MOODYS CORP /DE/MCO
MOODYS CORP /DE/ Income Taxes Disclosure
INCOME TAXES
Components of the Company’s income tax provision are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 231 | $ | 280 | $ | 76 | |||||||||||
| State and Local | 99 | 106 | 67 | ||||||||||||||
| Non-U.S. | 355 | 316 | 222 | ||||||||||||||
| Total current | 685 | 702 | 365 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 35 | (21) | (14) | ||||||||||||||
| State and Local | 8 | (6) | (4) | ||||||||||||||
| Non-U.S. | (60) | (35) | (20) | ||||||||||||||
| Total deferred | (17) | (62) | (38) | ||||||||||||||
| Total provision for income taxes | $ | 668 | $ | 640 | $ | 327 | |||||||||||
A reconciliation of the U.S. federal statutory tax rate to the Company’s ETR on income before provision for income taxes is as follows:
| Year Ended December 31, | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||||||||||||||||||||
| U.S. statutory tax rate | $ | 657 | 21.0 | % | $ | 567 | 21.0 | % | $ | 406 | 21.0 | % | |||||||||||||||||||||||
State and local taxes, net of federal tax benefit (1) | 93 | 3.0 | % | 74 | 2.7 | % | 49 | 2.5 | % | ||||||||||||||||||||||||||
| Net U.S. tax effect of cross-border tax laws | (4) | (0.1) | % | (14) | (0.5) | % | 2 | 0.1 | % | ||||||||||||||||||||||||||
| Other nontaxable or nondeductible items | 30 | 1.0 | % | 22 | 0.9 | % | 4 | 0.2 | % | ||||||||||||||||||||||||||
| Excess tax benefits on share-based payments | (33) | (1.1) | % | (27) | (1.0) | % | (15) | (0.8) | % | ||||||||||||||||||||||||||
| Tax credits - research credit | (12) | (0.4) | % | (15) | (0.6) | % | (19) | (0.9) | % | ||||||||||||||||||||||||||
| Domestic state and local income taxes, net of federal effect | 731 | 23.4 | % | 607 | 22.5 | % | 427 | 22.1 | % | ||||||||||||||||||||||||||
| Foreign Tax Expense | |||||||||||||||||||||||||||||||||||
| Belgium | |||||||||||||||||||||||||||||||||||
| Innovation deduction | (37) | (1.2) | % | (25) | (0.9) | % | (26) | (1.3) | % | ||||||||||||||||||||||||||
| Other | 15 | 0.4 | % | 3 | 0.1 | % | 10 | 0.5 | % | ||||||||||||||||||||||||||
| United Kingdom | 11 | 0.4 | % | 34 | 1.3 | % | 25 | 1.2 | % | ||||||||||||||||||||||||||
| Other foreign jurisdictions | 3 | 0.1 | % | 1 | — | % | 7 | 0.4 | % | ||||||||||||||||||||||||||
| Tax expense (benefit) relating to foreign operations | (8) | (0.3) | % | 13 | 0.5 | % | 16 | 0.8 | % | ||||||||||||||||||||||||||
| Changes in unrecognized tax benefits | (55) | (1.8) | % | 20 | 0.7 | % | (116) | (6.0) | % | ||||||||||||||||||||||||||
| Total | $ | 668 | 21.3 | % | $ | 640 | 23.7 | % | $ | 327 | 16.9 | % | |||||||||||||||||||||||
(1) For all years presented, state taxes in California, New York and New York City made up the majority (greater than 50 percent) of the tax effect in this category.
Components of the Company’s income tax paid are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. Federal | $ | 353 | $ | 223 | $ | 59 | |||||||||||
| U.S. State and Local | 132 | 88 | 23 | ||||||||||||||
| Total U.S. | 485 | 311 | 82 | ||||||||||||||
| Belgium | 32 | 39 | 32 | ||||||||||||||
| Canada | 68 | 63 | 44 | ||||||||||||||
| Germany | 43 | 30 | 35 | ||||||||||||||
| United Kingdom | 79 | 93 | 64 | ||||||||||||||
| Other foreign jurisdictions | 118 | 77 | 87 | ||||||||||||||
| Total non-U.S. | 340 | 302 | 262 | ||||||||||||||
| Total Income Tax Paid | $ | 825 | $ | 613 | $ | 344 | |||||||||||
The source of income before provision for income taxes is as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. | $ | 1,743 | $ | 1,446 | $ | 892 | |||||||||||
| Non-U.S. | 1,387 | 1,253 | 1,043 | ||||||||||||||
| Income before provision for income taxes | $ | 3,130 | $ | 2,699 | $ | 1,935 | |||||||||||
The components of deferred tax assets and liabilities are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Account receivable allowances | $ | 10 | $ | 10 | |||||||
| Stock-based compensation | 69 | 60 | |||||||||
| Accrued compensation and benefits | 52 | 50 | |||||||||
| Capitalized costs | 43 | 24 | |||||||||
| Operating lease liabilities | 87 | 84 | |||||||||
| Deferred revenue | 217 | 211 | |||||||||
| Net operating loss | 64 | 58 | |||||||||
| Uncertain tax positions | 30 | 33 | |||||||||
Loss on net investment hedges - OCI | 83 | — | |||||||||
| Interest expense carryforward | 25 | 20 | |||||||||
| Other | 25 | 30 | |||||||||
| Total deferred tax assets | 705 | 580 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Accumulated depreciation and amortization of intangible assets and capitalized software | (563) | (522) | |||||||||
| ROU Assets | (67) | (56) | |||||||||
| Capital gains | (14) | (13) | |||||||||
| Deferred tax on unremitted foreign earnings | (21) | (20) | |||||||||
| Gain on net investment hedges - OCI | (4) | (82) | |||||||||
| Other | (16) | (18) | |||||||||
| Total deferred tax liabilities | (685) | (711) | |||||||||
Net deferred tax asset and (liabilities) | 20 | (131) | |||||||||
| Valuation allowance | (30) | (25) | |||||||||
| Total net deferred tax liabilities | $ | (10) | $ | (156) | |||||||
The Company regularly evaluates which entities it will indefinitely reinvest earnings. The Company has provided deferred taxes for those entities whose earnings are not considered indefinitely reinvested.
The Company had valuation allowances of $30 million and $25 million at December 31, 2025 and 2024, respectively, related to foreign net operating losses, for which realization is uncertain.
A reconciliation of the beginning and ending amount of UTPs is as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance as of January 1 | $ | 211 | $ | 196 | $ | 322 | |||||||||||
| Additions for tax positions related to the current year | 22 | 33 | 21 | ||||||||||||||
| Additions for tax positions of prior years | — | 11 | 3 | ||||||||||||||
| Reductions for tax positions of prior years | (5) | (11) | (17) | ||||||||||||||
| Settlements with taxing authorities | — | (3) | (108) | ||||||||||||||
| Lapse of statute of limitations | (70) | (15) | (25) | ||||||||||||||
| Balance as of December 31 | $ | 158 | $ | 211 | $ | 196 | |||||||||||
As of December 31, 2025, the Company had $158 million of UTPs of which $145 million represents the amount that, if recognized, would impact the ETR in future periods.
Moody’s Corporation and subsidiaries are subject to U.S. federal income tax as well as income tax in various state, local and multiple foreign jurisdictions. The Company’s U.S. federal income tax returns for 2022 through 2024 remain open to examination. Currently, the Company's New York State tax returns for 2022 through 2024 are under examination. Additionally, New York City tax returns for the years 2018 through 2022 are also under examination, while returns for 2023 and 2024 are open for examination. Furthermore, the Company's U.K. corporate income tax returns are under audit for the years 2017 through 2023, with the 2024 return still open for examination.
The Company classifies interest related to UTPs in interest expense in its consolidated statements of operations. Penalties, if incurred, are recognized in other non-operating (expense) income, net. Refer to Note 16 for disclosure of interest (expense) income relating to UTPs and other tax-related liabilities. As of December 31, 2025, 2024, and 2023 the amount of accrued interest recorded in the Company’s consolidated balance sheets related to UTPs was $43 million, $47 million and $36 million, respectively.
In the fourth quarter of 2025, pursuant to a lapse of a statute of limitations, the Company reversed $64 million in reserves (and $15 million in related interest accruals) for uncertain tax positions that were assumed as part of a prior year M&A transaction, for which the sellers had indemnified Moody's. This tax benefit and related reduction to Interest expense, net is offset by the release of the related indemnification asset within Other non-operating income, net, with no impact to net income. In 2023, settlements with taxing authorities were primarily attributable to the favorable resolution of UTPs across various U.S. and non-U.S. jurisdictions.
Tax Legislation
Effective in 2024, multiple foreign jurisdictions in which the Company operates have enacted legislation to adopt a minimum tax rate described in the Global Anti-Base Erosion tax model rules (referred to as GloBE or Pillar II) issued by the OECD. A minimum ETR of 15% would apply to multinational companies with consolidated revenue above €750 million. Under the GloBE rules, a company would be required to determine a combined ETR for all entities located in a jurisdiction. If the jurisdictional tax rate is less than 15%, an additional tax generally will be due to bring the jurisdictional effective tax rate up to 15%. The Pillar II minimum tax did not have a material impact on the Company's results of operations or financial position.
On July 4, 2025, the One Big Beautiful Bill Act was enacted in the U.S. Key provisions of the OBBBA include making permanent certain aspects of the Tax Act, modifying certain international tax rules, and restoring provisions that accelerate deductions for certain business investments and expenditures. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented in subsequent years. The OBBBA did not have material impact on the Company’s consolidated financial statements for the year ended December 31, 2025, and the Company does not expect the changes to have a material impact on the provision for income taxes or net income in future periods.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 18, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 14, 2024 | |
| 2022 | Feb 15, 2023 | |
| 2021 | Feb 22, 2022 | |
| 2020 | Feb 22, 2021 | |
| 2019 | Feb 24, 2020 | |
| 2018 | Feb 25, 2019 | |
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.