PROCTER & GAMBLE CoPG
PROCTER & GAMBLE Co Income Taxes Disclosure
INCOME TAXES
Income taxes are recognized for the amount of taxes payable for the current year and for the impact of deferred tax assets and liabilities, which represent future tax consequences of events that have been recognized differently in the financial statements than for tax purposes. Deferred tax assets and liabilities are established using the enacted statutory tax rates and are adjusted for any changes in such rates in the period of change.
We have elected to account for the tax effects of Global Intangible Low-Taxed Income (GILTI) as a current period expense when incurred.
Earnings before income taxes consisted of the following:
| Fiscal years ended June 30 | 2025 | 2024 | 2023 | ||||||||||||||
| United States | $ | 13,911 | $ | 12,246 | $ | 12,107 | |||||||||||
| International | 6,256 | 6,515 | 6,246 | ||||||||||||||
| TOTAL | $ | 20,167 | $ | 18,761 | $ | 18,353 | |||||||||||
Income taxes consisted of the following:
| Fiscal years ended June 30 | 2025 | 2024 | 2023 | ||||||||||||||
| CURRENT TAX EXPENSE | |||||||||||||||||
| U.S. federal | $ | 2,215 | $ | 1,954 | $ | 2,303 | |||||||||||
| International | 1,330 | 1,708 | 1,412 | ||||||||||||||
| U.S. state and local | 407 | 368 | 353 | ||||||||||||||
| TOTAL | 3,953 | 4,031 | 4,068 | ||||||||||||||
| DEFERRED TAX EXPENSE/(BENEFIT) | |||||||||||||||||
| U.S. federal | 9 | (133) | (224) | ||||||||||||||
| International and other | 141 | (111) | (229) | ||||||||||||||
| TOTAL | 149 | (244) | (453) | ||||||||||||||
| TOTAL TAX EXPENSE | $ | 4,102 | $ | 3,787 | $ | 3,615 | |||||||||||
A reconciliation of the U.S. federal statutory income tax rate to our actual effective income tax rate is provided below:
| Fiscal years ended June 30 | 2025 | 2024 | 2023 | ||||||||||||||
| U.S. federal statutory income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
| Country mix impacts of foreign operations | (0.4) | % | 0.1 | % | (0.5) | % | |||||||||||
| State income taxes, net of federal benefit | 1.7 | % | 1.8 | % | 1.6 | % | |||||||||||
| Excess tax benefits from the exercise of stock options | (1.4) | % | (1.5) | % | (1.0) | % | |||||||||||
| Foreign derived intangible income deduction (FDII) | (0.8) | % | (1.1) | % | (0.8) | % | |||||||||||
| Changes in uncertain tax positions | 0.1 | % | 0.1 | % | 0.1 | % | |||||||||||
| Other | 0.2 | % | (0.2) | % | (0.7) | % | |||||||||||
| EFFECTIVE INCOME TAX RATE | 20.3 | % | 20.2 | % | 19.7 | % | |||||||||||
Country mix impacts of foreign operations includes the effects of foreign subsidiaries' earnings taxed at rates other than the U.S. statutory rate, the U.S. tax impacts of non-U.S. earnings repatriation and any net impacts of intercompany transactions. Excess tax benefits from the exercise of stock options reflect the excess of actual tax benefits received on employee exercises of stock options and other share-based payments (which generally equals the income taxable to the employee) over the amount of tax benefits that were calculated and recognized based on the grant date fair values of such instruments. Changes in uncertain tax positions represent changes in our net liability related to prior year tax positions.
Prior to the passage of the 2017 U.S. Tax Act, the Company asserted that substantially all of the undistributed earnings of its foreign subsidiaries were considered indefinitely invested and, accordingly, no deferred taxes were provided. Pursuant to the provisions of the 2017 U.S. Tax Act, these earnings were subjected to a one-time transition tax. This charge included taxes for all U.S. income taxes and for the related foreign withholding taxes for the portion of those earnings which are no longer considered indefinitely invested. We have not provided deferred taxes on approximately $22 billion of earnings that are considered indefinitely invested.
A reconciliation of the beginning and ending liability for uncertain tax positions is as follows:
| Fiscal years ended June 30 | 2025 | 2024 | 2023 | ||||||||||||||
| BEGINNING OF YEAR | $ | 582 | $ | 515 | $ | 583 | |||||||||||
| Increases in tax positions for prior years | 240 | 157 | 113 | ||||||||||||||
| Decreases in tax positions for prior years | (181) | (133) | (119) | ||||||||||||||
| Increases in tax positions for current year | 57 | 160 | 60 | ||||||||||||||
| Settlements with taxing authorities | (65) | (100) | (108) | ||||||||||||||
| Lapse in statute of limitations | (6) | (9) | (7) | ||||||||||||||
| Currency translation | 7 | (8) | (7) | ||||||||||||||
| END OF YEAR | $ | 634 | $ | 582 | $ | 515 | |||||||||||
Included in the total liability for uncertain tax positions at June 30, 2025, is $497 that, depending on the ultimate resolution, could impact the effective tax rate in future periods.
The Company is present in about 70 countries and over 150 taxable jurisdictions and, at any point in time, has 30-40 jurisdictional audits underway at various stages of completion. We evaluate our tax positions and establish liabilities for
uncertain tax positions that may be challenged by local authorities and may not be fully sustained, despite our belief that the underlying tax positions are fully supportable. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, developments in case law and the closing of statutes of limitation. Such adjustments are reflected in the tax provision as appropriate. We have tax years open ranging from 2010 and forward. We are generally not able to reliably estimate the timing and ultimate settlement amounts until the close of an audit. Based on information currently available, we anticipate that over the next 12-month period, audit activity could be completed related to uncertain tax positions in multiple jurisdictions for which we have accrued liabilities of approximately $114, including interest and penalties.
We recognize the additional accrual of any possible related interest and penalties relating to the underlying uncertain tax position in income tax expense. As of June 30, 2025 and 2024, we had accrued interest of $141 and $111 and accrued penalties of $45 and $15, respectively, which are not included in the above table.
Deferred income tax assets and liabilities were comprised of the following:
| As of June 30 | 2025 | 2024 | |||||||||
| DEFERRED TAX ASSETS | |||||||||||
| Capitalized research & development | $ | 1,251 | $ | 1,140 | |||||||
| Loss and other carryforwards | 857 | 892 | |||||||||
| Pension and other retiree benefits | 601 | 592 | |||||||||
| Accrued marketing and promotion | 497 | 460 | |||||||||
| Stock-based compensation | 445 | 433 | |||||||||
| Unrealized loss on financial and foreign exchange transactions | 358 | 107 | |||||||||
| Fixed assets | 230 | 206 | |||||||||
| Lease liabilities | 212 | 199 | |||||||||
| Other | 758 | 843 | |||||||||
| Valuation allowances | (293) | (290) | |||||||||
| TOTAL | $ | 4,915 | $ | 4,582 | |||||||
| DEFERRED TAX LIABILITIES | |||||||||||
| Goodwill and other intangible assets | $ | 5,475 | $ | 5,459 | |||||||
| Fixed assets | 1,547 | 1,573 | |||||||||
| Other retiree benefits | 1,102 | 1,319 | |||||||||
| Lease right-of-use assets | 209 | 196 | |||||||||
| Foreign withholding tax on earnings to be repatriated | 131 | 104 | |||||||||
| Unrealized gain on financial and foreign exchange transactions | 96 | 263 | |||||||||
| Other | 492 | 441 | |||||||||
| TOTAL | $ | 9,052 | $ | 9,355 | |||||||
Net operating loss carryforwards were $2.0 billion at June 30, 2025, and $2.3 billion at June 30, 2024. If unused, approximately $100 will expire between 2025 and 2045. The remainder, totaling $1.9 billion at June 30, 2025, may be carried forward indefinitely.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 4, 2025 | Showing above |
| 2024 | Aug 5, 2024 | |
| 2023 | Aug 4, 2023 | |
| 2022 | Aug 5, 2022 | |
| 2021 | Aug 6, 2021 | |
| 2020 | Aug 6, 2020 | |
| 2019 | Aug 6, 2019 | |
| 2018 | Aug 7, 2018 | |
| 2017 | Aug 7, 2017 | |
| 2016 | Aug 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.