Keurig Dr Pepper Inc.KDP
Keurig Dr Pepper Inc. Income Taxes Disclosure
Income Taxes
Income before provision for income taxes was as follows:
| For the Year Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| U.S. | $ | 1,289 | $ | 696 | $ | 1,665 | |||||||||||
| Foreign | 1,398 | 1,218 | 1,092 | ||||||||||||||
| Total | $ | 2,687 | $ | 1,914 | $ | 2,757 | |||||||||||
The provision for income taxes has the following components:
| For the Year Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 255 | $ | 377 | $ | 270 | |||||||||||
| State | 68 | 108 | 117 | ||||||||||||||
| Foreign | 240 | 242 | 193 | ||||||||||||||
| Total current provision | $ | 563 | $ | 727 | $ | 580 | |||||||||||
| Deferred: | |||||||||||||||||
| Federal | $ | 10 | $ | (199) | $ | 31 | |||||||||||
| State | 13 | (55) | 2 | ||||||||||||||
| Foreign | 22 | — | (37) | ||||||||||||||
| Total deferred provision | 45 | (254) | (4) | ||||||||||||||
| Total provision for income taxes | $ | 608 | $ | 473 | $ | 576 | |||||||||||
The following tables reconcile the provision for income taxes computed at the U.S. federal statutory tax rate to the provision for income taxes reported in the Consolidated Statements of Income:
For the Year Ended December 31, 2025 | |||||||||||
| ($ in millions) | Amount | Percentage | |||||||||
| Statutory federal income tax rate | $ | 564 | 21.0 | % | |||||||
State income taxes, net(1) | 59 | 2.2 | |||||||||
| Impact of foreign operations | |||||||||||
| Ireland | |||||||||||
| Statutory tax rate difference between Ireland and U.S. | (71) | (2.6) | |||||||||
| Other | 20 | 0.7 | |||||||||
| Other foreign jurisdictions | 21 | 0.8 | |||||||||
| Effect of cross-border tax laws | 9 | 0.3 | |||||||||
| Tax credits | (28) | (1.0) | |||||||||
| Nontaxable or nondeductible items | 12 | 0.4 | |||||||||
| Changes in unrecognized tax benefits | 22 | 0.8 | |||||||||
| Total provision for income taxes | $ | 608 | 22.6 | % | |||||||
(1)California, Tennessee, New Jersey, Florida, Illinois, and Texas comprise more than 50% of State income taxes, net.
| For the Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Statutory federal income tax rate | 21.0 | % | 21.0 | % | |||||||
| State income taxes, net | 2.1 | 3.2 | |||||||||
| Impact of foreign operations | (1.4) | (1.7) | |||||||||
| Tax credits | (6.2) | (3.7) | |||||||||
| Valuation allowance for deferred tax assets | 0.6 | — | |||||||||
| U.S. taxation of foreign earnings | 5.1 | 3.0 | |||||||||
| Goodwill impairment | 2.7 | — | |||||||||
| Deferred rate change | (0.4) | (0.3) | |||||||||
| Uncertain tax positions | — | 0.1 | |||||||||
| U.S. federal provision to return | 0.2 | — | |||||||||
| Excess tax deductions on stock-based compensation | (0.2) | (0.3) | |||||||||
| Other | 1.2 | (0.4) | |||||||||
| Effective tax rate | 24.7 | % | 20.9 | % | |||||||
Deferred tax assets and liabilities were comprised of the following:
| December 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Operating lease liability | $ | 236 | $ | 229 | |||||||
| Net operating losses carryforwards | 24 | 30 | |||||||||
| Tax credit carryforwards | 5 | 10 | |||||||||
| Accrued expenses | 152 | 154 | |||||||||
| Research and development capitalization | 45 | 94 | |||||||||
| Accrued termination fees | 52 | 56 | |||||||||
| Other | 84 | 107 | |||||||||
| Total deferred tax assets | 598 | 680 | |||||||||
| Valuation allowances | (24) | (25) | |||||||||
| Total deferred tax assets, net of valuation allowances | $ | 574 | $ | 655 | |||||||
| Deferred tax liabilities: | |||||||||||
| Brands, trade names and other intangible assets | $ | (5,540) | $ | (5,486) | |||||||
| Property, plant, and equipment | (230) | (299) | |||||||||
| Right of use assets | (234) | (224) | |||||||||
| Other | (60) | (42) | |||||||||
| Total deferred tax liabilities | (6,064) | (6,051) | |||||||||
| Net deferred tax liabilities | $ | (5,490) | $ | (5,396) | |||||||
CASH PAID FOR INCOME TAXES
For the year ended December 31, 2025, our cash paid for income taxes, net of refunds received, consisted of the following:
| (in millions) | For the Year Ended December 31, 2025 | |||||||
| U.S. | ||||||||
| Federal | $ | 103 | ||||||
| State | 95 | |||||||
| Foreign | ||||||||
| Mexico | 103 | |||||||
| Ireland | 102 | |||||||
| Canada | 31 | |||||||
| Other foreign jurisdictions | 26 | |||||||
Total cash paid for income taxes, net of refunds received | $ | 460 | ||||||
We paid $331 million and $507 million in cash for income taxes, net of refunds received, during the years ended December 31, 2024 and 2023, respectively.
CARRYFORWARDS
As of December 31, 2025 and 2024, we had $24 million and $30 million, respectively, in tax-effected net operating loss carryforwards. Of the $24 million of net operating loss carryforwards as of December 31, 2025, $21 million will not expire, $1 million related to state income tax will begin to expire in 2027, and the remaining $2 million related to foreign income tax will begin to expire in the year 2035.
As of December 31, 2025 and 2024, we had $5 million and $10 million of credit carryforwards, respectively. As of December 31, 2025, the $5 million of state tax credit carryforwards will begin to expire in the year 2027.
VALUATION ALLOWANCES
For the year ended December 31, 2025, the changes in our valuation allowances were insignificant.
UNDISTRIBUTED FOREIGN EARNINGS
An actual repatriation from our foreign subsidiaries could still be subject to additional foreign withholding taxes. We have analyzed our global working capital and cash requirements and continue to be indefinitely reinvested in our undistributed earnings, except for amounts in excess of our working capital and cash requirements. We have recorded any potential withholding tax liabilities, if necessary, attributable to repatriation.
OTHER TAX MATTERS
We file income tax returns for U.S. federal purposes and in various state jurisdictions. We also file income tax returns in various foreign jurisdictions, principally Canada, Ireland, Mexico, and Singapore. The U.S. and most state income tax returns for years prior to 2020 are closed to examination by applicable tax authorities. Canadian and Mexican income tax returns are generally open for audit for tax years 2020 and forward, and Ireland income tax returns are open for audit for tax years 2021 and forward.
Certain taxpayers may elect to transfer an eligible credit to an unrelated transferee taxpayer where the transferee taxpayer is then able to use the transferred tax credit against its own taxable income. During the years ended December 31, 2025, 2024, and 2023, we executed agreements with eligible taxpayers to purchase federal tax credits of $266 million, $260 million, and $270 million, respectively, which will be used against our federal tax liability. The discounts negotiated for the transfer of eligible federal tax credits of $23 million, $20 million, and $16 million were recorded as an income tax benefit in the Consolidated Statements of Income for the years ended December 31, 2025, 2024, and 2023, respectively.
On July 4, 2025, the OBBB was signed into law in the U.S., which includes a broad range of tax reform provisions. The OBBB resulted in no significant impacts to our consolidated financial statements.
UNRECOGNIZED TAX BENEFITS
The following is a reconciliation of the changes in the gross balance of unrecognized tax benefits:
| For the Year Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance, beginning of the period | $ | 12 | $ | 13 | $ | 15 | |||||||||||
| Increases related to tax positions taken during the current year | 3 | 2 | 3 | ||||||||||||||
| Increases (decreases) related to tax positions taken during the prior year | 17 | (1) | (2) | ||||||||||||||
| Decreases related to lapse of applicable statute of limitations | — | (2) | (3) | ||||||||||||||
| Balance, end of the period | $ | 32 | $ | 12 | $ | 13 | |||||||||||
The total amount of unrecognized tax benefits that would reduce the effective tax rate if recognized is $28 million after considering the federal impact of state income taxes.
We accrue interest and penalties on our uncertain tax positions as a component of our provision for income taxes. We recognized $5 million, $1 million, and $1 million of expense related to interest and penalties for uncertain tax positions for each of the years ended December 31, 2025, 2024, and 2023, respectively. We had a total of $9 million and $3 million accrued for interest and penalties for our uncertain tax positions reported as part of other non-current liabilities as of both December 31, 2025 and 2024.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 25, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 14, 2018 | |
| 2016 | Feb 14, 2017 | |
| 2015 | Feb 23, 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.