Reynolds Consumer Products Inc.REYN
Reynolds Consumer Products Inc. Income Taxes Disclosure
Income Taxes
The components of income before income tax were as follows:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Income before income taxes: | |||||||||||||||||
| United States | $ | 381 | $ | 438 | $ | 380 | |||||||||||
| International | 12 | 13 | 13 | ||||||||||||||
| Total income before income taxes | $ | 393 | $ | 451 | $ | 393 | |||||||||||
Significant components of income tax expense were as follows:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Current | |||||||||||||||||
| United States | |||||||||||||||||
| Federal | $ | 65 | $ | 93 | $ | 83 | |||||||||||
| State | 11 | 13 | 16 | ||||||||||||||
| Foreign | 3 | 4 | 3 | ||||||||||||||
| Total current income tax expense | 79 | 110 | 102 | ||||||||||||||
| Deferred | |||||||||||||||||
| United States | |||||||||||||||||
| Federal | 14 | (1) | (4) | ||||||||||||||
| State | (1) | (10) | (3) | ||||||||||||||
| Foreign | — | — | — | ||||||||||||||
| Total deferred income tax (benefit) expense | 13 | (11) | (7) | ||||||||||||||
| Total income tax expense | $ | 92 | $ | 99 | $ | 95 | |||||||||||
A reconciliation of income taxes computed at the U.S. Federal statutory income tax rate of 21% for 2025 to our income tax expense was as follows:
| For the Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| Amount (in millions) | Percent | ||||||||||
| $ | 83 | 21.0 | % | ||||||||
State and local income taxes, net of Federal income tax effect (1) | 6 | 1.5 | % | ||||||||
| Foreign tax effects | 1 | 0.1 | % | ||||||||
| Effects of cross-border tax laws | (1) | (0.2) | % | ||||||||
| Tax credits | (1) | (0.3) | % | ||||||||
| Changes in valuation allowances | 2 | 0.6 | % | ||||||||
| Changes in unrecognized tax benefits | 2 | 0.6 | % | ||||||||
| Income tax expense and effective tax rate | $ | 92 | 23.3 | % | |||||||
(1) State taxes in Wisconsin, California and Minnesota made up the majority (greater than 50%) of the tax effect in this category.
A reconciliation of income taxes computed at the U.S. Federal statutory income tax rate of 21% for 2024 and 2023, to our income tax expense was as follows:
| For the Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in millions) | |||||||||||
| U.S. Federal income tax expense at the statutory rate | $ | 95 | $ | 82 | |||||||
| U.S. State income tax expense | 12 | 10 | |||||||||
Change in tax rates(1) | (9) | — | |||||||||
| Non-deductible expenses | 2 | 3 | |||||||||
| Return to provision adjustments | (1) | — | |||||||||
| Total income tax expense | $ | 99 | $ | 95 | |||||||
(1) Primarily due to a discrete tax benefit for the remeasurement of deferred tax liabilities due to a change in our state tax rates after apportionment.
Deferred Tax Assets and Liabilities
Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The components of our net deferred income tax liability were as follows:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (in millions) | |||||||||||
| Deferred tax assets | |||||||||||
| Employee benefits | $ | 30 | $ | 25 | |||||||
| Lease obligations | 27 | 24 | |||||||||
| Inventory | 8 | 8 | |||||||||
| Reserves | 11 | 5 | |||||||||
| Tax losses | 6 | 4 | |||||||||
| Total deferred tax assets | 82 | 66 | |||||||||
| Valuation allowance | (9) | (7) | |||||||||
| Total deferred tax assets after valuation allowance | 73 | 59 | |||||||||
| Deferred tax liabilities | |||||||||||
| Intangible assets | (268) | (260) | |||||||||
| Property, plant and equipment | (111) | (101) | |||||||||
| Lease right-of-use assets | (26) | (23) | |||||||||
| Prepaid expense | (16) | (12) | |||||||||
| Financial instruments | — | (4) | |||||||||
| Other | (2) | (1) | |||||||||
| Total deferred tax liabilities | (423) | (401) | |||||||||
| Net deferred tax liabilities | $ | (350) | $ | (342) | |||||||
Uncertain Tax Positions
ASC 740 prescribes a recognition threshold of more-likely-than not to be sustained upon examination as it relates to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. Our policy is to include interest and penalties related to gross unrecognized tax benefits in income tax expense.
The following table summarizes the activity related to our gross unrecognized tax benefits:
| For the Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Balance as of beginning of the year | $ | 11 | $ | 11 | $ | 8 | |||||||||||
| Increase associated with tax positions taken during the current year | 1 | 1 | 2 | ||||||||||||||
| Increase (decrease) associated with tax positions taken in prior years | 1 | (1) | 1 | ||||||||||||||
| Ending unrecognized tax benefits | $ | 13 | $ | 11 | $ | 11 | |||||||||||
Each year we file income tax returns in the various federal, state, local and foreign income taxing jurisdictions in which we operate. Canada is the only foreign jurisdiction in which we operate. Our income tax returns are subject to examination and possible challenge by the tax authorities. Although ultimate timing is uncertain, the net amount of tax liability for unrecognized tax benefits may change within the next twelve months due to changes in audit status, settlements of tax assessments and other events.
Taxes Paid
The components of cash paid for income taxes, net of refunds received, were as follows:
| For the Year Ended December 31, | |||||
| 2025 | |||||
| (in millions) | |||||
| Federal | $ | 55 | |||
| State | 9 | ||||
| Foreign | 3 | ||||
| Net cash taxes paid | $ | 67 | |||
Tax Reform
On July 4, 2025, the U.S. government enacted the One Big Beautiful Bill Act (“OBBBA”) which includes, among other provisions, changes to the U.S. corporate income tax system, including the allowance of 100% expensing of qualified asset expenditures, immediate expensing of qualifying domestic research and development expenses and permanent extensions of certain other provisions within the Tax Cuts and Jobs Act. Certain provisions are effective for 2025, beginning January 19, 2025. The enactment did not have a material impact on our effective tax rate for the year ended December 31, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 4, 2026 | Showing above |
| 2024 | Feb 5, 2025 | |
| 2023 | Feb 7, 2024 | |
| 2022 | Feb 8, 2023 | |
| 2021 | Feb 9, 2022 | |
| 2020 | Feb 12, 2021 | |
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.