Medline Inc.MDLN
Medline Inc. Income Taxes Disclosure
INCOME TAXES
Income Before Income Tax Expense by Category
Income before taxes and equity in earnings of affiliates from continuing operations was as follows:
Year ended | |||||||||||||||||
(in millions) | December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||
| United States | $ | 929 | $ | 952 | $ | 15 | |||||||||||
| International | 319 | 294 | 249 | ||||||||||||||
| Income before provision for income taxes | $ | 1,248 | $ | 1,246 | $ | 264 | |||||||||||
Income Tax Expense
Income tax expense for each reporting period consists of the following:
| Year ended | ||||||||||||||||||||
(in millions) | December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||||
| Current income tax expense: | ||||||||||||||||||||
| U.S. federal income tax expense | $ | 24 | $ | 6 | $ | — | ||||||||||||||
| State income tax expense | 4 | 6 | 7 | |||||||||||||||||
| Foreign income tax expense in various foreign tax jurisdictions | 83 | 58 | 46 | |||||||||||||||||
| Total current | 111 | 70 | 53 | |||||||||||||||||
| Deferred income tax expense: | ||||||||||||||||||||
| U.S. federal income tax expense | 4 | — | — | |||||||||||||||||
| State income tax expense | — | — | — | |||||||||||||||||
| Foreign income tax expense in various foreign tax jurisdictions | (24) | (24) | (23) | |||||||||||||||||
| Total deferred | (20) | (24) | (23) | |||||||||||||||||
| Provision for income taxes | $ | 91 | $ | 46 | $ | 30 | ||||||||||||||
Deferred Tax Assets and Liabilities
The following table presents the components of deferred tax assets and liabilities:
(in millions) | December 31, 2025 | December 31, 2024 | |||||||||
| Deferred tax asset | |||||||||||
| Net operating loss and credit carryforwards | $ | 256 | $ | 2 | |||||||
| Interest expense carryforward | 142 | — | |||||||||
| Future tax benefits from TRA payments | 310 | — | |||||||||
| Pensions and other post-retirement benefits | 14 | 13 | |||||||||
| Accrued expenses | 17 | 10 | |||||||||
| Others | 8 | 4 | |||||||||
| Valuation allowance | — | (1) | |||||||||
| Total deferred tax asset | 747 | 28 | |||||||||
| Deferred tax liability | |||||||||||
| Investment in partnership | (157) | — | |||||||||
| Intangibles | (170) | (183) | |||||||||
| Property, plant, and equipment | (34) | (37) | |||||||||
| Inventories | — | (1) | |||||||||
| Others | (2) | (2) | |||||||||
| Total deferred tax liability | (363) | (223) | |||||||||
| Net deferred tax asset (liability) | $ | 384 | $ | (195) | |||||||
As of December 31, 2025, the Company had foreign net operating loss (“NOL”) carryforwards of $10 million. Out of this, $8 million of the foreign NOL carryforwards will expire between 2027 and 2035, and $2 million of the foreign NOL carryforwards have no expiration date.
As part of the IPO Reorganization, the Company acquired $911 million of U.S. NOL carryforwards. As of December 31, 2025, the Company had U.S. NOL carryforwards of $964 million which have no expiration date.
Realization of the NOL carryforwards depends on generating sufficient future earnings. An immaterial valuation allowance was recognized as of December 31, 2025 and 2024 to reduce the deferred tax assets associated with NOL carryforwards because the Company does not believe it is more likely than not that these assets will be fully realized prior to expiration.
The following table is a summary of changes in our deferred tax valuation allowance:
| Year ended | |||||||||||||||||
(in millions) | December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||
| Balance at the beginning of the period | $ | 1 | $ | — | $ | — | |||||||||||
| Charges to income tax expense | (1) | 1 | — | ||||||||||||||
| Balance at the end of the period | $ | — | $ | 1 | $ | — | |||||||||||
The Company did not have any unrecognized tax benefits recorded on its Consolidated Balance Sheets as of December 31, 2025 and 2024.
Income Tax Expense Reconciliation
The Company has elected to prospectively adopt the guidance in ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective tax rate in accordance with ASU 2023-09.
Year ended | ||||||||
(in millions) | December 31, 2025 | |||||||
| Income tax expense at U.S. statutory rate | $ | 262 | 21.0 | % | ||||
State and local tax effect, net of federal benefit (1) | 4 | 0.4 | % | |||||
Statutory income tax rate differential (2) | (19) | (1.5) | % | |||||
| Effects of changes in tax laws or rates enacted in the current period | 2 | 0.1 | % | |||||
Effects of cross-border tax laws (3) | 2 | 0.2 | % | |||||
| Changes in valuation allowance | (1) | (0.1) | % | |||||
| Nontaxable or non deductible items | ||||||||
| Impact of non-taxable partnership earnings | (160) | (12.8) | % | |||||
| Other | 1 | — | % | |||||
| Income tax expense | $ | 91 | 7.3 | % | ||||
(1) During the year ended December 31, 2025, state and local taxes in New York City and Tennessee comprised greater than 50% of the tax effect in this category.
(2) Includes the impact of the global minimum tax under Pillar Two.
(3) GILTI and Subpart F, net of Section 250 deduction and Foreign Tax Credits.
The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective tax rate prior to the adoption of ASU 2023-09.
Year ended | ||||||||
(in millions) | December 31, 2024 | December 31, 2023 | ||||||
| Income tax expense at U.S. statutory rate | $ | 262 | $ | 55 | ||||
| Tax rate differential | (211) | (42) | ||||||
| Tax holidays | (2) | (1) | ||||||
| GILTI & Subpart F income | 34 | 28 | ||||||
| Tax credits | (32) | (24) | ||||||
| State tax effect | 6 | 7 | ||||||
| Changes in NOL | 1 | 1 | ||||||
| Nontaxable or non deductible items | (12) | 5 | ||||||
| Other | — | 1 | ||||||
| Income tax expense | $ | 46 | $ | 30 | ||||
The Company’s effective income tax rate can differ from the 21% U.S. federal statutory rate due to a number of factors, including the operating partnership, tax incentives, foreign rate differences, state income taxes, non-deductible expenses, and non-taxable income.
Cash paid, net of refunds received, for income taxes consisted of the following:
Year ended | |||||
(in millions) | December 31, 2025 | ||||
| Federal | $ | 12 | |||
| State | 3 | ||||
| Foreign | |||||
| Canada | |||||
| Federal | 13 | ||||
| Territories | 2 | ||||
| Mexico | 15 | ||||
| Netherlands | 4 | ||||
| Other | 13 | ||||
| Total | $ | 62 | |||
Tax Holidays
The Company receives tax holidays as a result of Free Trade Zones in United Arab Emirates, Panama, and the Dominican Republic. The financial impact of the reductions as compared to the statutory tax rate is indicated in the income tax expense reconciliation table above.
Examinations of Tax Returns
The Company currently files income tax returns in the U.S. and all foreign jurisdictions in which it has entities, which are periodically under audit by federal, state, and foreign tax authorities. As of December 31, 2025, the Company had ongoing audits in the U.S. for tax year 2021 and in Canada, Germany, India, Italy, Vietnam, and other jurisdictions for the tax years 2014 through 2024. While the final outcome of these matters is inherently uncertain, the Company does not believe that any of these pose a material risk to the consolidated financial statements. During 2025, the Company closed audits in the U.S., India, and Switzerland, with no material adjustments to the Company’s consolidated financial statements.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.