MARSH & MCLENNAN COMPANIES, INC.MRSH
MARSH & MCLENNAN COMPANIES, INC. Income Taxes Disclosure
Income Taxes
For financial reporting purposes, income before income taxes includes the following components:
| For the Years Ended December 31, | ||||||||||||||||||||
(In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Income before income taxes: | ||||||||||||||||||||
| U.S. | $ | 1,986 | $ | 1,894 | $ | 1,823 | ||||||||||||||
| Foreign | 3,553 | 3,586 | 3,203 | |||||||||||||||||
| $ | 5,539 | $ | 5,480 | $ | 5,026 | |||||||||||||||
| The expense (benefit) for income taxes is comprised of: | ||||||||||||||||||||
| Current – | ||||||||||||||||||||
| U.S. federal | $ | 203 | $ | 247 | $ | 273 | ||||||||||||||
| U.S. state and local | 131 | 123 | 142 | |||||||||||||||||
| Foreign | 848 | 836 | 838 | |||||||||||||||||
| 1,182 | 1,206 | 1,253 | ||||||||||||||||||
| Deferred – | ||||||||||||||||||||
| U.S. federal | 73 | 53 | 29 | |||||||||||||||||
| U.S. state and local | 16 | 20 | 15 | |||||||||||||||||
| Foreign | 34 | 84 | (73) | |||||||||||||||||
| 123 | 157 | (29) | ||||||||||||||||||
| Total income taxes | $ | 1,305 | $ | 1,363 | $ | 1,224 | ||||||||||||||
The significant components of deferred income tax assets and liabilities and their balance sheet classifications are as follows:
| December 31, | ||||||||||||||
(In millions) | 2025 | 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Accrued expenses not currently deductible | $ | 745 | $ | 713 | ||||||||||
| Differences related to non-U.S. operations (a) | 286 | 282 | ||||||||||||
| Accrued U.S. retirement benefits | 131 | 149 | ||||||||||||
| Net operating losses (b) | 346 | 312 | ||||||||||||
| Income currently recognized for tax | 39 | 40 | ||||||||||||
| Other | 49 | 40 | ||||||||||||
| $ | 1,596 | $ | 1,536 | |||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Differences related to non-U.S. operations | $ | 590 | $ | 588 | ||||||||||
| Depreciation and amortization | 699 | 616 | ||||||||||||
| Accrued retirement & post-retirement benefits – non-U.S. operations | 440 | 374 | ||||||||||||
| Capitalized expenses currently recognized for tax | 144 | 133 | ||||||||||||
| Other | 48 | 42 | ||||||||||||
| $ | 1,921 | $ | 1,753 | |||||||||||
(a)Net of valuation allowances of $96 million in 2025 and $75 million in 2024.
(b)Net of valuation allowances of $62 million in 2025 and $69 million in 2024.
| December 31, | ||||||||||||||
(In millions) | 2025 | 2024 | ||||||||||||
| Balance sheet classifications: | ||||||||||||||
| Deferred tax assets | $ | 212 | $ | 237 | ||||||||||
| Other liabilities | $ | 537 | $ | 454 | ||||||||||
Additional U.S. state and withholding taxes would apply to the cumulative undistributed earnings that are indefinitely reinvested in non-U.S. subsidiaries, if such earnings were repatriated. The amount of these additional taxes is estimated to be approximately $100 million.
Future U.S. federal tax costs related to basis differences in non-U.S. subsidiaries are realized through the U.S. Net Controlled Foreign Corporation Tested Income ("NCTI") minimum tax regime, formerly known as Global Intangible Low-Taxed Income ("GILTI"). The Company elected to recognize NCTI tax costs as a period cost and has not provided deferred tax liabilities on these basis differences.
A reconciliation from the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:
| For the Years Ended December 31, | 2025 | |||||||||||||
| Amount | Percentage | |||||||||||||
| U.S. federal statutory rate | $ | 1,163 | 21.0 | % | ||||||||||
| U.S. state and local income taxes – net of U.S. Federal income tax benefit (a) | 116 | 2.1 | ||||||||||||
| Change in valuation allowance | 19 | 0.4 | ||||||||||||
| Tax credits | (20) | (0.4) | ||||||||||||
| Nontaxable and nondeductible items, net | (8) | (0.1) | ||||||||||||
| Cross-border taxes | ||||||||||||||
| Tax on flow through entities | (138) | (2.5) | ||||||||||||
| Other | 24 | 0.4 | ||||||||||||
| Other U.S. adjustments | (24) | (0.4) | ||||||||||||
| Foreign tax effects | ||||||||||||||
| United Kingdom | 41 | 0.7 | ||||||||||||
| Other foreign | 129 | 2.3 | ||||||||||||
| Worldwide changes in prior year unrecognized tax benefits | 3 | 0.1 | ||||||||||||
| Effective tax rate | $ | 1,305 | 23.6 | % | ||||||||||
(a)State taxes in New York State, California, New York City, Illinois, New Jersey, and Pennsylvania made up the majority (greater than 50 percent) of the tax effect in this category.
| For the Years Ended December 31, | 2024 | 2023 | ||||||||||||
| U.S. federal statutory rate | 21.0 | % | 21.0 | % | ||||||||||
| U.S. state and local income taxes – net of U.S. Federal income tax benefit | 2.1 | 2.6 | ||||||||||||
| Differences related to non-U.S. operations | 2.5 | 2.2 | ||||||||||||
| Change in valuation allowance | — | (1.4) | ||||||||||||
| Equity compensation | (0.7) | (0.7) | ||||||||||||
| Uncertain tax positions | (0.3) | (0.1) | ||||||||||||
| Other | 0.3 | 0.7 | ||||||||||||
| Effective tax rate | 24.9 | % | 24.3 | % | ||||||||||
The rates in all periods reflect the effects of tax planning and the ongoing impact of regulatory and other guidance as it became available. The tax rates in all periods include a valuation allowance for certain tax credits, the impact of uncertain tax positions, and certain tax planning benefits. The tax rate in 2023 includes the effect of a release of valuation allowances on deferred tax assets related to the Company’s non-U.S. operations, due to sustained profitability.
A valuation allowance was recorded to adjust deferred tax assets to the amount that the Company believes is more likely than not to be realized. Valuation allowances had a net increase of $16 million in 2025, a net increase of $24 million in 2024, and a net decrease of $110 million in 2023. Adjustments of the beginning of the year balances of valuation allowances increased tax expense by $1 million in 2025. Adjustments of the beginning of the year balances of valuation allowances had no impact to the income tax expense in 2024, and decreased income tax expense by $94 million in 2023. Approximately 8% of the Company’s net operating loss carryforwards expire from 2026 through 2038, and the remaining 92% are unlimited. The gross deferred tax assets of the potential tax benefit from net operating loss carryforwards at the end of 2025 is primarily comprised of non-U.S. tax benefits of $410 million.
Changes in tax laws, rulings, policies, or related legal and regulatory interpretations occur frequently and may have significant favorable or adverse impacts on our effective tax rate.
On July 4, 2025, U.S. tax legislation was signed into law (known as the "One Big Beautiful Bill Act" or "OBBBA") which made permanent many of the tax provisions enacted in 2017 as part of the Tax Cuts and Jobs Act that were set to expire at the end of 2025. In addition, the OBBBA made changes to certain U.S. corporate tax provisions, but many are generally not effective until 2026. The enactment of the OBBBA does not have a material impact on the results from operations for the current or future years.
The Organization for Economic Cooperation and Development ("OECD") provided model rules for a 15% global minimum tax, known as Pillar Two. Pillar Two has now been enacted by most key non-U.S. jurisdictions where the Company operates, including the U.K. and Ireland. Parts of the minimum tax rules were applicable for 2024, with the remaining provisions becoming fully effective for 2025. This minimum tax is treated as a period cost and does not have a material impact on the Company's financial results of operations for the current period.
While the U.S. has negotiated a "side-by-side" arrangement for the existing U.S. minimum taxes with the intent to exempt U.S. multinational companies from certain of the Pillar Two provisions, uncertainty remains related to the implementation of this arrangement. The Company continues to monitor legislative developments, as well as additional guidance from countries that have enacted Pillar Two legislation, and will ensure it complies with any changes.
Following is a reconciliation of the Company’s total gross unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023:
| (In millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Balance at January 1, | $ | 112 | $ | 124 | $ | 97 | ||||||||||||||
| Additions, based on tax positions related to current year | 5 | 5 | 6 | |||||||||||||||||
| Additions for tax positions of prior years | 3 | 8 | 44 | |||||||||||||||||
| Reductions for tax positions of prior years | (1) | — | (8) | |||||||||||||||||
| Settlements | (1) | (10) | (8) | |||||||||||||||||
| Lapses in statutes of limitations | (9) | (15) | (7) | |||||||||||||||||
| Balance at December 31, | $ | 109 | $ | 112 | $ | 124 | ||||||||||||||
Of the total unrecognized tax benefits at December 31, 2025, 2024 and 2023, $108 million, $111 million and $122 million, respectively, represent the amount that, if recognized, would favorably affect the effective tax rate in any future periods. The total gross amount of accrued interest and penalties, before any applicable federal benefit, was $48 million at December 31, 2025, $45 million at December 31, 2024, and $48 million at December 31, 2023.
The Company is routinely examined by the jurisdictions in which it has significant operations. In the U.S. federal jurisdiction, the Company participates in the Internal Revenue Service’s ("IRS") Compliance Assurance Process ("CAP"), which is structured to be, in effect, a real-time audit. The IRS CAP Audit for tax year 2025 and CAP Maintenance Audits for tax years 2024 and 2023 are ongoing. In 2024, the IRS concluded its examination of the Company’s 2022 tax return.
New York is a significant tax jurisdiction for the Company. New York State and New York City have continuing examinations underway in 2025 for various entities covering the years 2015 through 2021. In 2023, the New York State audits for 2013-2014 and the New York City audits for 2010-2014 were finalized.
We conduct business through multiple legal entities in significant jurisdictions outside the U.S. Separate audits for individual entities within a jurisdiction may open or close within a particular year.
The status of audits for significant jurisdictions outside the U.S. are summarized in the table below:
| Tax Audit (Years) | ||||||||||||||||||||
| Jurisdiction: | Initiated in 2025 | Ongoing | Concluded in 2025 | |||||||||||||||||
| United Kingdom | 2023 | 2016 - 2022 | ||||||||||||||||||
| Canada | 2024 | 2021 | ||||||||||||||||||
| Australia | 2021 - 2023 | 2019 - 2020 | ||||||||||||||||||
| Germany | 2017 - 2020 | |||||||||||||||||||
| France | 2022 - 2023 | 2021 | ||||||||||||||||||
| Italy | 2020 | 2015 - 2017 | 2018 | |||||||||||||||||
| Singapore | 2023 | 2019 - 2022 | 2018 | |||||||||||||||||
| Japan | 2024 | 2021 - 2024 | ||||||||||||||||||
| Mexico | 2020 | |||||||||||||||||||
| India | 2007 - 2022 | |||||||||||||||||||
In 2024, the Company received closure notices and assessments from the U.K. tax authority in relation to its 2016-2020 examinations which disallowed certain interest expense deductions. The Company has appealed the assessments and is prepared to resolve this matter through litigation or alternative dispute resolution, which may take several years.
The Company has established liabilities for uncertain tax positions in relation to potential assessments in the jurisdictions in which it operates. The Company believes the resolution of tax matters will not have a material effect on the consolidated financial position of the Company. However, an adverse resolution of tax matters from current or future audits or tax litigation could have a material impact on the Company's net income or cash flows and on its effective tax rate in a particular future period.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 9, 2026 | Showing above |
| 2024 | Feb 10, 2025 | |
| 2023 | Feb 12, 2024 | |
| 2022 | Feb 13, 2023 | |
| 2021 | Feb 16, 2022 | |
| 2020 | Feb 17, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 24, 2017 | |
| 2015 | Feb 24, 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.