INTERNATIONAL PAPER CO /NEW/IP
INTERNATIONAL PAPER CO /NEW/ Income Taxes Disclosure
INCOME TAXES
The components of International Paper’s earnings from continuing operations before income taxes and equity
earnings by taxing jurisdiction were as follows:
In millions | 2025 | 2024 | 2023 |
Earnings (loss) | |||
U.S. | $(224) | $127 | $203 |
Non-U.S. | (3,144) | 242 | 199 |
Earnings (loss) from continuing operations before income taxes and equity earnings (losses) | $(3,368) | $369 | $402 |
The provision (benefit) for income taxes from continuing operations (excluding noncontrolling interests) by taxing
jurisdiction was as follows:
In millions | 2025 | 2024 | 2023 |
Current tax provision (benefit) | |||
U.S. federal | $(13) | $(71) | $132 |
U.S. state and local | 3 | 26 | 10 |
Non-U.S. | 92 | 42 | 36 |
$82 | $(3) | $178 | |
Deferred tax provision (benefit) | |||
U.S. federal | $(352) | $(252) | $(125) |
U.S. state and local | (65) | (92) | 12 |
Non-U.S. | (198) | (14) | 3 |
$(615) | $(358) | $(110) | |
Income tax provision (benefit) | $(533) | $(361) | $68 |
The Company’s deferred income tax provision (benefit) includes a $(1) million benefit, a $1 million expense and a
$(6) million benefit for 2025, 2024 and 2023, respectively, for the effect of various changes in non-U.S. and U.S.
state tax rates.
In 2025, International Paper made income tax payments (net of refunds) of $161 million, consisting of $39 million of
U.S. Federal tax payments, $13 million of U.S. state and local income tax payments and $109 million of non-U.S.
tax payments. Of these amounts, income taxes paid (net of refunds) exceeded 5 percent of total income taxes paid
(net of refunds) in the following jurisdictions:
In millions | Income Tax Payments (Net of Refunds) |
Germany | $18 |
Ireland | 13 |
Italy | 9 |
Mexico | 25 |
Morocco | 20 |
Spain | 13 |
The Company made income tax payments, net of refunds, of $394 million and $340 million in 2024 and 2023,
respectively.
The following table reconciles income tax expense using the statutory U.S. Federal income tax rate to the
consolidated income tax provision and reported effective tax rate in 2025:
In millions | 2025 | Effective Income Tax Rate % |
Earnings (loss) from continuing operations before income taxes and equity earnings | $(3,368) | n/a |
Statutory U.S. income tax rate | 21% | n/a |
Tax expense (benefit) using statutory U.S. income tax rate | (707) | 21% |
State and local income taxes, net of federal income tax effect (a) | (39) | 1% |
Foreign tax effects: | ||
Luxembourg: | ||
NOL Expiration | 134 | (4)% |
Non-Deductible Expenses | 32 | (1)% |
Valuation Allowance | (140) | 4% |
Other | 8 | —% |
Subtotal Luxembourg | 34 | (1)% |
Portugal: | ||
Other | (62) | 2% |
Subtotal Portugal | (62) | 2% |
United Kingdom: | ||
Impact of rate differential on non-U.S. permanent differences and earnings | (54) | 2% |
Non-Deductible Expenses | 558 | (17)% |
Non-Taxable Income | (2) | —% |
Other Permanent Differences | 11 | —% |
Other | 9 | —% |
Subtotal United Kingdom | 522 | (15)% |
Other Foreign Jurisdictions | 56 | (2)% |
Total Foreign Tax Effects | 550 | (16)% |
Effect of cross-border tax laws: | ||
Outside basis difference | (570) | 17% |
U.S. tax on non-U.S. earnings (GILTI and Subpart F) | 15 | —% |
Total Effect of Cross-Border Tax Laws | (555) | 16% |
Tax credits | (35) | 1% |
Valuation allowances | 250 | (7)% |
Nontaxable or nondeductible items | (27) | 1% |
Worldwide changes in unrecognized tax benefits | 32 | (1)% |
Other | (2) | —% |
Income tax provision (benefit) | $(533) | 16% |
(a) State taxes in California, Georgia, Illinois, Louisiana, Mississippi, New Jersey, Tennessee, and Wisconsin made up the majority (greater than
50%) of the tax effect in this category.
The following table reconciles income tax expense using the statutory U.S. Federal income tax rate to the
consolidated income tax provision and reported effective tax rate in 2024 and 2023:
In millions | 2024 | 2023 |
Earnings (loss) from continuing operations before income taxes and equity earnings | $369 | $402 |
Statutory U.S. income tax rate | 21% | 21% |
Tax expense (benefit) using statutory U.S. income tax rate | 77 | 84 |
State and local income taxes | (52) | 8 |
Impact of rate differential on non-U.S. permanent differences and earnings | (23) | (6) |
Non-taxable income | (4) | (2) |
Non-deductible business expenses | 20 | 7 |
Non-deductible compensation | 8 | 7 |
Tax audits | — | (12) |
Foreign derived intangible income deduction | — | 2 |
US tax on non-U.S. earnings (GILTI and Subpart F) | 32 | (1) |
Foreign tax credits | 7 | 6 |
General business and other tax credits | (36) | (29) |
Tax expense (benefit) on equity earnings | (1) | (4) |
Legal entity restructuring expense (benefit) | (391) | 4 |
Other, net | 2 | 4 |
Income tax provision (benefit) | $(361) | $68 |
Effective income tax rate | (98)% | 17% |
The tax effects of significant temporary differences, representing deferred income tax assets and liabilities at
December 31, 2025 and 2024, were as follows:
In millions | 2025 | 2024 |
Deferred income tax assets: | ||
Postretirement benefit accruals | $69 | $72 |
Pension obligations | — | 63 |
Tax credits | 191 | 183 |
Net operating and capital loss carryforwards | 1,313 | 1,181 |
Compensation reserves | 186 | 224 |
Lease obligations | 177 | 112 |
Environmental reserves | 143 | 131 |
Investments | 3 | 4 |
Research and development expenditures | 5 | 240 |
Outside basis difference | 622 | — |
Other | 466 | 203 |
Gross deferred income tax assets | $3,175 | $2,413 |
Less: valuation allowance (a) | (1,535) | (1,201) |
Net deferred income tax asset | $1,640 | $1,212 |
Deferred income tax liabilities: | ||
Intangibles | $(1,132) | $(133) |
Right of use assets | (177) | (112) |
Pension obligations | (26) | — |
Plants, properties and equipment | (1,722) | (1,528) |
Forestlands, related installment sales, and investment in subsidiary | (487) | (486) |
Gross deferred income tax liabilities | $(3,544) | $(2,259) |
Net deferred income tax liability (b) | $(1,904) | $(1,047) |
(a) The net change in the total valuation allowance for the years ended December 31, 2025 and 2024 was an increase of $334 million and an
increase of $353 million, respectively.
(b)The net deferred income tax liability for the years ended December 31, 2025 and 2024 includes net deferred tax liability of $42 million and
$44 million included in held for sale.
Deferred income tax assets and liabilities are recorded in the accompanying consolidated balance sheets under the
captions Deferred charges and other assets and Deferred income taxes, respectively. The $487 million of deferred
tax liabilities for forestlands, related installment sales, and investment in subsidiary is attributable to a 2007 Temple-
During 2025, the Company incurred a $2.47 billion impairment charge related to the PS EMEA business segment.
The impairment charge results in a deferred tax asset related to the investment in its PS EMEA subsidiaries. The
Company intends to realize a portion of this deferred tax asset in 2026 for which a capital loss will be recognized for
U.S. federal and state income tax purposes. A valuation allowance is recognized on the deferred tax asset to the
extent the capital loss exceeds anticipated future capital gains. This results in the recognition of a net tax benefit of
$271 million.
During 2024, the Company completed an internal legal entity restructuring for which a capital loss was recognized
for U.S. federal and state income tax purposes resulting in a tax benefit of $401 million. The Company intends to
carry back a portion of the loss to prior years and has set up a receivable in the amount of $265 million. The
remaining capital loss will be carried forward to offset future capital gains, and, as such, the Company recorded a
deferred tax asset in the amount of $136 million for the year ended December 31, 2025.
A reconciliation of the beginning and ending amount of unrecognized tax benefits recorded in Other Liabilities in the
accompanying consolidated balance sheet for the years ended December 31, 2025, 2024 and 2023 is as follows:
In millions | 2025 | 2024 | 2023 |
Balance at January 1 | $(204) | $(173) | $(177) |
Assumed as part of DS Smith acquisition | (133) | — | — |
(Additions) reductions for tax positions related to current year | (26) | (10) | (13) |
(Additions) for tax positions related to prior years | (26) | (40) | (11) |
Reductions for tax positions related to prior years | 14 | 7 | 1 |
Settlements | 4 | 4 | 17 |
Expiration of statutes of limitations | 1 | 6 | 11 |
Currency translation adjustment | (14) | 2 | (1) |
Balance at December 31 | $(384) | $(204) | $(173) |
If the Company were to prevail on the unrecognized tax benefits recorded, substantially all of the balances at
December 31, 2025, 2024 and 2023 would benefit the effective tax rate.
The Company accrues interest on unrecognized tax benefits as a component of interest expense. Penalties, if
incurred, are recognized as a component of income tax expense. The Company had approximately $92 million and
$50 million accrued for the payment of estimated interest and penalties associated with unrecognized tax benefits at
December 31, 2025 and 2024, respectively.
The Company is currently subject to audits in the United States and other taxing jurisdictions around the world.
Generally, tax years 2012 through 2024 remain open and subject to examination by the relevant tax authorities. The
Company frequently faces challenges regarding the amount of taxes due. These challenges include positions taken
by the Company related to the timing, nature, and amount of deductions and the allocation of income among
various tax jurisdictions.
On September 3, 2024, the Company received the Unagreed Revenue Agent Report from the Internal Revenue
Service relating to investment tax credits for the 2017-2019 years that currently are under examination. The
estimated net incremental tax liability associated with the proposed adjustments would be approximately $50
million. The Company disagrees with the proposed adjustments and initiated the administrative appeals process on
October 30, 2024 with the filing of our Protest of the proposed adjustments. An unfavorable resolution in the
administrative appeals process or future tax litigation could result in cash tax payments and could adversely impact
the effective tax rate.
On July 4, 2025, the United States enacted the One Big Beautiful Bill Act (“OBBBA”). The OBBBA made significant
tax law changes, including the extension of certain provisions of the 2017 Tax Cuts and Jobs Act, modifications to
the U.S. international tax framework and the reinstatement of favorable treatment for certain business-related
deductions. The tax provisions of the OBBBA have staggered effective dates beginning in 2025 and extending
through 2027. The OBBBA did not have a material impact on the Company’s income tax provision or effective tax
rate for the year ended December 31, 2025.
The Company provides for foreign withholding taxes and any applicable U.S. state income taxes on earnings
intended to be repatriated from non-U.S. subsidiaries, which we believe will be limited in the future to each year's
current earnings. No provision for these taxes on undistributed earnings of non-U.S. subsidiaries as of
December 31, 2025 has been made, as these earnings are considered indefinitely invested. Determination of the
amount of taxes that might be paid on these undistributed earnings if eventually remitted in a taxable manner is not
practicable.
If management decided to monetize the Company’s foreign investments, we would recognize the tax cost related to
the excess of the book value over the tax basis of those investments. This would include foreign withholding taxes
and any applicable U.S. Federal and state income taxes. Determination of the tax cost that would be incurred upon
monetization of the Company’s foreign investments is not practicable; however, we do not believe it would be
material.
The following details the scheduled expiration dates of the Company’s net operating loss and income tax credit and
capital loss carryforwards:
In millions | 2025 Through 2034 | 2035 Through 2044 | Indefinite | Total |
U.S. federal and non-U.S. NOLs | $39 | $483 | $506 | $1,028 |
State taxing jurisdiction NOLs (a) | 20 | 31 | — | 51 |
U.S. federal NOL | — | — | 70 | 70 |
U.S. federal, non-U.S. and state tax credit carryforwards (a) | 85 | 10 | 96 | 191 |
U.S. federal and state capital loss carryforwards (a) | 164 | — | — | 164 |
Total | $308 | $524 | $672 | $1,504 |
Less: valuation allowance (a) | (82) | (499) | (494) | (1,075) |
Total, net | $226 | $25 | $178 | $429 |
(a) State amounts are presented net of federal benefit.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 17, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 19, 2020 | |
| 2018 | Feb 20, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 22, 2017 | |
| 2015 | Feb 25, 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.