Magnera CorpMAGN
Magnera Corp Income Taxes Disclosure
6. Income Taxes
The Company is being taxed at the U.S. corporate level as a C-Corporation and has provided for U.S. Federal, State and foreign income taxes. Significant components of income tax expense for the fiscal years ended are as follows:
| 2025 | 2024 | 2023 | |||||||||
| Current | |||||||||||
| U.S. | |||||||||||
| Federal | $ | 3 | $ | 8 | $ | 12 | |||||
| State | 1 | 1 | 1 | ||||||||
| Non-U.S. | 16 | 19 | 30 | ||||||||
| Total current | 20 | 28 | 43 | ||||||||
| Deferred: | |||||||||||
| U.S. | |||||||||||
| Federal | (30 | ) | (4 | ) | (5 | ) | |||||
| State | (1 | ) | (1 | ) | (2 | ) | |||||
| Non-U.S. | 4 | (4 | ) | (2 | ) | ||||||
| Total deferred | (27 | ) | (9 | ) | (9 | ) | |||||
| Expense (benefit) for income taxes | $ | (7 | ) | $ | 19 | $ | 34 |
U.S. income before income taxes was $(186) million, $18 million, and $15 million for fiscal years 2025, 2024, and 2023, respectively. Non-U.S. income before income taxes was $20 million, $(153) million, and $57 million for fiscal years 2025, 2024, and 2023, respectively. The Company paid cash taxes of $22 million, $9 million, and $29 million in fiscal years 2025, 2024, and 2023, respectively.
The reconciliation between U.S. Federal income tax expense at the statutory rate and the Company’s expense for income taxes for fiscal years ended are as follows:
| 2025 | 2024 | 2023 | |||||||||
| U.S. Federal income tax expense (benefit) at the statutory rate | $ | (35 | ) | $ | (28 | ) | $ | 15 | |||
| Adjustments to reconcile to the income tax provision: | |||||||||||
| U.S. state income tax expense | (3 | ) | — | — | |||||||
| Federal and state credits | (1 | ) | (1 | ) | (1 | ) | |||||
| Share-based compensation | 4 | — | — | ||||||||
| Withholding taxes | (1 | ) | 2 | 6 | |||||||
| Changes in valuation allowance | 31 | 11 | 5 | ||||||||
| Foreign income taxed in the U.S. | 2 | — | 1 | ||||||||
| Brazil ICMS rate reduction | (4 | ) | (6 | ) | (2 | ) | |||||
| Foreign operations, inclusive of rate differential | (7 | ) | — | 3 | |||||||
| Uncertain tax positions | 2 | (5 | ) | 2 | |||||||
| Goodwill impairment | — | 44 | — | ||||||||
| Other | 5 | 2 | 5 | ||||||||
| Expense (benefit) for income taxes | (7 | ) | $ | 19 | $ | 34 |
Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The components of the net deferred income tax liability as of fiscal years ended are as follows:
| 2025 | 2024 | ||||||
| Deferred tax assets: | |||||||
| Accrued liabilities and reserves | $ | 6 | $ | 7 | |||
| Inventories | 22 | 3 | |||||
| Net operating loss carryforwards | 250 | 103 | |||||
| Lease liability | 9 | 12 | |||||
| Foreign tax credit carryforwards | 35 | 19 | |||||
| Capitalization research and development expenditures | 10 | 9 | |||||
| Hedges | 23 | — | |||||
| Interest limitation carryforwards | 68 | — | |||||
| Other | 14 | 3 | |||||
| Total deferred tax assets | 437 | 156 | |||||
| Valuation allowance | (199 | ) | (36 | ) | |||
| Total deferred tax assets, net of valuation allowance | 238 | 120 | |||||
| Deferred tax liabilities: | |||||||
| Property, plant and equipment | 139 | 68 | |||||
| Intangible assets | 40 | 50 | |||||
| Leased asset | 8 | 12 | |||||
| Other | 21 | 11 | |||||
| Total deferred tax liabilities | 208 | 141 | |||||
| Net deferred tax asset (liability) | $ | 30 | $ | (21 | ) |
The Company had $76 million and $57 million of net deferred tax assets recorded in Other assets, and $46 million and $78 million of net deferred tax liabilities recorded in Deferred income taxes on the Consolidated and Combined Balance Sheets as of the fiscal years ended 2025 and 2024, respectively.
As of September 27, 2025, the Company has recorded deferred tax assets related to federal, state, and foreign net operating losses, interest, and tax credits. These attributes are spread across multiple jurisdictions and generally have expiration periods beginning in 2025 while a portion remains available indefinitely. Each attribute has been assessed for realization and a valuation allowance is recorded against the deferred tax assets to bring the net amount recorded to the amount more likely than not to be realized. The valuation allowance against deferred tax assets was $199 million and $36 million as of the fiscal years ended 2025 and 2024, respectively, related to the foreign and U.S. federal and state operations.
The Company is permanently reinvested except to the extent the foreign earnings are previously taxed or to the extent that we have sufficient basis in our non-U.S. subsidiaries to repatriate earnings on an income tax free basis.
Uncertain Tax Positions
The following table summarizes the activity related to our gross unrecognized tax benefits for fiscal years ended:
| 2025 | 2024 | ||||||
| Beginning unrecognized tax benefits | $ | 12 | $ | 17 | |||
| Penalties and interest | (4 | ) | — | ||||
| Increases recognized through acquisition | 38 | — | |||||
| Gross increases – tax positions in prior periods | 1 | 2 | |||||
| Gross increases – current period tax positions | 6 | — | |||||
| Settlements | — | (1 | ) | ||||
| Lapse of statute of limitations | (8 | ) | (6 | ) | |||
| Ending unrecognized tax benefits | $ | 45 | $ | 12 |
As of fiscal year end 2025, the amount of unrecognized tax benefit that, if recognized, would affect our effective tax rate was $45 million and we had $11 million accrued for payment of interest and penalties related to our uncertain tax positions. Our penalties and interest related to uncertain tax positions are included in income tax expense.
As a result of global operations, we file income tax returns in the U.S. federal, various state and local, and foreign jurisdictions and are routinely subject to examination by taxing authorities throughout the world. Excluding potential adjustments to net operating losses, the U.S. federal and state income tax returns are no longer subject to income tax assessments for years before 2021. With few exceptions, the major foreign jurisdictions are no longer subject to income tax assessments for years before 2017.
On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was enacted. The Act provides for several corporate tax changes including, but not limited to, restoring full expensing of domestic research and development costs, restoring immediate deductibility of certain capital expenditures, and changes in the computation of U.S. taxation on international earnings. The impact the Act had on our business was immaterial.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Nov 25, 2025 | Showing above |
| 2023 | Feb 28, 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.