SMITHFIELD FOODS INCSFD
SMITHFIELD FOODS INC Income Taxes Disclosure
INCOME TAXES
Income (loss) from continuing operations before income taxes consists of the following:
| Fiscal Year | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
U.S. | $ | 1,219 | $ | 1,008 | $ | (134) | |||||||||||
| Foreign | 51 | 53 | 5 | ||||||||||||||
| Total income (loss) from continuing operations before income taxes | $ | 1,270 | $ | 1,061 | $ | (129) | |||||||||||
Income Tax Expense
Income tax expense (benefit) from continuing operations consists of the following:
| Fiscal Year | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Current income tax expense: | |||||||||||||||||
| Federal | $ | 142 | $ | 161 | $ | 55 | |||||||||||
| State | 31 | 19 | 33 | ||||||||||||||
| Foreign | 16 | — | — | ||||||||||||||
| 189 | 180 | 89 | |||||||||||||||
| Deferred income tax expense (benefit): | |||||||||||||||||
| Federal | 93 | 72 | (120) | ||||||||||||||
| State | — | 8 | (6) | ||||||||||||||
| Foreign | 1 | 11 | (4) | ||||||||||||||
| 94 | 91 | (130) | |||||||||||||||
| Total income tax expense (benefit) | $ | 283 | $ | 271 | $ | (41) | |||||||||||
Effective Tax Rate Reconciliation
The following tables reconcile the federal statutory income tax rate to our effective tax rate:
| Fiscal Year 2025 | |||||||||||
| Amount | Percent | ||||||||||
| (in millions) | |||||||||||
| U.S. federal statutory tax rate | 267 | 21.0 | % | ||||||||
State and local income taxes, net of federal income tax benefit (1) | 23 | 1.8 | % | ||||||||
| Foreign tax effects: | |||||||||||
| Statutory tax rate difference in Mexico | 5 | 0.4 | % | ||||||||
| Other | 2 | 0.2 | % | ||||||||
| Cross-border tax laws | (6) | (0.5) | % | ||||||||
Tax credits: (2) | |||||||||||
| Research and development tax credits | (10) | (0.8) | % | ||||||||
| Other | (3) | (0.2) | % | ||||||||
Nontaxable or nondeductible items (3) | 6 | 0.5 | % | ||||||||
| Change in unrecognized tax benefits | 1 | 0.1 | % | ||||||||
| Other | (1) | (0.1) | % | ||||||||
| Effective tax rate | $ | 283 | 22.3 | % | |||||||
| Fiscal Year | |||||||||||
| 2024 | 2023 | ||||||||||
| Federal income taxes at statutory rate | 21.0 | % | 21.0 | % | |||||||
| Unrecognized tax benefits | 3.5 | (13.0) | |||||||||
| State income taxes, net of federal tax benefit | 1.7 | (3.5) | |||||||||
| Impact of foreign operations | 0.5 | 0.1 | |||||||||
Equity method investments (4) | 0.2 | 7.4 | |||||||||
Officers’ life insurance | (0.1) | 2.9 | |||||||||
| Foreign income taxes | (0.4) | 4.3 | |||||||||
Tax credits (2) | (1.3) | 13.0 | |||||||||
| Other | 0.5 | — | |||||||||
| Effective tax rate | 25.5 | % | 32.2 | % | |||||||
________________
(1)State taxes in Illinois and Virginia in aggregate made up the majority (greater than 50 percent) of the tax effect in this category.
(2)We recognized federal tax credits of $13 million, $14 million and $17 million in fiscal years 2025, 2024 and 2023, respectively.
(3)Consists primarily of a non-taxable gain for a one-time benefit on company-owned life insurance policies and nondeductible executive compensation.
(4)The results of our equity method investments are excluded from income (loss) from continuing operations before income taxes. However, to the extent applicable, income taxes on our equity method investments are included in income tax expense (benefit), which can have significant impact on our computed effective tax rate.
The impact of the reconciling items between the federal statutory rate and our effective tax rate were more pronounced in fiscal year 2023 largely due to the pre-tax loss of $129 million in fiscal year 2023 compared to pre-tax income of $1,270 million and $1,061 million in fiscal years 2025 and 2024, respectively.
Income Taxes Receivable and Payable
Income taxes receivable totaled $56 million and $99 million as of December 28, 2025 and December 29, 2024, respectively, and were included in prepaid expenses and other current assets on the consolidated balance sheets. Income taxes payable totaled $30 million and $9 million as of December 28, 2025 and December 29, 2024, respectively, and were included in accrued expenses and other current liabilities on the consolidated balance sheets.
Income Taxes Paid
We paid income taxes totaling $124 million, $130 million and $108 million in fiscal years 2025, 2024 and 2023, respectively. The following table provides income taxes paid (net of refunds received) by primary jurisdiction for fiscal year 2025.
| (in millions) | |||||
| Federal | $ | 103 | |||
State (1) | 19 | ||||
| Foreign | 3 | ||||
| Total income taxes paid | $ | 124 | |||
_____________
(1)In fiscal year 2025, income taxes paid (net of refunds received) in the state of California was $7 million, which exceeded 5 percent of total income taxes paid (net of refunds received).
Deferred Tax Assets and Liabilities
The tax effects of temporary differences between the tax basis and book basis of our assets and liabilities are presented in the table below:
| December 28, 2025 | December 29, 2024 | ||||||||||
| (in millions) | |||||||||||
| Deferred tax assets: | |||||||||||
| Research and development expenses | $ | 30 | $ | 104 | |||||||
| Operating lease obligations | 91 | 79 | |||||||||
| Accrued expenses and other current liabilities | 49 | 46 | |||||||||
| Pension and other retirement liabilities | 43 | 72 | |||||||||
Tax credits and net operating losses (1) | 18 | 26 | |||||||||
| Employee benefits | 15 | 14 | |||||||||
| Deferred payroll taxes | — | 3 | |||||||||
| Other | 11 | 28 | |||||||||
| Total deferred tax asset before valuation allowance | 256 | 372 | |||||||||
Valuation allowance (2) | (4) | (8) | |||||||||
| Total deferred tax asset | $ | 252 | $ | 364 | |||||||
| Deferred tax liabilities: | |||||||||||
| Property, plant and equipment | 416 | 412 | |||||||||
| Intangible assets | 310 | 307 | |||||||||
| Operating lease assets | 89 | 78 | |||||||||
| Inventory | 43 | 38 | |||||||||
| Investments | 30 | 27 | |||||||||
| Accrued expenses and other current liabilities | 7 | 12 | |||||||||
| Other | 15 | 8 | |||||||||
| Total deferred tax liability | $ | 910 | $ | 882 | |||||||
| Net deferred tax liability | $ | 658 | $ | 518 | |||||||
________________
(1)We have $446 million of gross state net operating losses, $33 million of which have no expiration, and $413 million that will expire between 2026 and 2045. We have $2 million of state tax credits that will expire between 2026 and 2039.
(2)Valuation allowances are established if the Company’s deferred tax assets are not more likely than not to be realized. The valuation allowance primarily relates to state credits and state net operating loss carryforwards, which are expected to expire unused. The valuation allowance decreased by $4 million as a result of utilizing net operating losses and applying the interest expense limitation deduction.
We consider the earnings of our foreign subsidiaries to be indefinitely reinvested as we intend to use these earnings in our foreign operations. The amount of foreign subsidiary net earnings that was considered indefinitely reinvested was $184 million and $164 million as of December 28, 2025 and December 29, 2024, respectively, which is considered previously taxed income. The determination of any unrecorded deferred tax asset or liability on the remaining excess carrying amount of our investments over their respective tax bases is not practicable due to the uncertainty of how these investments would be recovered and such differences are not expected to be recognized in the foreseeable future.
One Big Beautiful Bill
On July 4, 2025, the Tax Relief for American Families and Workers Act of 2025 (commonly known as the “One Big Beautiful Bill” or “OBBB”) was signed into law. This comprehensive legislation made several significant changes to federal tax law, including:
•Permanently reinstating 100% bonus depreciation and adding 100% bonus deprecation for real property placed in service after January 19, 2025 and used in production activity.
•Permanently reinstating the immediate expensing of R&D in the U.S, which impacted years 2022 and beyond.
•Permanently restoring the EBITDA-based limitation for interest deduction under Section 163(j) of the IRS Tax Code.
In fiscal year 2025, following the enactment of the OBBB, we reclassified approximately $77 million of deferred tax assets related to R&D capitalization to prepaid expenses and other current assets.
Unrecognized Tax Benefits
A reconciliation of the beginning and ending liability, excluding interest and penalties, for unrecognized tax benefits is as follows:
| (in millions) | |||||
| Balance, January 1, 2023 | $ | 28 | |||
| Additions for tax positions taken in fiscal year 2023 | 1 | ||||
| Additions for tax positions taken for prior years | 17 | ||||
| Lapse of statute of limitations | (1) | ||||
| Balance, December 31, 2023 | 45 | ||||
| Additions for tax positions taken in fiscal year 2024 | 5 | ||||
| Additions for tax positions taken for prior years | 59 | ||||
| Reductions for cash remittances for tax positions taken in prior years | (17) | ||||
| Lapse of statute of limitations | (5) | ||||
| Balance, December 29, 2024 | 87 | ||||
| Additions for tax positions taken in fiscal year 2025 | 2 | ||||
| Reductions for tax positions taken in prior years | (9) | ||||
| Lapse of statute of limitations | (2) | ||||
| Balance, December 28, 2025 | $ | 77 | |||
During fiscal years 2025, 2024 and 2023, we recognized interest and penalties totaling $3 million, $2 million, and $4 million, respectively, within income tax expense (benefit). The unrecognized tax benefits, if recognized, would have favorably affected income tax expense by $25 million, $24 million and $25 million in fiscal years 2025, 2024 and 2023, respectively. It is not practicable at this time to estimate the amount by which the liability for unrecognized tax benefits will change in the next twelve months.
We operate in multiple taxing jurisdictions, both within the U.S. and outside of the U.S., and are subject to examination from various tax authorities. The liability for unrecognized tax benefits included $14 million and $11 million of accrued interest as of December 28, 2025 and December 29, 2024, respectively.
We are currently being audited in several tax jurisdictions and remain subject to examination until the statute of limitations expires for the respective tax jurisdiction. Within the U.S. and Mexico, we may be subject to audit by various tax authorities, and our subsidiaries operating within each country may be subject to different statute of
limitations expiration dates. We have concluded all U.S. federal income tax matters through the tax year ended January 1, 2017. We are currently under U.S federal examination for all subsequent tax years through December 28, 2025. We are also subject to examination from tax authorities in Mexico and certain U.S. states for the tax years ended January 3, 2021 through December 28, 2025.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 24, 2026 | Showing above |
| 2024 | Mar 25, 2025 | |
| 2016 | Mar 29, 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.