ILLUMINA, INC.ILMN
ILLUMINA, INC. Income Taxes Disclosure
| 10. INCOME TAXES | ||
Income (loss) before income taxes summarized by region was as follows:
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| United States | $ | 331 | $ | (1,834) | $ | (1,735) | |||||||||||
| Foreign | 755 | 655 | 618 | ||||||||||||||
Total income (loss) before income taxes | $ | 1,086 | $ | (1,179) | $ | (1,117) | |||||||||||
The provision for income taxes consisted of the following:
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | — | $ | 6 | $ | (5) | |||||||||||
| State | 13 | 18 | 6 | ||||||||||||||
| Foreign | 104 | 137 | 77 | ||||||||||||||
| Total current provision | 117 | 161 | 78 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 106 | (59) | (13) | ||||||||||||||
| State | 19 | (56) | (26) | ||||||||||||||
| Foreign | (6) | (2) | 5 | ||||||||||||||
| Total deferred benefit | 119 | (117) | (34) | ||||||||||||||
| Total tax provision | $ | 236 | $ | 44 | $ | 44 | |||||||||||
During the year ended December 28, 2025, we adopted ASU 2023-09 to enhance the income tax disclosures regarding income taxes paid and the rate reconciliation disclosure. The provision for income taxes reconciles to the amount computed by applying the federal statutory rate to income (loss) before income taxes as follows:
| 2025 | 2024 | 2023 | ||||||||||||||||||||||||
| Dollars in millions | $ | % | $ | % | $ | % | ||||||||||||||||||||
| US federal statutory tax rate | $ | 228 | 21.0 | % | $ | (248) | 21.0 | % | $ | (235) | 21.0 | % | ||||||||||||||
State and local income taxes, net of federal income tax effect (1) | 22 | 2.0 | % | (36) | 3.1 | % | (32) | 2.9 | % | |||||||||||||||||
| Foreign tax effects | ||||||||||||||||||||||||||
| Singapore | ||||||||||||||||||||||||||
| Statutory rate difference between Singapore and US | (54) | (5.0) | % | (110) | 9.3 | % | (103) | 9.2 | % | |||||||||||||||||
| Change in valuation allowance | (74) | (6.8) | % | (3) | 0.3 | % | 31 | (2.8) | % | |||||||||||||||||
| Nondeductible R&D expense | 2 | 0.2 | % | 15 | (1.3) | % | 2 | (0.2) | % | |||||||||||||||||
| Other | 10 | 0.9 | % | 12 | (1.0) | % | 3 | (0.2) | % | |||||||||||||||||
| United Kingdom | ||||||||||||||||||||||||||
| Pillar 2 (Global Minimum Tax) top-up tax | 10 | 0.9 | % | 54 | (4.6) | % | — | — | % | |||||||||||||||||
| Other | 15 | 1.4 | % | 4 | (0.3) | % | (2) | 0.2 | % | |||||||||||||||||
| Other foreign jurisdictions | 16 | 1.5 | % | 20 | (1.7) | % | 8 | (0.7) | % | |||||||||||||||||
| Effect of changes in tax laws or rates enacted in current period | — | — | % | — | — | % | — | — | % | |||||||||||||||||
| Effect of cross-border tax laws | ||||||||||||||||||||||||||
| Global intangible low-taxed income (GILTI) | 12 | 1.1 | % | 121 | (10.3) | % | 153 | (13.7) | % | |||||||||||||||||
| Subpart F income | (15) | (1.4) | % | 23 | (2.0) | % | 20 | (1.8) | % | |||||||||||||||||
| Foreign-derived intangible income (FDII) | (5) | (0.5) | % | (4) | 0.3 | % | 5 | (0.4) | % | |||||||||||||||||
| Tax Credits | ||||||||||||||||||||||||||
| Research tax credits | (16) | (1.5) | % | (21) | 1.8 | % | (27) | 2.4 | % | |||||||||||||||||
| Change in valuation allowances | 44 | 4.1 | % | 14 | (1.2) | % | (2) | 0.2 | % | |||||||||||||||||
| Nontaxable or nondeductible items | ||||||||||||||||||||||||||
| Stock compensation | 17 | 1.6 | % | 16 | (1.4) | % | 31 | (2.8) | % | |||||||||||||||||
| Goodwill impairment | — | — | % | 308 | (26.1) | % | 149 | (13.3) | % | |||||||||||||||||
| Accrual of European Commission fine | — | — | % | (99) | 8.4 | % | 3 | (0.3) | % | |||||||||||||||||
| Impact of acquisition related items | (3) | (0.3) | % | (46) | 3.9 | % | 8 | (0.7) | % | |||||||||||||||||
| Other | 6 | 0.6 | % | 4 | (0.3) | % | — | — | % | |||||||||||||||||
| Changes in unrecognized tax benefits | 22 | 2.0 | % | 19 | (1.6) | % | 32 | (2.9) | % | |||||||||||||||||
| Other adjustments | (1) | (0.1) | % | 1 | (0.1) | % | — | — | % | |||||||||||||||||
| Total tax provision, effective tax rate | $ | 236 | 21.7 | % | $ | 44 | (3.8) | % | $ | 44 | (3.9) | % | ||||||||||||||
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(1)State taxes in California, Massachusetts, Illinois and Maryland made up the majority (greater than 50%) of the tax effect in this category for 2025. California and Massachusetts made up the majority (greater than 50%) of the tax effect in this category for 2024 and 2023.
We have elected to account for the global intangible low-taxed income (GILTI) as a period cost in our consolidated financial statements.
The impact of acquisition related items includes the income tax expense impact of transaction costs, acquisition related compensation, and changes to the contingent value rights associated with the GRAIL acquisition.
Significant components of deferred tax assets and liabilities were as follows:
| In millions | December 28, 2025 | December 29, 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Net operating losses | $ | 125 | $ | 189 | |||||||
| Tax credits | 290 | 252 | |||||||||
| Other accruals and reserves | 32 | 40 | |||||||||
| Stock compensation | 31 | 34 | |||||||||
| Capitalized U.S. R&D expenses | 134 | 181 | |||||||||
| Other amortization | 36 | 42 | |||||||||
| Operating lease liabilities | 97 | 112 | |||||||||
| Property and equipment | 22 | 17 | |||||||||
| Investments | — | 23 | |||||||||
| Other | 68 | 63 | |||||||||
| Total gross deferred tax assets | 835 | 953 | |||||||||
| Valuation allowance on deferred tax assets | (250) | (278) | |||||||||
Total deferred tax assets | 585 | 675 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Purchased intangible amortization | (23) | (35) | |||||||||
| Operating lease right-of-use assets | (50) | (57) | |||||||||
| Investments | (39) | — | |||||||||
| Other | (23) | (25) | |||||||||
| Total deferred tax liabilities | (135) | (117) | |||||||||
| Deferred tax assets, net | $ | 450 | $ | 558 | |||||||
A valuation allowance is established when it is more likely than not the future realization of all or some of the deferred tax assets will not be achieved. The evaluation of the need for a valuation allowance is performed on a jurisdiction-by-jurisdiction basis and includes a review of all available positive and negative evidence, including operating results and forecasted ranges of future taxable income. Based on the available evidence as of December 28, 2025, we were not able to conclude it is more likely than not certain deferred tax assets will be realized. Therefore, a valuation allowance of $250 million was recorded against certain U.S. and foreign deferred tax assets.
As of December 28, 2025, we had net operating loss carryforwards for federal and state tax purposes of $59 million and $1,829 million, respectively, which will begin to expire in 2036 and 2026, respectively, unless utilized prior. We also had federal and state tax credit carryforwards of $173 million and $250 million, which will begin to expire in 2031 and 2027, respectively, unless utilized prior.
Pursuant to Section 382 and 383 of the Internal Revenue Code, utilization of net operating losses and credits may be subject to annual limitations in the event of any significant future changes in its ownership structure. These annual limitations may result in the expiration of net operating losses and credits prior to utilization. The deferred tax assets as of December 28, 2025 are net of any previous limitations due to Section 382 and 383.
Our manufacturing operations in Singapore operate under various tax holidays and incentives, which will begin to expire in 2035. These tax holidays and incentives resulted in a $37 million, $33 million, and $75 million decrease to the provision for income taxes in 2025, 2024, and 2023, respectively. These tax holidays and incentives resulted in an increase in diluted earnings per share of $0.24 in 2025, and a decrease in diluted loss per share of $0.20 and $0.47 in 2024 and 2023, respectively.
As of December 28, 2025, we asserted that $1,729 million of foreign earnings would not be indefinitely reinvested, and accordingly, recorded a deferred tax liability of $23 million.
The following table summarizes the gross amount of our uncertain tax positions:
| In millions | December 28, 2025 | December 29, 2024 | December 31, 2023 | ||||||||||||||
| Balance at beginning of year | $ | 232 | $ | 210 | $ | 153 | |||||||||||
| Increases related to prior year tax positions | 14 | 2 | 27 | ||||||||||||||
| Decreases related to prior year tax positions | — | (2) | (2) | ||||||||||||||
| Increases related to current year tax positions | 11 | 23 | 42 | ||||||||||||||
| Decreases related to lapse of statute of limitations | (4) | (1) | (10) | ||||||||||||||
| Balance at end of year | $ | 253 | $ | 232 | $ | 210 | |||||||||||
Included in the balance of uncertain tax positions as of December 28, 2025 and December 29, 2024, was $216 million and $202 million, respectively, of net unrecognized tax benefits that, if recognized, would reduce the effective income tax rate in future periods.
Any interest and penalties related to uncertain tax positions are reflected in the provision for income taxes. We recognized expense of $9 million, $6 million, and $2 million in 2025, 2024, and 2023, respectively, related to potential interest and penalties on uncertain tax positions. We recorded a liability for potential interest and penalties of $23 million and $13 million as of December 28, 2025 and December 29, 2024, respectively.
Tax years 1997 to 2024 remain subject to future examination by the major tax jurisdictions in which we are subject to tax. The Internal Revenue Service recently began an examination of the U.S. Corporation Income Tax Returns for tax years 2021 through 2024. Given the uncertainty of potential adjustments from examination as well as the potential expiration of the statute of limitations, it is reasonably possible that the balance of unrecognized tax benefits could change significantly over the next 12 months. Due to the number of years remaining that are subject to examination, we are unable to estimate the full range of possible adjustments to the balance of gross unrecognized tax benefits.
The following table summarizes income taxes paid (net of refunds):
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| Federal | $ | 22 | $ | 31 | $ | (2) | |||||||||||
| State | 7 | — | 4 | ||||||||||||||
| Foreign | 44 | 74 | 63 | ||||||||||||||
| Total | $ | 73 | $ | 105 | $ | 65 | |||||||||||
The following table summarizes components of income tax paid (net of refunds received) exceeding 5% of the annual total by jurisdiction:
| In millions | 2025 | 2024 | 2023 | ||||||||||||||
| Federal | $ | 22 | $ | 31 | * | ||||||||||||
| California | $ | 5 | * | * | |||||||||||||
| Maryland | * | * | $ | 3 | |||||||||||||
| Brazil | * | $ | 10 | * | |||||||||||||
| China | $ | 10 | * | $ | 14 | ||||||||||||
| Germany | $ | 4 | * | $ | 6 | ||||||||||||
| Israel | * | * | $ | 7 | |||||||||||||
| Netherlands | $ | 5 | * | * | |||||||||||||
| United Kingdom | $ | 6 | $ | 31 | $ | 17 | |||||||||||
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*Income tax paid (net of refunds received) did not exceed 5% of the annual total by jurisdiction.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 12, 2025 | |
| 2023 | Feb 17, 2023 | |
| 2022 | Feb 18, 2022 | |
| 2021 | Feb 17, 2021 | |
| 2019 | Feb 11, 2020 | |
| 2018 | Feb 12, 2019 | |
| 2017 | Feb 13, 2018 | |
| 2016 | Mar 2, 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.