Kenvue Inc.KVUE
Kenvue Inc. Income Taxes Disclosure
Income Taxes
Beginning in the fiscal three months ended December 28, 2025, the Company adopted the guidance in ASU 2023-09 on a prospective basis. See Note 1, “Description of the Company and Summary of Significant Accounting Policies—Recently Adopted Accounting Standards,” for additional information.
For the purposes of the Consolidated Financial Statements, income taxes and related income tax accounts have been calculated using the separate return method as if the Company filed income tax returns on a standalone basis for the fiscal twelve months ended December 31, 2023. Prior to the Kenvue IPO, the Company’s operations were calculated on a carve-out basis and included certain hypothetical foreign tax credit benefits. Following the Kenvue IPO, these hypothetical foreign tax credit benefits are not available for future utilization by the Company and were removed from the tax provision. Furthermore, the
Company operated as part of J&J until the completion of the Exchange Offer on August 23, 2023, and therefore the Company was included in J&J’s U.S. federal consolidated income tax return until that date. The Company filed a standalone U.S. federal consolidated income tax return and a standalone return in most other jurisdictions in which it operated for the remainder of fiscal year 2023 and has continued to file a standalone return for all fiscal years thereafter. Certain current income tax liabilities related to the Company’s activities included in J&J’s income tax returns were assumed to be immediately settled with J&J through the Net Investment from J&J or Additional paid-in capital accounts on the Consolidated Balance Sheets and reflected in the Consolidated Statement of Cash Flows as a financing activity for the fiscal twelve months ended December 31, 2023. Following the Exchange Offer, the Company’s operating footprint, as well as tax return elections and assertions, are different, and therefore, the Company’s income taxes, as presented in the Consolidated Financial Statements, may differ in future periods.
Income before taxes was attributable to the following geographic regions for the fiscal twelve months ended December 28, 2025, December 29, 2024, and December 31, 2023:
| Fiscal Twelve Months Ended | ||||||||||||||||||||
| (Dollars in Millions) | December 28, 2025 | December 29, 2024 | December 31, 2023 | |||||||||||||||||
U.S. | $ | 585 | $ | 352 | $ | 825 | ||||||||||||||
International | 1,414 | 1,063 | 1,365 | |||||||||||||||||
| Income before taxes | $ | 1,999 | $ | 1,415 | $ | 2,190 | ||||||||||||||
The Provision for taxes on income for the fiscal twelve months ended December 28, 2025, December 29, 2024, and December 31, 2023 consisted of:
| Fiscal Twelve Months Ended | ||||||||||||||||||||
| (Dollars in Millions) | December 28, 2025 | December 29, 2024 | December 31, 2023 | |||||||||||||||||
| Current: | ||||||||||||||||||||
U.S. taxes(1) | $ | 201 | $ | 287 | $ | 266 | ||||||||||||||
| International taxes | 436 | 383 | 374 | |||||||||||||||||
| Total current taxes | 637 | 670 | 640 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
U.S. taxes(2) | (90) | (178) | (39) | |||||||||||||||||
| International taxes | (18) | (107) | (75) | |||||||||||||||||
Total deferred taxes | (108) | (285) | (114) | |||||||||||||||||
| Provision for taxes | $ | 529 | $ | 385 | $ | 526 | ||||||||||||||
(1) The current portion of the Provision for taxes includes $148 million for U.S. federal taxes and $53 million for U.S. state and local taxes for the fiscal twelve months ended December 28, 2025.
(2) The deferred portion of the Provision for taxes includes $(50) million for U.S. federal taxes and $(40) million for U.S. state and local taxes for the fiscal twelve months ended December 28, 2025.
Net cash paid for income taxes was attributable to the following jurisdictions in accordance with ASU 2023-09 for the fiscal twelve months ended December 28, 2025:
| Fiscal Twelve Months Ended | ||||||||
| (Dollars in Millions) | December 28, 2025 | |||||||
U.S. federal | $ | 153 | ||||||
U.S. state and local | 88 | |||||||
International | 354 | |||||||
Total cash paid for income taxes, net of refunds(1)(2) | $ | 595 | ||||||
(1) Individual jurisdictions equaling 5% or more of the total cash paid for income taxes, net of refunds, includes U.S. federal at $153 million, India at $40 million, China at $32 million, and Sweden at $30 million.
(2) Total cash paid for income taxes, net of refunds, includes payments to J&J under the Tax Matters Agreements (as defined in Note 12, “Relationship with J&J”) for income tax liabilities, which J&J has paid on the Company’s behalf post-Kenvue IPO to the tax authorities.
A comparison of the Provision for taxes at the U.S. federal statutory rate of 21% to the Company’s effective tax rate in accordance with ASU 2023-09 in the fiscal twelve months ended December 28, 2025 was as follows:
| Fiscal Twelve Months Ended | ||||||||||||||
| December 28, 2025 | ||||||||||||||
| (Dollars in Millions) | Amount | Percent | ||||||||||||
U.S. federal statutory tax rate | $ | 420 | 21.0 | % | ||||||||||
Effect of cross-border tax laws(1) | 7 | 0.4 | ||||||||||||
Tax credits | (32) | (1.6) | ||||||||||||
Nontaxable or nondeductible items | 3 | 0.1 | ||||||||||||
Changes in valuation allowances | 3 | 0.1 | ||||||||||||
Other adjustments | (4) | (0.2) | ||||||||||||
State and local income taxes, net of federal income tax effect(2) | 10 | 0.5 | ||||||||||||
Foreign tax effects(3) | ||||||||||||||
| Switzerland | ||||||||||||||
Rate differential | (38) | (1.9) | ||||||||||||
Other | 27 | 1.4 | ||||||||||||
Other foreign jurisdictions | 88 | 4.4 | ||||||||||||
Worldwide changes in unrecognized tax benefits(4) | 45 | 2.3 | ||||||||||||
Effective tax rate | $ | 529 | 26.5 | % | ||||||||||
(1) Effect of cross-border tax laws is presented net of related foreign tax credits.
(2) State taxes in New York, Indiana, New Jersey, Maryland, Illinois, and Texas made up the majority (greater than 50%) of the tax effect in this category.
(3) Foreign tax effects reflect the impacts of operations in jurisdictions with statutory tax rates that are different than the United States. For the fiscal twelve months ended December 28, 2025, the Company had operations in Singapore under various tax incentives.
(4) Includes the effect of current year increases to unrecognized tax benefits.
A comparison of the Provision for taxes at the U.S. federal statutory rate of 21% to the Company’s effective tax rate in the fiscal twelve months ended December 29, 2024 and December 31, 2023 was as follows:
| Fiscal Twelve Months Ended | ||||||||||||||
| December 29, 2024 | December 31, 2023 | |||||||||||||
| Tax rates: | ||||||||||||||
U.S. federal statutory tax rate | 21.0 | % | 21.0 | % | ||||||||||
U.S. taxes on international income(1) | 2.8 | (1.5) | ||||||||||||
International operations(2) | 2.8 | 0.8 | ||||||||||||
| State | (0.4) | 2.0 | ||||||||||||
| Change in valuation allowance | 1.0 | 2.5 | ||||||||||||
| Tax shortfall (windfall) on stock-based compensation | 0.5 | (0.5) | ||||||||||||
| All other | (0.5) | (0.3) | ||||||||||||
Effective tax rate | 27.2 | % | 24.0 | % | ||||||||||
(1) Includes the impact of the tax on GILTI and other foreign income that is taxable under the U.S. tax code as well as tax implications of repatriating foreign earnings.
(2) International operations reflect the impacts of operations in jurisdictions with statutory tax rates different than the United States. For each of the fiscal twelve months ended December 29, 2024 and December 31, 2023, the Company had operations in Singapore under various tax incentives. The Company’s largest international operations are in Canada, China, Japan, Singapore, and Switzerland. The amounts for the fiscal twelve months ended December 29, 2024 and December 31, 2023 include a $4 million net increase in uncertain tax benefits and a $46 million net reduction in uncertain tax benefits, respectively.
The worldwide effective income tax rate for the fiscal twelve months ended December 28, 2025 was 26.5% and is higher than the U.S. federal statutory tax rate primarily due to the following:
•Increase in unrecognized tax benefits driven by new developments in ongoing tax audits during the fiscal twelve months ended December 28, 2025 as compared to the fiscal twelve months ended December 29, 2024, as well as U.S. taxes on foreign inclusions with limited capacity for full foreign tax credit utilization. This increase from the statutory tax rate was partially offset by favorable return-to-provision adjustments, as well as the income tax benefits derived from the remeasurement of state deferred taxes for the fiscal twelve months ended December 28, 2025.
The worldwide effective income tax rate for the fiscal twelve months ended December 29, 2024 was 27.2% and is higher than the U.S. federal statutory tax rate primarily due to the following:
•U.S. taxes on foreign inclusions are driven by reduced foreign tax credit utilization, as well as unfavorable return-to-provision adjustments, which was primarily driven by non-deductible expenses. This increase from the statutory tax rate was partially offset by the impairment to the Dr.Ci:Labo® skin health business and the corresponding reversal of a deferred tax liability at the higher Japanese tax rate, the remeasurement of the state deferred tax liability as a result of a change in the Company’s state tax rate, and regional cash planning resulting in a partial release of a valuation allowance.
The worldwide effective income tax rate for the fiscal twelve months ended December 31, 2023 was 24.0% and is higher than the U.S. federal statutory tax rate primarily due to the following:
•The issuance of debt in the fiscal three months ended April 2, 2023 resulted in an increase in annual interest expense and reduced the Company’s capacity to utilize foreign tax credits against U.S. foreign source income. This resulted in an increase in the valuation allowance for foreign tax credits related to earnings that are not indefinitely reinvested, as well as state and local income taxes. These items are partially offset by reductions in unrecognized tax benefits in certain foreign jurisdictions reflected in international operations within the rate reconciliation, as well as the recapture of an overall domestic loss allowing the Company to claim additional U.S. foreign tax credit benefits against the Company’s U.S. tax on foreign earnings. The additional U.S. foreign tax credit benefit is reflected in U.S. taxes on international income within the rate reconciliation.
The decrease in the worldwide effective income tax rate for the fiscal twelve months ended December 28, 2025 as compared to the fiscal twelve months ended December 29, 2024 was primarily the result of changes to the jurisdictional mix of income and favorable return-to-provision adjustments. The decrease was partially offset by income tax benefits recognized during the fiscal
twelve months ended December 29, 2024 resulting from the impairment to the Dr.Ci:Labo® skin health business and the corresponding reversal of a deferred tax liability at the higher Japanese rate, as well as an increase in unrecognized tax benefits driven by new developments in ongoing tax audits during the fiscal twelve months ended December 28, 2025 as compared to the fiscal twelve months ended December 29, 2024.
The increase in the worldwide effective income tax rate for the fiscal twelve months ended December 29, 2024 as compared to the fiscal twelve months ended December 31, 2023 was primarily the result of fewer releases of uncertain tax positions due to the expiration of certain statutes of limitations and reduced tax benefits derived from the Separation as compared to the fiscal twelve months ended December 31, 2023, unfavorable return-to-provision adjustments and shortfall on stock-based compensation recorded during the fiscal twelve months ended December 29, 2024, as well as changes to the jurisdictional mix of income. These increases were offset by the impairment to the Dr.Ci:Labo® skin health business and the corresponding reversal of a deferred tax liability, the remeasurement of the state deferred tax liability as a result of a change in the Company’s state tax rate, and a partial release of a valuation allowance.
As of December 28, 2025 and December 29, 2024, temporary differences and carryforwards were as follows:
| December 28, 2025 | December 29, 2024 | |||||||||||||||||||||||||
| (Dollars in Millions) | Asset | Liability | Asset | Liability | ||||||||||||||||||||||
Employee-related obligations | $ | 34 | $ | — | $ | 18 | $ | — | ||||||||||||||||||
Stock-based compensation | 63 | — | 70 | — | ||||||||||||||||||||||
Depreciation of property, plant, and equipment | 15 | — | 2 | — | ||||||||||||||||||||||
| Goodwill and intangibles | — | (2,597) | — | (2,434) | ||||||||||||||||||||||
Reserves and liabilities | 120 | — | 110 | — | ||||||||||||||||||||||
Net operating loss (“NOL”) and tax credit carryforward | 178 | — | 122 | — | ||||||||||||||||||||||
Undistributed foreign earnings | — | (37) | 78 | (103) | ||||||||||||||||||||||
Miscellaneous international | 67 | — | 66 | — | ||||||||||||||||||||||
Research and development capitalized for tax | 82 | — | 94 | — | ||||||||||||||||||||||
Miscellaneous U.S. | 31 | — | — | (11) | ||||||||||||||||||||||
Subtotal | 590 | (2,634) | 560 | (2,548) | ||||||||||||||||||||||
Valuation allowance | (73) | — | (89) | — | ||||||||||||||||||||||
| Total deferred income taxes | $ | 517 | $ | (2,634) | $ | 471 | $ | (2,548) | ||||||||||||||||||
The Company has wholly owned international subsidiaries that have cumulative net losses. The Company believes that it is more likely than not that these subsidiaries will generate future taxable income sufficient to utilize these deferred tax assets. However, in certain jurisdictions, valuation allowances have been recorded against deferred tax assets for loss carryforwards that are not more likely than not to be realized.
The Company has recognized $77 million and $64 million of deferred tax assets related to U.S. state and foreign NOL carryforwards and $101 million and $58 million of deferred tax assets related to U.S. federal and state and foreign tax credit carryforwards as of December 28, 2025 and December 29, 2024, respectively. Foreign NOLs expire over various years based on local laws; however, if unused, the majority of foreign NOL carryforwards will expire between 2026 through 2034. Existing federal tax credit carryforwards will expire between 2035 and 2045. U.S. state NOLs generally expire between 2035 and 2045. The Company assessed NOLs, tax credit carryforwards, and other deferred tax assets for realizability and, based upon all available evidence, recorded valuation allowances against deferred tax assets on a “more likely than not” standard. As of December 28, 2025, December 29, 2024, and December 31, 2023, valuation allowances of $73 million, $89 million, and $75 million have been recorded against certain NOLs and foreign tax credit carryforwards, respectively. The Company recognized a net change in valuation allowance of $(16) million, $14 million, and $(175) million in the fiscal twelve months ended December 28, 2025, December 29, 2024, and December 31, 2023, respectively. For the fiscal twelve months ended December 28, 2025, the net change was primarily related to the write-off of Puerto Rico tax credits that expired due to changes in tax law that were previously fully valued and a release of a valuation allowance on the Company’s foreign tax credit carryforwards, partially offset by an increase in foreign NOL carryforwards that the Company does not expect to utilize in future periods.
The Company has recorded deferred tax liabilities on all undistributed earnings of its international subsidiaries through the fiscal twelve months ended December 31, 2017 and certain undistributed earnings arising after the fiscal twelve months ended December 31, 2017. For all other undistributed earnings from the Company’s subsidiaries organized outside the United States, the Company has not recorded deferred taxes where the earnings are indefinitely reinvested. The Company intends to continue to reinvest these earnings in those international operations. If the Company decides at a later date to repatriate these earnings to the United States, the Company would be required to provide for the net tax effects on these amounts. The Company estimates that the tax effect of this repatriation would be approximately $158 million under currently enacted tax laws and regulations and at current currency exchange rates.
The following table summarizes the activity related to unrecognized tax benefits for the fiscal twelve months ended December 28, 2025, December 29, 2024, and December 31, 2023:
| Fiscal Twelve Months Ended | ||||||||||||||||||||
| (Dollars in Millions) | December 28, 2025 | December 29, 2024 | December 31, 2023 | |||||||||||||||||
Beginning of fiscal year | $ | 176 | $ | 185 | $ | 437 | ||||||||||||||
| Increases related to current year tax positions | 24 | 21 | 26 | |||||||||||||||||
| Increases related to prior period tax positions | 3 | — | 3 | |||||||||||||||||
| Decreases related to prior period tax positions | — | (11) | (19) | |||||||||||||||||
| Settlements | (4) | — | — | |||||||||||||||||
| Lapse of statute of limitations | (5) | (19) | (42) | |||||||||||||||||
Net decreases related to the Separation | — | — | (220) | |||||||||||||||||
End of fiscal year | $ | 194 | $ | 176 | $ | 185 | ||||||||||||||
As of December 28, 2025, the Company had unrecognized tax benefits of $194 million. If recognized, $182 million would affect the Company’s annual effective tax rate. Pursuant to the Tax Matters Agreement between J&J and the Company, certain liabilities for unrecognized tax benefits have been reduced during the fiscal twelve months ended December 31, 2023 to reflect the fact that the liabilities are retained by J&J, including with respect to the U.S. federal income tax, or have been reclassified as indemnification payables to J&J where the liabilities relate to the Company for periods prior to the Kenvue IPO. The Company conducts business and files tax returns in numerous countries. With respect to the United States, per the Tax Matters Agreement between J&J and the Company, J&J remains liable for all liabilities related to the final settlement of any U.S. federal income tax audits in which the Company was part of J&J’s federal consolidated tax return. The Company has therefore reduced its unrecognized tax benefits for U.S. federal uncertain tax positions as reflected in the table above under Net decreases related to the Separation during the fiscal twelve months ended December 31, 2023. In other major jurisdictions where the Company conducts business, the years that are under tax audit or remain open to tax audits range from 2015 and forward.
The Company classifies liabilities for unrecognized tax benefits and related interest and penalties as long-term liabilities on the Consolidated Balance Sheets. Interest expense and penalties related to unrecognized tax benefits are classified as Provision for taxes in the Consolidated Statements of Operations. The Company recognized after-tax interest expense (benefit) of $10 million, $5 million, and $(8) million in the fiscal twelve months ended December 28, 2025, December 29, 2024, and December 31, 2023, respectively. The total amount of accrued interest was $31 million and $23 million as of December 28, 2025 and December 29, 2024, respectively.
The Company has included the impact of enacted legislation related to the Organization for Economic Co-operation and Development’s (the “OECD”) Pillar Two Inclusive Framework (“Pillar Two”) in its provision for taxes beginning in fiscal year 2024. While the impact of currently enacted laws for Pillar Two is not significant, it is possible that further administrative guidance from the OECD or new legislation in countries where the Company operates could have a material effect on the Company’s provision for taxes in the future. In addition, in January 2025, the United States issued an executive order expressing disagreement with certain aspects of Pillar Two. In June 2025, the Group of Seven issued a statement supporting the exclusion of U.S. parented groups from certain aspects of Pillar Two in exchange for the United States not imposing certain retaliatory taxes. On January 5, 2026, the OECD announced the Side-by-Side (“SbS”) package, implemented as administrative guidance and modifying the operation of the Pillar Two rules. The package introduces simplifications and new safe harbors for U.S. and other multinational companies where domestic and international tax systems meet robust requirements to coexist with Pillar Two, which would fully exempt U.S.-parented groups from the application of the Income Inclusion Rule and Undertaxed Profits Rule Pillar Two top up taxes. The SbS package also extends the current Transitional Country-by-Country Reporting
Safe Harbor by one year. The SbS package is not expected to have a material impact on the Company’s effective tax rate. The Company will continue to monitor any additional changes to Pillar Two.
On July 4, 2025, the reconciliation bill commonly referred to as the One Big Beautiful Bill Act (the “OBBBA”) was signed into law. The OBBBA made a number of changes to U.S. federal income tax law, including the permanent suspension of the requirement to capitalize and amortize domestic research and experimental expenditures, changes to certain deductions available for deemed inclusions, and a permanent extension of certain corporate international income tax provisions. The enactment of the OBBBA did not have a material impact on the Company’s current fiscal year effective tax rate.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 24, 2025 | |
| 2023 | Mar 1, 2024 | |
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.