OMNICOM GROUP INC.OMC
OMNICOM GROUP INC. Income Taxes Disclosure
Income Taxes
Income before income taxes:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Domestic | $ | 319.0 | $ | 940.0 | $ | 696.0 | |||||||||||
| International | (40.8) | 1,187.6 | 1,296.9 | ||||||||||||||
| Income Before Income Taxes | $ | 278.2 | $ | 2,127.6 | $ | 1,992.9 | |||||||||||
Income tax expense (benefit):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current: | |||||||||||||||||
| U.S. federal | $ | 103.0 | $ | 183.8 | $ | 154.2 | |||||||||||
| U.S. state and local | 26.9 | 46.6 | 34.8 | ||||||||||||||
| International | 171.5 | 309.9 | 330.8 | ||||||||||||||
Total Current Income Tax Expense | 301.4 | 540.3 | 519.8 | ||||||||||||||
| Deferred: | |||||||||||||||||
| U.S. federal | (19.0) | 17.5 | 10.9 | ||||||||||||||
| U.S. state and local | (10.9) | 1.3 | 1.3 | ||||||||||||||
| International | (29.3) | 1.4 | (7.1) | ||||||||||||||
Total Deferred Tax Expense (Benefit) | (59.2) | 20.2 | 5.1 | ||||||||||||||
Total Income Tax Expense | $ | 242.2 | $ | 560.5 | $ | 524.9 | |||||||||||
Total Income Tax Expense: | |||||||||||||||||
| U.S. federal | 84.0 | 201.3 | 165.1 | ||||||||||||||
| U.S. state and local | 16.0 | 47.9 | 36.1 | ||||||||||||||
| International | 142.2 | 311.3 | 323.7 | ||||||||||||||
Total Income Tax Expense | $ | 242.2 | $ | 560.5 | $ | 524.9 | |||||||||||
On January 1, 2025, we prospectively adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”), that requires, greater disaggregation of information in the rate reconciliation.
Reconciliation from the statutory U.S. federal income tax rate to effective tax rate for 2025:
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| Statutory U.S. federal income tax rate | $ | 58.4 | 21.0 | % | |||||||
Domestic - Federal | |||||||||||
| Tax credits | (6.5) | (2.3) | % | ||||||||
Nontaxable and nondeductible items | |||||||||||
Nondeductible transaction costs | 49.0 | 17.6 | % | ||||||||
Nontaxable investment income | (42.1) | (15.1) | % | ||||||||
Other | 23.8 | 8.6 | % | ||||||||
Cross-border taxes, net of foreign tax credit | (0.2) | (0.1) | % | ||||||||
| U.S. state and local income taxes, net of U.S. federal income tax benefit | 7.0 | 2.5 | % | ||||||||
Impact of foreign operations: | |||||||||||
Australia - Statutory rate differential | 5.1 | 1.8 | % | ||||||||
Australia - Nondeductible expenses | 1.4 | 0.5 | % | ||||||||
Germany - Statutory rate differential | (2.9) | (1.0) | % | ||||||||
Germany - Nondeductible expenses | 12.4 | 4.5 | % | ||||||||
Germany - Other | 6.5 | 2.3 | % | ||||||||
Malta - Investment income | 63.5 | 22.8 | % | ||||||||
Malta - Reduced rate due to imputation system | (63.4) | (22.8) | % | ||||||||
United Kingdom - Statutory rate differential | 7.6 | 2.7 | % | ||||||||
United Kingdom - Nondeductible expenses | 25.8 | 9.3 | % | ||||||||
Other | 94.5 | 34.0 | % | ||||||||
Changes in unrecognized tax benefits, net | 2.3 | 0.8 | % | ||||||||
| Change in valuation allowance | — | — | % | ||||||||
| Effective tax rate | $ | 242.2 | 87.1 | % | |||||||
Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Statutory U.S. federal income tax rate | 21.0 | % | 21.0 | % | |||||||
| U.S. state and local income taxes, net of U.S. federal income tax benefit | 1.7 | % | 1.4 | % | |||||||
| Total impact of foreign operations | 3.8 | % | 3.9 | % | |||||||
Other | (0.2) | % | — | % | |||||||
| Effective tax rate | 26.3 | % | 26.3 | % | |||||||
Our effective tax rate for 2025 increased year-over-year to 87.1%. The effective tax rate for 2025 was unfavorably impacted by the lower tax benefit associated with the non-deductibility in certain jurisdictions of severance and repositioning charges, loss on disposition of subsidiaries and acquisition-related costs of the Merger.
Numerous foreign jurisdictions have enacted or are in the process of enacting legislation to adopt a minimum effective tax rate described in the Global Anti-Base Erosion, or Pillar Two, model rules issued by the Organization for Economic Co-operation and Development. A minimum effective tax rate of 15% would apply to multinational companies with consolidated revenue above €750 million.
Under the Pillar Two rules, a company is required to determine a combined effective tax rate for all entities located in a jurisdiction. If the jurisdictional effective tax rate determined under the Pillar Two rules is less than 15%, a top-up tax will be due to bring the jurisdictional effective tax rate up to 15%. We are continuing to monitor Pillar Two legislative developments and the effects of Pillar Two on our business, such as the recent statement of understanding released by the Group of Seven (G7) of a potential “side-by-side system” approach to the Pillar Two framework, which would exclude U.S. parented groups from certain
Pillar Two provisions in recognition of existing U.S. minimum tax rules. The provisions effective in 2025 do not have a materially adverse impact on our results of operations, financial position, or cash flows.
On July 4, 2025, the One Big Beautiful Bill Act was signed into law in the U.S., which contains a broad range of tax reform provisions affecting businesses. The legislation does not have a material impact on our financial statements.
The Tax Cuts and Jobs Act of 2017, or the Tax Act, imposed a one-time tax, the transition tax, on the accumulated earnings of foreign subsidiaries. At December 31, 2025 and 2024, the remaining transition tax liability was $6.4 million and $41.2 million, respectively. The transition tax is expected to be fully paid in 2026. The Tax Act also implemented a territorial tax system that allows us to repatriate earnings of our foreign subsidiaries without incurring additional U.S. tax by providing a 100% dividend exemption. While a territorial tax system limits U.S. federal income tax to domestic source income, foreign source income is subject to tax in the appropriate foreign jurisdiction at the local rate, which in certain jurisdictions may be higher than the U.S. federal statutory income tax rate of 21%. Therefore, the foreign tax rate differential will cause our effective tax rate to be higher than the U.S. federal statutory income tax rate.
We have elected to account for any tax on the global intangible low-taxed income, or GILTI, in the period in which it is incurred. We provided $2.8 million and $5.5 million in 2025 and 2024, respectively, for tax impact of GILTI.
Deferred tax assets and liabilities and balance sheet classification:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Compensation | $ | 237.6 | $ | 136.1 | |||||||
| Tax loss and credit carryforwards | 292.5 | 78.2 | |||||||||
| Basis differences from acquisitions | 164.2 | 53.2 | |||||||||
Operating lease liability | 276.9 | 160.8 | |||||||||
| Capitalized research and development expenditures | 181.2 | 106.8 | |||||||||
| Other | 35.9 | (44.4) | |||||||||
| Deferred tax assets | 1,188.3 | 490.7 | |||||||||
| Valuation allowance | (281.9) | (17.0) | |||||||||
| Deferred tax assets, net | $ | 906.4 | $ | 473.7 | |||||||
| Deferred tax liabilities: | |||||||||||
| Goodwill and intangible assets | $ | 1,866.1 | $ | 707.5 | |||||||
Basis difference from short-term assets and liabilities | 0.9 | 8.7 | |||||||||
ROU assets - Operating lease | 2.0 | 124.5 | |||||||||
| Unremitted foreign earnings | 148.6 | 44.1 | |||||||||
| Basis differences from investments | 37.7 | 5.2 | |||||||||
| Deferred tax liabilities | $ | 2,055.3 | $ | 890.0 | |||||||
| Long-term deferred tax assets | $ | 300.5 | $ | 75.5 | |||||||
| Long-term deferred tax liabilities | $ | 1,449.4 | $ | 491.8 | |||||||
The increase in our deferred tax assets and liabilities in 2025 relates primarily to the Merger. We have concluded that it is more likely than not that we will be able to realize our net deferred tax assets in future periods because results of future operations are expected to generate sufficient taxable income. At December 31, 2025 and 2024, the valuation allowance of $281.9 million and $17.0 million, respectively, relates to tax losses and tax credit carryforwards in the U.S. and in international jurisdictions. The change in valuation allowance between 2024 an 2025 is primarily related to deferred tax assets acquired as part of the IPG Merger. Tax loss and credit carryforwards for which there is no valuation allowance are available for periods ranging from 2026 to 2045, which is longer than the forecasted utilization of such carryforwards.
Reconciliation of unrecognized tax benefits:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| January 1 | $ | 181.5 | $ | 167.8 | |||||||
| Additions: | |||||||||||
| Current year tax positions | 4.4 | 15.7 | |||||||||
| Prior year tax positions | 11.1 | 4.4 | |||||||||
Positions acquired as part of IPG Merger | 294.6 | — | |||||||||
| Reduction of prior year tax positions | (47.4) | (2.5) | |||||||||
| Settlements | (0.8) | (2.6) | |||||||||
| Foreign currency translation | 0.7 | (1.3) | |||||||||
| December 31 | $ | 444.1 | $ | 181.5 | |||||||
Substantially all the liability for uncertain tax positions is recorded in long-term liabilities. At December 31, 2025 and 2024, approximately $426.9 million and $175.1 million, respectively, of the liability for uncertain tax positions would affect our effective tax rate upon resolution of the uncertain tax positions.
Income tax expense in 2025, 2024 and 2023 includes $5.2 million, $4.4 million and $3.2 million, respectively, of interest, net of tax benefit, and penalties related to tax positions taken on our tax returns. At December 31, 2025 and 2024, accrued interest and penalties were $70.0 million and $23.5 million, respectively.
We file a consolidated U.S. federal income tax return and income tax returns in various state and local jurisdictions. Our subsidiaries file tax returns in various foreign jurisdictions. Our principal foreign jurisdictions include the U.K., France and Germany. The Internal Revenue Service has completed its examination of our U.S. federal tax returns through 2016. Tax returns in the U.K., France and Germany have been examined through 2023, 2019 and 2013, respectively.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 5, 2025 | |
| 2023 | Feb 7, 2024 | |
| 2022 | Feb 8, 2023 | |
| 2021 | Feb 9, 2022 | |
| 2020 | Feb 18, 2021 | |
| 2019 | Feb 11, 2020 | |
| 2018 | Feb 12, 2019 | |
| 2017 | Feb 15, 2018 | |
| 2016 | Feb 9, 2017 | |
| 2015 | Feb 9, 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.