KIMBERLY CLARK CORPKMB

KIMBERLY CLARK CORP Income Taxes Disclosure

10-KFiled Feb 12, 20267 min read
Income Taxes
The Provision for income taxes consists of the following:
Year Ended December 31
202520242023
Current income taxes
  United States$117 $236 $364 
  State42 56 53 
  Other countries226 195 252 
    Total385 487 669 
Deferred income taxes
  United States241 (14)(120)
  State1 (18)(28)
  Other countries(28)(13)(178)
    Total214 (45)(326)
Total Provision for income taxes$599 $442 $343 
The components of Income from Continuing Operations Before Income Taxes and Equity Interests are as follows:
Year Ended December 31
202520242023
United States$1,743 $2,194 $1,954 
Other countries309 224 (348)
Total Income from Continuing Operations Before Income Taxes and Equity Interests$2,052 $2,418 $1,606 
Deferred income tax assets and liabilities are comprised of the following:
December 31
20252024
Deferred tax assets
Pension and other postretirement benefits$162 $169 
Tax credits and loss carryforwards 712 623 
Capitalized research costs204 272 
Lease liabilities114 112 
Other423 364 
1,615 1,540 
Valuation allowances(451)(295)
Total deferred tax assets 1,164 1,245 
Deferred tax liabilities
Property, plant and equipment851 854 
Investments in subsidiaries133 113 
Goodwill69 64 
Lease assets109 105 
Other186 203 
Total deferred tax liabilities1,348 1,339 
Net deferred tax assets (liabilities)$(184)$(94)
Valuation allowances as of December 31, 2025 primarily relate to tax credits, capital loss carryforwards, and income tax loss carryforwards of $1.1 billion. If these items are not utilized against taxable income, $484 of the income tax loss carryforwards will expire from 2026 through 2045. The remaining $589 has no expiration date.
Realization of income tax loss carryforwards is dependent on generating sufficient taxable income prior to expiration of these carryforwards. Although realization is not assured, we believe it is more likely than not that all of the deferred tax assets, net of applicable valuation allowances, will be realized. The amount of the deferred tax assets considered realizable could be reduced or increased due to changes in the tax environment or if estimates of future taxable income change during the carryforward period.
Presented below is a reconciliation of the Provision for income taxes computed at the U.S. federal statutory tax rate to the actual effective tax rate:
Year Ended December 31
202520242023
AmountPercentAmountPercentAmountPercent
U.S. statutory rate applied to income from continuing operations before income taxes and equity interests$431 21.0 %$508 21.0 %$337 21.0 %
State income taxes, net of federal tax benefit(a)
34 1.7 31 1.3 25 1.6 
Effect of changes in tax laws or rates enacted in the current period119 5.8 — — (21)(1.3)
Effect of Cross-Border Tax Laws
Foreign-derived intangible income(10)(0.5)(19)(0.8)(20)(1.2)
Other(24)(1.2)15 0.6 (9)(0.6)
Tax Credits
Research and development credits(33)(1.6)(41)(1.7)(28)(1.7)
Other(8)(0.4)(6)(0.2)— — 
Changes in valuation allowances52 2.5 (7)(0.3)38 2.4 
Nontaxable or Nondeductible Items12 0.6 18 0.7 5 0.3 
Other Adjustments
Nigeria worthless stock deduction— — (40)(1.7)— — 
Tax effects of the impairment of intangible assets— — (9)(0.4)(43)(2.7)
Other(15)(0.7)(33)(1.4)(5)(0.3)
Foreign tax effects43 2.1 78 3.2 70 4.4 
Changes in unrecognized tax benefits(2)(0.1)(53)(2.2)(6)(0.4)
Effective tax rate$599 29.2%$442 18.3%$343 21.4%
Note - table may not foot due to rounding.
(a)    State taxes in California and Illinois made up greater than 50% of the 2025 tax effect in this category. State taxes in Alabama, California, Illinois, and Wisconsin made up greater than 50% of the 2024 tax effect in this category. State taxes in California, Illinois, Massachusetts, Michigan, Minnesota, New Jersey, New York, Oregon, South Carolina, Texas, and Wisconsin made up greater than 50% of the 2023 tax effect in this category.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. During the year ended December 31, 2025, we recorded incremental tax charges of approximately $145 primarily relating to a valuation allowance on current and prior year U.S. foreign tax credits. Of these total charges, approximately $96 was associated with the realizability of our prior year U.S. foreign tax credits.
As of December 31, 2025, deferred taxes have been recorded on $1.2 billion of earnings of foreign consolidated subsidiaries expected to be repatriated. We do not intend to distribute any remaining foreign earnings and therefore have not recorded deferred taxes for foreign and U.S. income taxes on such earnings. Any additional taxes due with respect to such previously-taxed foreign earnings, if repatriated, would generally be limited to foreign and U.S. state income taxes.
We consider any excess of the amount for financial reporting over the tax basis in our foreign subsidiaries to be indefinitely reinvested. The determination of deferred tax liabilities on the amount of financial reporting over tax basis or the remaining foreign earnings is not practicable.
Presented below is a reconciliation of the beginning and ending amounts of unrecognized income tax benefits:
202520242023
Balance as of January 1$528 $579 $479 
Gross increases for tax positions of prior years42 61 38 
Gross decreases for tax positions of prior years(20)(113)(13)
Gross increases for tax positions of the current year35 50 109 
Settlements(38)(32)(26)
Other(2)(17)(8)
Balance as of December 31$545 $528 $579 
Of the amounts recorded as unrecognized income tax benefits as of December 31, 2025, $470 would reduce our effective tax rate if recognized.
We recognize accrued interest and penalties related to unrecognized income tax benefits in Provision for income taxes. The net impact of interest and penalties for the years ended December 31, 2025, 2024, and 2023 was not significant. Total accrued penalties and net accrued interest was $59 and $54 as of December 31, 2025 and 2024, respectively.
As of December 31, 2025, the following tax years remain subject to examination for the major jurisdictions where we conduct business:
JurisdictionYears
United States2021to2025
Brazil2020to2025
China2015to2025
South Korea2021to2025
Our originally filed U.S. federal income tax returns have been audited through 2020; we filed an amended U.S. federal income tax return for 2016, which remains open to examination.
State income tax returns are generally subject to examination for a period of 3 to 5 years after filing of the respective return. The state effect of any changes to filed federal positions remains subject to examination by various states for a period of up to two years after formal notification to the states. We have various state income tax return positions in the process of examination, administrative appeals or litigation.
The Brazilian tax authority, Secretaria da Receita Federal do Brasil ("RFB"), concluded an audit for the taxable periods from 2008-2013. This audit included a review of our determinations of amortization of certain goodwill arising from prior acquisitions in Brazil, and the RFB has proposed adjustments that effectively eliminate the goodwill amortization benefits related to these transactions. Administrative appeals have been exhausted with a partial favorable decision for our position, and the remaining dispute is in the judicial phase. Based upon the matters that remain in dispute, the amount of the proposed tax and penalty adjustments is approximately $45 as of December 31, 2025 (translated at the December 31, 2025 currency exchange rate). The amount ultimately in dispute will be significantly greater because of interest. The first instance judge has issued a decision in our favor, finding that our amortization of the goodwill at issue was valid; however, an appeal is pending and final resolution of this matter is expected to take a number of years.
As part of the tax audit of our U.S. federal income tax returns for the taxable years ended December 31, 2017 and 2018, the U.S. Internal Revenue Service issued an adjustment that would increase the amount of the one-time transition tax on certain undistributed earnings of foreign subsidiaries owed by us. We believe we have adequate reserves and meritorious defenses and intend to vigorously defend against the assessment; however, it could take a number of years to reach resolution of this matter.
As part of the tax audit of our U.S. federal income tax returns for the taxable years ended December 31, 2019 and 2020, the U.S. Internal Revenue Service proposed an adjustment that would increase the amount of U.S. income tax on distributions made by minority owned foreign affiliates. We believe we have meritorious defenses and intend to vigorously defend against the proposed adjustment and have therefore not recorded a reserve; however, it could take a number of years to reach resolution of this matter.
Income taxes paid, net of refunds, are as follows:
Year Ended December 31
202520242023
U.S. Federal$175 $260 $346 
U.S. State25 48 15 
Foreign297 279 287 
Total$497 $587 $648 
Income taxes paid, net of refunds exceeded 5 percent of total income taxes paid, net of refunds, in the following jurisdictions:
Year Ended December 31
202520242023
Foreign
Australia$39 $31 $ *
China52 42 51 
Korea44 41 46 
*Jurisdiction below the threshold for the period presented.

Historical Timeline

Fiscal YearFiled
2025Feb 12, 2026Showing above
2024Feb 13, 2025
2023Feb 8, 2024
2022Feb 9, 2023
2021Feb 10, 2022
2020Feb 11, 2021
2019Feb 13, 2020
2018Feb 7, 2019
2017Feb 8, 2018
2016Feb 8, 2017
2015Feb 11, 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.

Other Available Disclosures

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