effect(1) | 4 | — | — | ||||||||
| Foreign tax effects: | |||||||||||
| Canada | |||||||||||
| Changes in valuation allowances | (8) | 1 | |||||||||
| Other | 5 | (1) | |||||||||
| Other foreign jurisdictions | 31 | (4) | |||||||||
| Effect of cross-border tax laws | 4 | — | |||||||||
| Tax credits: | |||||||||||
| Electric vehicle credits | (4) | — | |||||||||
| Changes in valuation allowances | 38 | (5) | |||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Change in fair value of Public Warrants and Exchangeable Notes | 13 | (1) | |||||||||
| Other | 8 | (1) | |||||||||
| Changes in unrecognized tax benefits | 1 | — | |||||||||
| Other adjustments | (1) | — | |||||||||
| Effective tax rate - Hertz Global | (83) | 10 | % | ||||||||
Hertz exclusive items (2) | — | 1 | % | ||||||||
| Effective tax rate - Hertz | $ | (83) | 11 | % | |||||||
(1) Illinois, Massachusetts, New Jersey, New York, Oregon, and California represents the majority (greater than 50 percent) of the tax effect in this category.
(2) Represents the tax rate differential due to the exclusion of the change in fair value of Public Warrants from Hertz's income (loss) before income taxes.
Consistent with pre-ASU 2023-09 guidance, key components reconciling statutory and effective income tax rates for the years ended December 31, 2024 and 2023 are presented in the table below. Percentages are calculated from the underlying numbers in thousands, and as a result, may not agree to the amount when calculated in millions.
Hertz Global and Hertz
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Statutory Federal Tax Rate | 21 | % | 21 | % | |||||||
| State and local income taxes, net of federal effect | 4 | 5 | |||||||||
| Change in state rates, net of federal effect | — | (4) | |||||||||
| Foreign tax rate differential | — | 2 | |||||||||
| Federal and foreign permanent differences | — | (5) | |||||||||
| Tax Credits | 1 | (70) | |||||||||
| Withholding taxes | — | 1 | |||||||||
| Valuation allowance | (17) | (73) | |||||||||
| Change in fair value of Public Warrants & Exchangeable Notes | 2 | (14) | |||||||||
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| European reorganization | — | 6 | |||||||||
| Uncertain tax positions | — | 1 | |||||||||
| U.S. tax on foreign earnings | — | 9 | |||||||||
| Nondeductible Officer Compensation | — | 5 | |||||||||
| Other | 1 | 1 | |||||||||
| Effective tax rate - Hertz Global | 12 | % | (115) | % | |||||||
Hertz exclusive items (1) | (1) | % | (153) | % | |||||||
| Effective tax rate - Hertz | 11 | % | (268) | % | |||||||
(1) Represents the tax rate differential due to the exclusion of the change in fair value of Public Warrants from Hertz's income (loss) before income taxes.
The change in tax provision in 2025 compared to 2024 is driven by lower pretax losses in 2025, non-taxable year-over-year fluctuations in the fair value adjustments of Public Warrants and Exchangeable Notes and lower tax credits in 2025, partially offset by lower valuation allowances in 2025.
The change in tax provision in 2024 compared to 2023 is driven by lower pretax income, increases in valuation allowances in 2024 and lower EV credits generated in 2024.
Many countries have enacted or are in the process of enacting a minimum tax rule based on the OECD framework, commonly referred to as "Pillar Two." The Company does not anticipate a material impact on taxes as a result of Pillar Two.
The amount income taxes paid (net of refunds received) by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows:
Hertz Global and Hertz
| Year Ended December 31, | |||||
| (In millions) | 2025 | ||||
| U.S. federal | $ | 4 | |||
| U.S. state and local: | |||||
| Florida | 5 | ||||
| Other | (5) | ||||
| State and local subtotal | — | ||||
| Foreign: | |||||
| Australia | 72 | ||||
| Canada | (12) | ||||
| Other | 16 | ||||
| Foreign subtotal | 76 | ||||
| Total cash taxes, net of refunds | $ | 80 | |||
On July 4, 2025, the OBBBA was enacted, reinstating full bonus depreciation, allowing interest deductions based on EBITDA, expensing R&D costs and modifying certain international provisions of the Code. As a result, the Company expects federal cash taxes to decrease in the near term, assuming fleet investments are maintained or increased from current levels. Alternatively, state cash taxes could increase depending on a state's conformity rules with the federal bonus depreciation rules.
The principal items of the U.S. and foreign net deferred tax assets and liabilities are as follows:
Hertz Global and Hertz
| As of December 31, | |||||||||||
| (In millions) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Employee benefit plans | $ | 11 | $ | 16 | |||||||
| Net operating loss carryforwards | 2,361 | 1,614 | |||||||||
| Capital loss carryforwards | 10 | 4 | |||||||||
| Federal and state tax credit carryforwards | 370 | 356 | |||||||||
| Deferred interest expense | 85 | 371 | |||||||||
| Accrued and prepaid expenses | 285 | 259 | |||||||||
| Operating lease liabilities | 581 | 530 | |||||||||
| Total deferred tax assets | 3,703 | 3,150 | |||||||||
| Less: valuation allowance | (931) | (839) | |||||||||
| Total net deferred tax assets | 2,772 | 2,311 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation on tangible assets | (1,810) | (1,516) | |||||||||
| Intangible assets | (717) | (715) | |||||||||
| Operating lease right-of-use assets | (578) | (537) | |||||||||
| Total deferred tax liabilities | (3,105) | (2,768) | |||||||||
| Net deferred tax liability - Hertz Global | (333) | (457) | |||||||||
| Deferred tax asset - net operating loss applicable to Hertz Holdings | (4) | (4) | |||||||||
| Net deferred tax liability - Hertz | $ | (337) | $ | (461) | |||||||
Hertz Global and Hertz
In determining valuation allowances, an assessment of positive and negative evidence was performed regarding realization of the deferred tax assets. This assessment included the evaluation of cumulative earnings and losses in recent years, scheduled reversals of deferred tax liabilities, the availability of carryforwards and the remaining period of the respective carryforward, future taxable income and any applicable tax-planning strategies that are available.
As of December 31, 2025, the Company has approximately $1.7 billion of tax-effected U.S. federal net operating loss carryforwards ("Federal NOLs"), which have an indefinite carryforward period and may offset 80% of taxable income generated in any future year. These net operating losses are offset, in part, by a valuation allowance totaling $97 million. The Company has approximately $332 million of federal tax credits which begin expiring in 2039. These credits are offset, in part, by a valuation allowance totaling $117 million. The Company has approximately $18 million of tax-effected federal deferred interest expense which has an indefinite carryforward period.
As of December 31, 2025, the Company has approximately $325 million of tax-effected state net operating loss carryforwards. Some of these net operating losses have an indefinite carryforward period, and those that do not will begin to expire in 2026 if not utilized. These net operating losses are offset, in part, by a valuation allowance totaling $227 million. The Company has approximately $38 million in state tax credits for which a full valuation allowance is recorded. The state tax credits expire over various years beginning in 2028. The Company has approximately $41 million of tax-effected deferred interest expense which has an indefinite carryforward period and is offset by a valuation allowance totaling $27 million. The tax effected amounts for all state tax attributes are net of federal benefit.
As of December 31, 2025, the Company has approximately $312 million of tax-effected foreign net operating loss carryforwards. Some of the net operating losses have an indefinite carryforward period, and those that do not will begin to expire in 2040 if not utilized. These net operating losses are offset, in part, by a valuation allowance totaling $260 million. The Company has no tax credits in foreign jurisdictions. The Company has approximately $26 million of tax-effected foreign deferred interest which has an indefinite carryforward period and for which a full valuation allowance is recorded. The Company has approximately $10 million of tax-effected foreign capital loss carryforwards for which a full valuation allowance has been recorded.
Due to the ownership changes before and upon emergence from bankruptcy in June 2021, the utilization of the Company's federal, state and foreign NOLs may be subject to limitations. Estimates of these limitations have been reflected in the tax provision.
The Company has provided for deferred taxes on undistributed earnings of foreign subsidiaries. However, it is not practicable to estimate the deferred taxes on other differences on investments in foreign subsidiaries.
Key provisions of the OBBBA, such as full bonus depreciation, allowing interest deductions based on EBITDA and expensing R&D costs, could increase federal deferred tax assets, such as net operating losses, and could necessitate additional valuation allowances depending on future fleet investment and taxable income and loss trends.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Hertz Global and Hertz
| Years Ended December 31, | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance as of January 1 | $ | 156 | $ | 130 | $ | 298 | |||||||||||
| Increase (decrease) attributable to tax positions taken during prior periods | (3) | — | (192) | ||||||||||||||
| Increase (decrease) attributable to tax positions taken during the current year | 12 | 29 | 24 | ||||||||||||||
| Decrease attributable to settlements with taxing authorities | — | (3) | — | ||||||||||||||
| Balance as of December 31 | $ | 165 | $ | 156 | $ | 130 | |||||||||||
The total amount of unrecognized tax benefits that, if recognized, would favorably impact the effective tax rate is $2 million. Net, after-tax interest and penalties related to tax liabilities are classified as a component of income tax in the accompanying consolidated statements of operations which were not significant for the years ended December 31, 2025, 2024 and 2023. Net, after-tax interest and penalties were accrued as a component of tax in the Company's consolidated balance sheet in the amount of $9 million and $8 million as of December 31, 2025 and 2024, respectively.
It is reasonably possible our unrecognized tax benefits will decrease by approximately $64 million within 12 months of our reporting date due to an agreement reached between competent authorities and the expiration of applicable statutes of limitations.
During 2021, as part of a restructuring of European operations, we generated a tax loss of approximately $1.3 billion, which was initially characterized as a capital loss in the 2021 provision. On February 9, 2023, the Company and the IRS agreed to the amount and to the character of the loss as ordinary. This resulted in a reduction in the amount of loss and a release of valuation allowances for a net benefit of $163 million in 2023.
The Company is subject to examination by taxing authorities worldwide. Tax years that are open for adjustment span from 2010 to 2025. Additionally, the Company is under audit in many jurisdictions, and it is reasonably possible that the amount of unrecognized tax benefits may change as the result of the completion of ongoing examinations, the expiration of the statute of limitations or unforeseen circumstances.
The Company's assumptions and estimates pertaining to uncertain tax positions require significant judgment. It is possible that the tax authorities could challenge the Company's estimates and assumptions used to assess the tax benefits, and the actual amount of the tax benefits related to uncertain tax positions may differ materially from these estimates.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 12, 2024 | |
| 2022 | Feb 7, 2023 | |
| 2021 | Feb 23, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 25, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Mar 6, 2017 | |
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.