SONOCO PRODUCTS COSON
SONOCO PRODUCTS CO Income Taxes Disclosure
Income taxes
The provision for taxes on income for the years ended December 31 consists of the following:
| 2025 | 2024 | 2023 | |||||||||||||||
| Pretax income | |||||||||||||||||
| Domestic | $ | 529,172 | $ | (35,733) | $ | 280,916 | |||||||||||
| Foreign | 235,929 | 99,219 | 208,111 | ||||||||||||||
| Total pretax income | $ | 765,101 | $ | 63,486 | $ | 489,027 | |||||||||||
| Current | |||||||||||||||||
| Federal | $ | 59,956 | $ | 3,693 | $ | 54,319 | |||||||||||
| State | 10,732 | 1,916 | 11,282 | ||||||||||||||
| Foreign | 97,293 | 57,034 | 63,617 | ||||||||||||||
| Total current | $ | 167,981 | $ | 62,643 | $ | 129,218 | |||||||||||
| Deferred | |||||||||||||||||
| Federal | $ | 30,415 | $ | (34,828) | $ | (3,307) | |||||||||||
| State | 14,220 | (9,837) | (1,646) | ||||||||||||||
| Foreign | (29,030) | (12,469) | (4,535) | ||||||||||||||
| Total deferred | $ | 15,605 | $ | (57,134) | $ | (9,488) | |||||||||||
| Total taxes | $ | 183,586 | $ | 5,509 | $ | 119,730 | |||||||||||
Deferred tax (liabilities)/assets are comprised of the following at December 31:
| 2025 | 2024 | ||||||||||
| Property, plant and equipment | $ | (235,929) | $ | (266,278) | |||||||
| Intangibles | (488,519) | (545,330) | |||||||||
| Leases | (109,707) | (76,225) | |||||||||
| Outside basis in Metal Packaging | (63,105) | (68,649) | |||||||||
| Other | (192) | — | |||||||||
| Gross deferred tax liabilities | $ | (897,452) | $ | (956,482) | |||||||
| Retiree health benefits | $ | 4 | $ | 245 | |||||||
| Foreign loss carryforwards | 110,055 | 79,314 | |||||||||
| U.S. Federal loss and credit carryforwards | 31,980 | 34,082 | |||||||||
| Capital loss carryforwards | 3,983 | 3,755 | |||||||||
| U.S. State loss and credit carryforwards | 23,413 | 26,181 | |||||||||
| Capitalized research and development costs | 67,894 | 103,043 | |||||||||
| Net investment hedge | 50,524 | — | |||||||||
| Employee benefits | 54,258 | 56,192 | |||||||||
| Leases | 116,184 | 82,031 | |||||||||
| Accrued liabilities and other assets | 44,023 | 71,370 | |||||||||
| Gross deferred tax assets | $ | 502,318 | $ | 456,213 | |||||||
| Valuation allowance on deferred tax assets | $ | (107,451) | $ | (81,496) | |||||||
Total deferred taxes, net1 | $ | (502,585) | $ | (581,765) | |||||||
1 Total deferred taxes, net includes $(15,666) reclassified to discontinued operations on the Consolidated Balance Sheets at December 31, 2024. This includes a valuation allowance on deferred tax assets of $(4,628).
The Company has total federal net operating loss (“NOL”) carryforwards of approximately $31,556 remaining at December 31, 2025. These losses were acquired as part of an acquisition and annual usage is limited based on certain attributes existing at that time. The losses expire between 2029 and 2041. U.S. foreign tax credit carryforwards of approximately $25,601 exist at December 31, 2025, $22,474 of which expire in 2027, and $3,127 of which expire in 2035. Foreign subsidiary loss carryforwards of approximately $532,745 remain at December 31, 2025. Their use is limited to future taxable earnings of the respective foreign subsidiaries or filing groups. Approximately $309,722 of these loss carryforwards do not have an expiration date. Of the remaining foreign subsidiary loss carryforwards, approximately $193,878 expire within the next five years and approximately $29,145 expire between 2031 and 2045. Foreign subsidiary capital loss carryforwards of approximately $16,108 exist at December 31, 2025 and do not have an expiration date. Their use is limited to future capital gains of the respective foreign subsidiaries.
Approximately $9,242 in tax value of state loss carryforwards and $20,395 of state credit carryforwards remain at December 31, 2025. These state loss and credit carryforwards are limited based upon future taxable earnings of the respective entities or filing group and expire between 2026 and 2046. State loss and credit carryforwards are reflected at their “tax” value, as opposed to the amount of expected gross deduction due to the vastly different apportionment and statutory tax rates applicable to the various entities and states in which the Company files.
Statutory tax rate reconciliation
A reconciliation of the U.S. federal statutory tax rate to the actual provision for income taxes in the expanded format set forth by ASU 2023-09 for the year ended December 31, 2025 is as follows:
| 2025 | |||||||||||
| U.S. Federal statutory tax rate | $ | 160,671 | 21.0 | % | |||||||
State and local income taxes, net of Federal income tax effect(a) | 16,129 | 2.1 | % | ||||||||
| Foreign tax effects | |||||||||||
| Luxembourg | |||||||||||
| Valuation allowances | 10,826 | 1.4 | % | ||||||||
| Other | (5,572) | (0.7) | % | ||||||||
| Finland | |||||||||||
| Nontaxable income | (8,115) | (1.1) | % | ||||||||
| Other | (479) | (0.1) | % | ||||||||
| Other foreign jurisdictions | 18,402 | 2.4 | % | ||||||||
| U.S. Federal tax effects | |||||||||||
| Effect of changes in tax laws or rates enacted in the current period | — | — | % | ||||||||
| Effect of cross-border tax laws | |||||||||||
| Global intangible low-taxed income (GILTI), net of foreign tax credit (FTC) | 9,525 | 1.2 | % | ||||||||
| Tax on undistributed earnings of subsidiaries | 11,756 | 1.5 | % | ||||||||
| Foreign branch inclusion | 10,479 | 1.4 | % | ||||||||
| Other | 4,380 | 0.6 | % | ||||||||
| Tax credits | (9,627) | (1.3) | % | ||||||||
| Changes in valuation allowances | 34 | — | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
| Benefit for purchased credits | (14,875) | (1.9) | % | ||||||||
| Other | 5,927 | 0.8 | % | ||||||||
| Changes in unrecognized tax benefits | 2,622 | 0.3 | % | ||||||||
| Other adjustments | |||||||||||
| Disposition of business | (29,994) | (3.9) | % | ||||||||
| Other | 1,497 | 0.2 | % | ||||||||
| Provision For Income Taxes | $ | 183,586 | 24.0 | % | |||||||
(a) State taxes in Tennessee, Illinois, California, Wisconsin and New Jersey make up the majority (greater than 50 percent) of the tax effect in this category.
A reconciliation of the U.S. federal statutory tax rate to the actual provision for income taxes for the years ended December 31, 2024 and 2023 is as follows:
| 2024 | 2023 | ||||||||||||||||||||||
| U.S. Federal statutory tax rate | $ | 13,332 | 21.0 | % | $ | 102,696 | 21.0 | % | |||||||||||||||
| State income taxes, net of federal tax benefit | (883) | (1.4) | % | 12,263 | 2.5 | % | |||||||||||||||||
| Valuation allowance | 7,763 | 12.2 | % | 4,486 | 0.9 | % | |||||||||||||||||
| Tax examinations including change in reserve for uncertain tax positions | (8,613) | (13.6) | % | 1,819 | 0.4 | % | |||||||||||||||||
| Adjustments to prior year deferred taxes | (9,129) | (14.4) | % | (2,489) | (0.5) | % | |||||||||||||||||
| Foreign earnings taxed at other than U.S. rates | 12,271 | 19.3 | % | 13,108 | 2.7 | % | |||||||||||||||||
| Divestiture of business | (2,954) | (4.7) | % | 464 | 0.1 | % | |||||||||||||||||
| Effect of tax rate changes | (1,552) | (2.4) | % | 387 | 0.1 | % | |||||||||||||||||
| Foreign withholding taxes | 5,344 | 8.4 | % | 4,591 | 0.9 | % | |||||||||||||||||
| Tax credits | (11,834) | (18.6) | % | (18,848) | (3.9) | % | |||||||||||||||||
| Global intangible low-taxed income (GILTI) | (5,604) | (8.8) | % | 4,853 | 1.0 | % | |||||||||||||||||
| Foreign-derived intangible income | (858) | (1.4) | % | (1,106) | (0.2) | % | |||||||||||||||||
| Foreign currency gain/(loss) on distributions of previously taxed income | 642 | 1.0 | % | (2,614) | (0.5) | % | |||||||||||||||||
| IRC Subpart F Income | 916 | 1.4 | % | 119 | — | % | |||||||||||||||||
| Executive compensation limitation | 2,569 | 4.0 | % | 3,767 | 0.8 | % | |||||||||||||||||
| Capitalized acquisition costs | 7,202 | 11.3 | % | 104 | — | % | |||||||||||||||||
| Other, net | (3,103) | (4.9) | % | (3,870) | (0.8) | % | |||||||||||||||||
| Provision for income taxes | $ | 5,509 | 8.7 | % | $ | 119,730 | 24.5 | % | |||||||||||||||
The “Change in unrecognized tax benefits” for 2025 and the change in “Tax examinations including change in reserve for uncertain tax positions” for 2024 and 2023 is shown net of associated deferred taxes and includes accrued interest. Included in the change are current year increases of approximately $1,732, $3,405 and $2,710 for 2025, 2024 and 2023, respectively. The change also includes adjustments for prior year items such as decreases related to lapses of statutes of limitations in international, federal and state jurisdictions as well as overall changes in facts and judgment. These adjustments changed the reserve by a total of approximately $(899), $(13,229) and $(891) in 2025, 2024 and 2023, respectively.
In many of the countries in which the Company operates, earnings are taxed at rates different than the U.S. federal tax rate. This difference is reflected in “Foreign tax effects” for 2025 and “Foreign earnings taxed at other than U.S. rates” for 2024 and 2023, along with other items, if any, that impacted taxes on foreign earnings in the periods presented.
The benefits included in “Adjustments to prior year deferred taxes” for 2024 and 2023 consist primarily of adjustments to deferred tax assets and liabilities arising from changes in estimates. The adjustment to deferred tax assets and liabilities in 2024 was driven largely by post-acquisition entity restructuring.
Of the $9,627 of tax credits for 2025, $3,008 relates to research and development tax credits. The GILTI tax, net of FTC in 2025 of $9,525 consists primarily of a prior year provision to return adjustment.
The benefit of $29,994 shown in “Disposition of business” is attributable to the sale of the U.S. ThermoSafe business and is due to a tax basis in the shares sold that is greater than the basis for accounting purposes.
The Company maintains its assertion that its undistributed foreign earnings prior to the Sonoco Metal Packaging EMEA acquisition, as well as current and future undistributed foreign earnings of its non-Sonoco Metal Packaging EMEA business, are indefinitely reinvested and, accordingly, has not recorded any deferred income tax liabilities that would be due if those earnings were repatriated. However, the Company does not assert that certain current and future earnings of its Sonoco Metal Packaging EMEA business are permanently reinvested. While the majority of the Company’s undistributed foreign earnings have already been taxed in the United States, a portion would be subject to foreign withholding and U.S. income taxes and credits if distributed. Computation of the deferred tax liability associated with unremitted earnings deemed to be indefinitely reinvested is not practicable at this time.
Income taxes paid
The following table sets forth income taxes paid, including payments for the acquisition of income tax credits, net of refunds, for the year ended December 31, 2025, disaggregated between foreign, domestic and state:
| 2025 | |||||
| Federal taxes paid | $ | 125,868 | |||
| State taxes paid | 30,926 | ||||
| Foreign taxes paid | 108,107 | ||||
| Total | $ | 264,901 | |||
Income taxes paid, net of refunds, exceeded 5 percent of total income taxes paid, net of refunds, in the following jurisdictions:
| 2025 | |||||
| Foreign Taxes Paid | |||||
| Spain | $ | 20,109 | |||
| Brazil | $ | 17,688 | |||
| Other | $ | 70,310 | |||
Reserve for uncertain tax positions
The following table sets forth the reconciliation of the gross amounts of unrecognized tax benefits at the beginning and ending of the periods indicated:
| 2025 | 2024 | 2023 | |||||||||||||||
| Gross Unrecognized Tax Benefits at January 1 | $ | 12,138 | $ | 21,677 | $ | 18,621 | |||||||||||
| Increases in prior years’ unrecognized tax benefits | 2,743 | 627 | 378 | ||||||||||||||
| Decreases in prior years’ unrecognized tax benefits | (1,404) | (1,915) | (572) | ||||||||||||||
| Increases in current year unrecognized tax benefits | 688 | 4,325 | 4,395 | ||||||||||||||
| Decreases in unrecognized tax benefits from the lapse of statutes of limitations | (235) | (12,100) | (1,094) | ||||||||||||||
| Settlements | (748) | (476) | (51) | ||||||||||||||
| Gross Unrecognized Tax Benefits at December 31 | $ | 13,182 | $ | 12,138 | $ | 21,677 | |||||||||||
Of the unrecognized tax benefit balances at December 31, 2025 and December 31, 2024, $11,102 and $9,857, respectively, would have an impact on the effective tax rate if ultimately recognized.
Interest and/or penalties related to income taxes are reported as part of income tax expense. The Company had $2,817 and $1,667 accrued for interest related to uncertain tax positions at December 31, 2025 and December 31, 2024, respectively. for the year ended December 31, 2025, includes net interest expense of $1,150, which is comprised of an interest benefit of $384 related to the adjustment of prior years’ items and interest expense of $1,534 on unrecognized tax benefits. The amounts listed above for accrued interest and interest expense do not reflect the benefit of a federal tax deduction which would be available if the interest were ultimately paid.
The Company and/or its subsidiaries file federal, state and local income tax returns in the United States and various foreign jurisdictions. With few exceptions, the Company is no longer subject to income tax examinations by tax authorities for years before 2019.
Although the Company’s estimate for the potential outcome for any uncertain tax issue is highly judgmental, management believes that any reasonably foreseeable outcomes related to these matters have been adequately provided for. However, future results may include favorable or unfavorable adjustments to estimated tax liabilities in the period the assessments are made or resolved or when statutes of limitation on potential assessments expire. Additionally, the jurisdictions in which earnings or deductions are realized may differ from current estimates. As a result, the effective tax rate may fluctuate significantly on a quarterly basis. The Company has operations in many countries outside of the United States and the taxes paid on those earnings are subject to varying rates. The Company is not dependent upon the favorable benefit of any one jurisdiction to an extent that loss of those benefits would have a material effect on the Company’s overall effective tax rate.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 26, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Feb 28, 2023 | |
| 2021 | Feb 28, 2022 | |
| 2020 | Feb 26, 2021 | |
| 2019 | Feb 28, 2020 | |
| 2018 | Feb 28, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Mar 1, 2017 | |
| 2015 | Feb 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.