Lumen Technologies, Inc.LUMN
Lumen Technologies, Inc. Income Taxes Disclosure
Note 15 — Income Taxes
The components of the income tax (benefit) expense are as follows:
| Year Ended December 31, | |||||
| 2025 | |||||
| (Dollars in millions) | |||||
| Loss before income taxes | |||||
| Domestic | $ | (2,698) | |||
| Foreign | (18) | ||||
| Total pre-tax book loss | $ | (2,716) | |||
| Income tax (benefit) expense | |||||
| Current tax (benefit) expense | |||||
| Federal | $ | (309) | |||
| State and Local | 32 | ||||
| Foreign | 5 | ||||
| Total current tax benefit | (272) | ||||
| Deferred tax (benefit) expenses | |||||
| Federal | (546) | ||||
| State and Local | (160) | ||||
| Foreign | 1 | ||||
| Total deferred tax benefit | (705) | ||||
| Income tax (benefit) expense | |||||
| Federal | (855) | ||||
| State and Local | (128) | ||||
| Foreign | 6 | ||||
| Total income tax benefit | $ | (977) | |||
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (Dollars in millions) | |||||||||||
| Income tax (benefit) expense | |||||||||||
| Federal | |||||||||||
| Current | $ | 87 | 7 | ||||||||
| Deferred | (251) | (2) | |||||||||
| State | |||||||||||
| Current | (29) | (6) | |||||||||
| Deferred | 15 | 55 | |||||||||
| Foreign | |||||||||||
| Current | 2 | — | |||||||||
| Deferred | 1 | 7 | |||||||||
| Total income tax benefit | $ | (175) | 61 | ||||||||
Income tax (benefit) expense was allocated as follows:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (Dollars in millions) | |||||||||||||||||
| Income tax (benefit) expense in the consolidated statements of operations: | |||||||||||||||||
| Attributable to income | $ | (977) | (175) | 61 | |||||||||||||
| Stockholders' (deficit) equity: | |||||||||||||||||
| Tax effect of the change in accumulated other comprehensive loss | 36 | 26 | (21) | ||||||||||||||
The following is a reconciliation from the statutory federal income tax rate to our effective income tax rate:
Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
(Dollars in millions) | (Percentage of pre-tax loss) | ||||||||||
| Statutory federal income tax rate | $ | (573) | 21.0 | % | |||||||
| Federal | |||||||||||
| Effect of cross-border tax laws | |||||||||||
| Other | (2) | 0.1 | % | ||||||||
| Tax Credits | |||||||||||
| Research and development credits | (4) | 0.2 | % | ||||||||
| Other | (1) | 0.1 | % | ||||||||
| Changes in valuation allowance | — | — | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Goodwill impairment | 32 | (1.2) | % | ||||||||
| Other | (20) | 0.7 | % | ||||||||
State income taxes, net of federal income tax benefit(1) | (110) | 4.1 | % | ||||||||
| Change in liability for unrecognized tax position | (322) | 11.8 | % | ||||||||
| Foreign tax effect | |||||||||||
| Other Jurisdictions | 23 | (0.8) | % | ||||||||
| Effective income tax rate | $ | (977) | 36.0 | % | |||||||
(1)During the year ended December 31, 2025, state taxes in California, Minnesota, Arizona, Florida, Colorado, and Illinois comprised greater than 50% of the tax effect in this category.
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (Percentage of pre-tax loss) | |||||||||||
| Statutory federal income tax rate | 21.0 | % | 21.0 | % | |||||||
| State income taxes, net of federal income tax benefit | 4.1 | % | (0.2) | % | |||||||
| Goodwill impairment | — | % | (21.9) | % | |||||||
| Change in liability for unrecognized tax position | (16.8) | % | (0.1) | % | |||||||
| Legislative changes to Global Intangible Low-Taxes Income ("GILTI") | (1.2) | % | — | % | |||||||
| Nondeductible executive stock compensation | (4.9) | % | — | % | |||||||
| Change in valuation allowance | 2.3 | % | 1.3 | % | |||||||
| Net foreign income taxes | (2.3) | % | — | % | |||||||
| Research and development credits | 6.5 | % | 0.1 | % | |||||||
| Divestiture of business | — | % | (0.4) | % | |||||||
| Indemnification refunds | 11.2 | % | — | % | |||||||
| Cancellation of debt income | 59.3 | % | — | % | |||||||
| Other, net | (3.1) | % | (0.4) | % | |||||||
| Effective income tax rate | 76.1 | % | (0.6) | % | |||||||
The effective tax rate for the year ended December 31, 2025 includes a $333 million favorable impact from statute of limitation releases on uncertain tax positions previously disclosed. The effective tax rate for December 31, 2024 includes a $135 million favorable impact from the exclusion of cancellation of debt income ("CODI") under Section 108 of the Internal Revenue Code. The effective tax rate for the year ended December 31, 2023 includes a $2.2 billion unfavorable impact of a non-deductible goodwill impairment and a $137 million favorable impact as a result of utilizing available capital losses generated by the sale of our Latin American business in 2022.
The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:
December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (Dollars in millions) | |||||||||||
| Deferred tax assets | |||||||||||
| Post-retirement and pension benefit costs | $ | 554 | 583 | ||||||||
| Net operating loss carryforwards | 725 | 649 | |||||||||
| Other employee benefits | 57 | 22 | |||||||||
| Deferred revenue | 796 | 271 | |||||||||
| Interest expense limitation carryforwards | 484 | 261 | |||||||||
| Other | 234 | 212 | |||||||||
| Gross deferred tax assets | 2,850 | 1,998 | |||||||||
| Less valuation allowance | (328) | (343) | |||||||||
| Net deferred tax assets | 2,522 | 1,655 | |||||||||
| Deferred tax liabilities | |||||||||||
| Property, plant and equipment, primarily due to depreciation differences | (3,723) | (3,447) | |||||||||
| Goodwill and other intangible assets | (900) | (1,002) | |||||||||
| Other | (24) | — | |||||||||
| Gross deferred tax liabilities | (4,647) | (4,449) | |||||||||
| Net deferred tax liability | $ | (2,125) | (2,794) | ||||||||
As of December 31, 2025, we have determined that a portion of our undistributed earnings in India are no longer permanently reinvested, resulting in the recognition of an immaterial deferred tax liability. We continue to assert that undistributed earnings of our subsidiaries in all other foreign jurisdictions are indefinitely reinvested.
Of the $2.1 billion and $2.8 billion net deferred tax liability as of December 31, 2025 and 2024, respectively, $2.3 billion and $2.9 billion is reflected as a long-term liability and $145 million and $96 million is reflected as a net noncurrent deferred tax asset, in other, net on our consolidated balance sheets as of December 31, 2025 and 2024, respectively.
Income taxes receivable as of December 31, 2025 and 2024, were $468 million and $483 million, respectively.
Income taxes paid (refunded), net are as follows:
Year Ended December 31, | |||||
| 2025 | |||||
| (Dollars in millions) | |||||
| State | |||||
| Texas | $ | 3 | |||
| Virginia | 2 | ||||
| Alabama | 2 | ||||
| Oregon | 2 | ||||
| Illinois | 2 | ||||
| Pennsylvania | 1 | ||||
| Massachusetts | (1) | ||||
| Foreign | |||||
| India | 6 | ||||
| Other | 1 | ||||
| Total income taxes paid (refunded), net | $ | 18 | |||
As of December 31, 2025, we had federal NOLs of approximately $982 million, net of expirations from limitations under Section 382 of the Internal Revenue Code and uncertain tax positions, for U.S. federal income tax purposes. We expect to use substantially all of these NOLs to reduce our future federal tax liabilities, although the timing of that use will depend upon our future earnings and future tax circumstances. Our ability to use these NOLs is subject to annual limits imposed by Section 382. If unused, approximately $570 million of pre-2018 NOLs will expire between 2027 and 2031.
As of December 31, 2025, we had state NOLs of $11 billion (net of uncertain tax positions). Our ability to use these NOLs is subject to annual limits under state law.
We establish valuation allowances when necessary to reduce the deferred tax assets to amounts we expect to realize. As of December 31, 2025, we established a valuation allowance of $328 million as it is more likely than not that this amount of NOLs will not be utilized prior to expiration. Our valuation allowance as of December 31, 2025 and 2024 is primarily related to NOLs. This valuation allowance decreased by $15 million during 2025, primarily due to changes in our state NOL carryforwards.
A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) for the years ended December 31, 2025 and 2024 is as follows:
| 2025 | 2024 | ||||||||||
| (Dollars in millions) | |||||||||||
| Unrecognized tax benefits at beginning of year | $ | 1,263 | 1,424 | ||||||||
| Increase (decrease) in tax positions of prior periods netted against deferred tax assets | 1 | (4) | |||||||||
| Decrease in tax positions taken in the current year | (7) | (64) | |||||||||
| Increase in tax positions taken in the prior year | 4 | 65 | |||||||||
| Decrease due to payments/settlements | (1) | — | |||||||||
| Decrease from the lapse of statute of limitations | (394) | (158) | |||||||||
| Unrecognized tax benefits at end of year | $ | 866 | 1,263 | ||||||||
As of December 31, 2025, the total amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate was $653 million. The unrecognized tax benefits also include tax positions that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes, which would not impact the effective tax rate but could impact cash tax amounts payable to taxing authorities.
Our policy is to reflect interest expense associated with unrecognized tax benefits in income tax (benefit) expense. We had accrued interest (presented before related tax benefits) of approximately $306 million and $217 million as of December 31, 2025 and 2024, respectively.
We, or at least one of our subsidiaries, file income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2004. The Internal Revenue Service and state and local taxing authorities reserve the right to audit any period where NOLs are available.
Based on our current assessment of various factors, including (i) the potential outcomes of these ongoing examinations, (ii) the expiration of statute of limitations for specific jurisdictions, (iii) the negotiated settlement of certain disputed issues, and (iv) the administrative practices of applicable taxing jurisdictions, it is reasonably possible that the related unrecognized tax benefits for uncertain tax positions previously taken may decrease by up to $287 million within the next 12 months. The actual amount of such decrease, if any, will depend on several future developments and events, many of which are outside our control.
In July 2025, the U.S. enacted the “One, Big Beautiful Bill Act” (the “OBBBA”), which permanently allows 100% bonus depreciation, immediate expensing for domestic R&D, and favorable changes to interest expense limitations. These provisions did not have a material impact on our 2025 effective tax rate but significantly reduced our federal income tax liability. The Company filed a refund claim for $400 million of federal estimated income taxes in July 2025 that it anticipates receiving in the first half of 2026.
The OECD has issued Pillar Two model rules introducing a new global minimum corporate tax of 15% for tax years effective after December 31, 2023. While the U.S. has not adopted Pillar Two legislation, certain countries in which we operate have already adopted legislation to implement Pillar Two. On January 5, 2026, the OECD announced the Side-by-Side ("SbS") package, implemented as administrative guidance modifying the operation of Pillar Two rules, which would fully exempt U.S.-parented groups from the application certain Pillar Two top-up taxes. The SbS package also extends the current Transitional Country-by-Country Reporting ("CbCR") Safe Harbor by one year, through the end of fiscal year of 2027. The Pillar Two rules have increased our compliance requirements but did not materially impact our 2025 results. We continue to monitor evolving global and domestic tax legislation and administrative guidance.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 20, 2025 | |
| 2023 | Feb 22, 2024 | |
| 2022 | Feb 23, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 25, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Mar 11, 2019 | |
| 2017 | Mar 1, 2018 | |
| 2016 | Feb 23, 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.