Kraft Heinz CoKHC
Kraft Heinz Co Income Taxes Disclosure
Income Taxes
Provision for/(Benefit from) Income Taxes:
Income/(loss) before income taxes and the provision for/(benefit from) income taxes, consisted of the following (in millions):
| December 27, 2025 | December 28, 2024 | December 30, 2023 | |||||||||||||||
| Income/(loss) before income taxes: | |||||||||||||||||
| United States | $ | (5,844) | $ | (165) | $ | 2,324 | |||||||||||
| Non-U.S. | 399 | 1,021 | 1,309 | ||||||||||||||
| Total | $ | (5,445) | $ | 856 | $ | 3,633 | |||||||||||
| Provision for/(benefit from) income taxes: | |||||||||||||||||
| Current: | |||||||||||||||||
| U.S. federal | $ | 459 | $ | 627 | $ | 449 | |||||||||||
| U.S. state and local | 75 | 56 | 88 | ||||||||||||||
| Non-U.S. | 364 | 284 | 233 | ||||||||||||||
| 898 | 967 | 770 | |||||||||||||||
| Deferred: | |||||||||||||||||
| U.S. federal | (502) | (417) | 30 | ||||||||||||||
| U.S. state and local | (85) | (79) | 11 | ||||||||||||||
| Non-U.S. | 92 | (2,361) | (24) | ||||||||||||||
| (495) | (2,857) | 17 | |||||||||||||||
| Total provision for/(benefit from) income taxes | $ | 403 | $ | (1,890) | $ | 787 | |||||||||||
The Organization for Economic Co-operation and Development (OECD), a global coalition of member countries, proposed a two-pillar plan that aims to ensure a fairer distribution of profits among countries and impose a floor on tax competition through the introduction of a global minimum tax of 15%. Many countries have enacted, or begun the process of enacting, laws based on the two-pillar plan proposals.
As part of our planning for the changes in the international tax environment, as well as to achieve greater operational synergies, we have enacted changes to our corporate entity structure which included a transfer of, and resulted in the movement of, certain business operations to a wholly-owned subsidiary in the Netherlands resulting in a tax benefit of $3.0 billion recorded as a non-U.S. deferred tax asset in December 2024. The deferred tax asset was recognized as a result of the book and tax basis difference on the business transferred to the Netherlands subsidiary with the tax basis determined by reference to the fair value of the business. The determination of the estimated fair value of the transferred business is complex and requires the exercise of substantial judgment due to the use of subjective assumptions in the valuation method used by management. The associated valuation allowance based on our latest assessment of the total tax benefit that is more likely than not to be realized was $0.7 billion as of December 27, 2025 and $0.6 billion as of December 28, 2024, and related to uncertainty in the Pillar Two legislative interpretation. The recognition of our future tax benefits associated with this transaction is dependent upon the acceptance of the business valuation and tax basis step-up by the associated taxing authorities.
We record tax expense/(benefits) related to the exercise of stock options and other equity instruments within our tax provision. Accordingly, we recognized an insignificant tax expense in our consolidated statements of income in 2025, 2024, and 2023 related to the exercise of stock options and other equity instruments.
Effective Tax Rate:
The effective tax rate on income/(loss) before income taxes for the years ended December 27, 2025 differed from the U.S. federal statutory tax rate for the following reasons:
| December 27, 2025 | |||||||||||
Amount | Percent | ||||||||||
| U.S. federal statutory tax rate | $ | (1,143) | 21.0 | % | |||||||
State and local income taxes, net of federal (national) income tax expense(a) | (23) | 0.4 | % | ||||||||
Effects of cross-border tax laws | 52 | (1.0) | % | ||||||||
Nontaxable or nondeductible items | |||||||||||
Goodwill impairment | 1,105 | (20.3) | % | ||||||||
Other | 17 | (0.3) | % | ||||||||
Other | (22) | 0.5 | % | ||||||||
Foreign tax effects | |||||||||||
Canada | |||||||||||
Goodwill impairment | 90 | (1.7) | % | ||||||||
Other | 49 | (0.9) | % | ||||||||
United Kingdom | |||||||||||
Goodwill impairment | 134 | (2.5) | % | ||||||||
Other | (13) | 0.2 | % | ||||||||
Other foreign jurisdictions | 57 | (1.0) | % | ||||||||
Changes in unrecognized tax benefits | 100 | (1.8) | % | ||||||||
Effective tax rate | $ | 403 | (7.4) | % | |||||||
(a) State taxes in Louisiana made up the majority (greater than 50%) of the tax effect in this category.
The effective tax rate on income/(loss) before income taxes for the years ended December 28, 2024 and December 30, 2023 differed from the U.S. federal statutory tax rate for the following reasons:
| December 28, 2024 | December 30, 2023 | ||||||||||
| U.S. federal statutory tax rate | 21.0 | % | 21.0 | % | |||||||
Tax on income of non-U.S. subsidiaries | (32.1) | % | (6.6) | % | |||||||
| U.S. state and local income taxes, net of federal tax benefit | 0.2 | % | 1.8 | % | |||||||
| Audit settlements and changes in uncertain tax positions | 3.1 | % | 0.3 | % | |||||||
| Global intangible low-taxed income | 4.7 | % | 1.4 | % | |||||||
| Goodwill impairment | 41.3 | % | 3.6 | % | |||||||
| Deferred tax adjustments | (347.8) | % | 0.1 | % | |||||||
| Movement of valuation allowances | 88.3 | % | 0.1 | % | |||||||
| Deferred tax effect of tax law changes | (4.8) | % | 0.1 | % | |||||||
| Repatriation costs | 3.2 | % | — | % | |||||||
Foreign income inclusion | 1.9 | % | 0.5 | % | |||||||
| Research and development credits | (1.1) | % | (0.3) | % | |||||||
| Change in prior year estimates | (1.8) | % | (0.7) | % | |||||||
Equity awards | 1.2 | % | 0.1 | % | |||||||
Other | 2.2 | % | 0.3 | % | |||||||
| Effective tax rate | (220.5) | % | 21.7 | % | |||||||
The provision for income taxes consists of provisions for federal, state, and non-U.S. income taxes. We operate in an international environment; accordingly, the consolidated effective tax rate is a composite rate reflecting the earnings in various locations and the applicable tax rates. Additionally, the calculation of the percentage point impact of goodwill impairment and other items on the effective tax rate shown in the table above are affected by income/(loss) before income taxes. The percentage point impacts on the effective tax rates fluctuate due to income/(loss) before income taxes, which included goodwill impairment losses in all years presented in the table. Fluctuations in the amount of income generated across locations around the world could impact comparability of reconciling items between periods. Additionally, small movements in tax rates due to a change in tax law or a change in tax rates that causes us to revalue our deferred tax balances produces volatility in our effective tax rate.
Our 2025 effective tax rate was an expense of 7.4% on pre-tax loss. Our effective tax rate was unfavorably impacted by non-deductible goodwill impairments.
Our 2024 effective tax rate was a benefit of 220.5% on pre-tax income. Our effective tax rate was favorably impacted by recognizing a non-U.S. deferred tax asset as a result of the movement of certain business operations to a wholly-owned subsidiary in the Netherlands and the geographic mix of pre-tax income in various non-U.S. jurisdictions. This impact was partly offset by establishing a partial valuation allowance against the Netherlands deferred tax asset and a full valuation allowance against the Brazil net deferred tax assets and non-deductible goodwill impairments.
The 2025 and 2024 year-over-year increase in the effective tax rate was due primarily to higher non-deductible goodwill impairments in the current year and recognizing a non-U.S. deferred tax asset as a result of the movement of certain business operations to a wholly-owned subsidiary in the Netherlands offset by establishing valuation allowances on certain non-U.S. deferred tax assets in the prior year.
Our 2023 effective tax rate was an expense of 21.7% on pre-tax income. Our effective tax rate was favorably impacted by geographic mix of pre-tax income in various non-U.S. jurisdictions. These impacts were partially offset by the impact of certain unfavorable rate reconciling items, primarily non-deductible goodwill impairments and the impact of the federal tax on global intangible low-taxed income (“GILTI”).
The 2024 and 2023 year-over-year decrease in the effective tax rate was due primarily to recognizing a non-U.S. deferred tax asset as a result of the movement of certain business operations to a wholly-owned subsidiary in the Netherlands offset by establishing valuation allowances on certain non-U.S. deferred tax assets in the current year versus the prior year.
See Note 9, Goodwill and Intangible Assets, for additional information related to our impairment losses.
Deferred Income Tax Assets and Liabilities:
The tax effects of temporary differences and carryforwards that gave rise to deferred income tax assets and liabilities consisted of the following (in millions):
| December 27, 2025 | December 28, 2024 | ||||||||||
| Deferred income tax liabilities: | |||||||||||
Intangible assets | $ | 8,697 | $ | 9,310 | |||||||
| Property, plant and equipment, net | 768 | 673 | |||||||||
| Right-of-use assets | 101 | 104 | |||||||||
| Other | 344 | 400 | |||||||||
| Deferred income tax liabilities | 9,910 | 10,487 | |||||||||
| Deferred income tax assets: | |||||||||||
Intangible assets | (3,171) | (2,959) | |||||||||
Deferred income | (317) | (328) | |||||||||
Loss carryforwards | (317) | (277) | |||||||||
| Lease liabilities | (109) | (114) | |||||||||
| Other | (545) | (441) | |||||||||
| Deferred income tax assets | (4,459) | (4,119) | |||||||||
| Valuation allowance | 932 | 851 | |||||||||
| Net deferred income tax liabilities | $ | 6,383 | $ | 7,219 | |||||||
The decrease in net deferred income tax liabilities from December 28, 2024 to December 27, 2025 was primarily driven by a reduction of $625 million due to the impairment of intangible assets.
As of December 27, 2025, non-U.S. operating loss carryforwards totaled $956 million. Of that amount, $52 million expire between 2026 and 2037; the other $904 million do not expire. We have recorded $274 million of deferred tax assets related to these non-U.S. operating loss carryforwards. Deferred tax assets of $26 million have been recorded for U.S. state and local operating loss carryforwards. These losses expire between 2026 and 2042. As of December 27, 2025, tax credit carryforwards totaled $25 million, which primarily include state tax credits of $11 million, and $14 million in other tax credits.
Uncertain Tax Positions:
As of December 27, 2025, our unrecognized tax benefits for uncertain tax positions were $480 million. If we had recognized all of these benefits, the impact on our effective tax rate would have been $455 million. Our unrecognized tax benefits for uncertain tax positions are included in income taxes payable and other non-current liabilities on our consolidated balance sheets.
The changes in our unrecognized tax benefits were (in millions):
| December 27, 2025 | December 28, 2024 | December 30, 2023 | |||||||||||||||
| Balance at the beginning of the period | $ | 400 | $ | 443 | $ | 455 | |||||||||||
| Increases for tax positions of prior years | 21 | 27 | 46 | ||||||||||||||
| Decreases for tax positions of prior years | (16) | (14) | (5) | ||||||||||||||
| Increases based on tax positions related to the current year | 97 | 45 | 67 | ||||||||||||||
| Decreases due to settlements with taxing authorities | (6) | (84) | (28) | ||||||||||||||
| Decreases due to lapse of statute of limitations | (16) | (17) | (92) | ||||||||||||||
| Balance at the end of the period | $ | 480 | $ | 400 | $ | 443 | |||||||||||
Our unrecognized tax benefits increased during 2025 mainly as a result of a net increase for tax positions related to the current and prior years in the U.S. and certain state and non-U.S. jurisdictions, which were partially offset by decreases related to audit settlements with certain state and non-U.S. taxing authorities and statute of limitations expirations.
Our unrecognized tax benefits decreased during 2024 mainly related to audit settlements with state, and non-U.S. taxing authorities and statute of limitations expirations partially offset by a net increase for tax positions related to the current and prior years in the U.S. and certain state and non-U.S. jurisdictions.
Our unrecognized tax benefits decreased during 2023 mainly related to audit settlements with federal, state, and non-U.S. taxing authorities and statute of limitations expirations partially offset by a net increase for tax positions related to the current and prior years in the U.S. and certain state and non-U.S. jurisdictions.
We include interest and penalties related to uncertain tax positions in our tax provision. Our provision for income taxes included a $26 million expense in 2025, a $19 million benefit in 2024, and a $1 million expense in 2023 related to interest and penalties. Accrued interest and penalties were $109 million as of December 27, 2025 and $83 million as of December 28, 2024.
Cash Paid for Income Taxes:
Income taxes paid in cash were as follows (in millions):
| December 27, 2025 | |||||
Federal | $ | 419 | |||
State | 57 | ||||
Foreign | 245 | ||||
Total | $ | 721 | |||
We paid income taxes, net of refunds, of $721 million in 2025, $967 million in 2024, and $932 million in 2023.
The following jurisdictions each accounted for more than 5% of total income taxes paid, net of refunds (in millions):
| December 27, 2025 | |||||
Foreign | |||||
Canada | $ | 39 | |||
Netherlands | 78 | ||||
United Kingdom | 53 | ||||
Other Income Tax Matters:
Tax Examinations:
We are currently under examination for income taxes by the Internal Revenue Service (“IRS”) for the years 2018 through 2022. In 2023, we received two Notices of Proposed Adjustment (the “NOPAs”) relating to transfer pricing with our foreign subsidiaries for the years 2018 and 2019. The NOPAs propose an increase to our U.S. taxable income that could result in additional U.S. federal income tax expense and liability of approximately $200 million for 2018 and approximately $210 million for 2019, excluding interest, and assert penalties of approximately $85 million for each of 2018 and 2019. In the
third quarter of 2025, we received a NOPA for the years 2020 through 2022 that could result in additional U.S. federal income tax expense and liability of approximately $200 million for 2020, $210 million for 2021, and $200 million for 2022, excluding interest and penalties for each year. In the fourth quarter of 2025, we received a NOPA asserting penalties of approximately $85 million for each of the years of 2020, 2021, and 2022. We strongly disagree with the IRS’s positions, believe that our tax positions are well documented and properly supported, and intend to vigorously contest the positions taken by the IRS and pursue all available administrative and judicial remedies. Therefore, we have not recorded any reserves related to this issue. We continue to maintain the same operating model and transfer pricing methodology with our foreign subsidiaries that was in place for the years 2018 through 2022. We believe our income tax reserves are appropriate for all open tax years and that final adjudication of this matter will not have a material impact on our results of operations and cash flows. However, the ultimate outcome of this matter is uncertain, and if we are required to pay the IRS additional U.S. taxes, interest, and/or potential penalties, our results of operations and cash flows could be materially affected.
In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as Brazil, Canada, Italy, the Netherlands, the United Kingdom, and the United States. As of December 27, 2025, we have substantially concluded all national income tax matters through 2022 for the United Kingdom, through 2019 for the Netherlands and for Italy, with the exception of 2015 for Italy which is under litigation, through 2017 for the United States and Canada, and through 2011 for Brazil, with the exception of 2007 and 2008 which are under litigation. We have concluded all U.S. state income tax matters through 2010.
On July 4, 2025, the One Big Beautiful Bill Act (the “OBBBA”) was signed into law in the United States. The OBBBA includes changes to U.S. tax law that was applicable to the Company beginning in 2025. These changes include provisions allowing accelerated tax deductions for qualified property and research and development expenditures. The OBBBA did not have a significant impact on our total tax provision as of December 27, 2025, and we do not expect the elective provisions of the law to have a material impact on our future effective tax rate. Further, certain provisions of the OBBBA impact the timing of cash tax payments, which resulted in a reduction of our cash tax payments in 2025, and is expected to reduce cash tax payments in 2026; however we do not expect these provisions to have a material impact on our cash flows in future periods.
Cash Held by International Subsidiaries:
Subsequent to January 1, 2018, we consider the unremitted earnings of certain international subsidiaries that impose local country taxes on dividends to be indefinitely reinvested. For those undistributed earnings considered to be indefinitely reinvested, our intent is to reinvest these funds in our international operations, and our current plans do not demonstrate a need to repatriate the accumulated earnings to fund our U.S. cash requirements. The amount of unrecognized deferred tax liabilities for local country withholding taxes that would be owed, if repatriated, related to our 2018 through 2025 accumulated earnings of certain international subsidiaries is approximately $65 million. Our undistributed historic earnings in foreign subsidiaries through December 31, 2017 are currently not considered to be indefinitely reinvested. Our deferred tax liability associated with these undistributed historical earnings was insignificant at December 27, 2025 and December 28, 2024, and relates to local withholding taxes that would be owed when this cash is distributed.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 12, 2026 | Showing above |
| 2024 | Feb 13, 2025 | |
| 2023 | Feb 15, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 17, 2021 | |
| 2019 | Feb 14, 2020 | |
| 2018 | Jun 7, 2019 | |
| 2017 | Feb 16, 2018 | |
| 2016 | Mar 3, 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.