STATE STREET CORPSTT

STATE STREET CORP Income Taxes Disclosure

10-KFiled Feb 19, 20265 min read
Income Taxes
We use an asset-and-liability approach to account for income taxes. Our objective is to recognize the amount of taxes payable or refundable for the current year through charges or credits to the current tax provision, and to recognize deferred tax assets and liabilities for future tax consequences of temporary differences between amounts reported in our consolidated financial statements and their respective tax bases. The measurement of tax assets and liabilities is based on enacted tax laws and applicable tax rates. The effects of a tax position on our consolidated financial statements are recognized when we believe it is more likely than not that the position will be sustained. A valuation allowance is established if it is considered more likely than not that all or a portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities recorded in our consolidated statement of condition are netted within the same tax jurisdiction.
The following table presents the components of income tax expense (benefit) for the periods indicated:
Years Ended December 31,
(In millions)202520242023
Current:
Federal$375 $108 $160 
State96 68 79 
Non-U.S.404 387 317 
Total current expense875 563 556 
Deferred:
Federal(133)77 (77)
State(1)2 (63)
Non-U.S.45 66 (44)
Total deferred expense (benefit)(89)145 (184)
Total income tax expense (benefit)$786 $708 $372 
The Company adopted ASU 2023-09, Improvements to Income Tax Disclosures, prospectively for annual periods beginning after December 31, 2024. The following table presents a reconciliation of the U.S. federal statutory tax rate to our effective income tax rate for the year ended December 31, 2025 (after adoption of ASU 2023-09):
Years Ended December 31,
(Dollars in millions)2025
U.S. federal income tax rate$783 21.0 %
Changes from statutory rate:
State and local income taxes, net of federal income tax effect(1)
81 2.2 
Foreign tax effects45 1.2 
Effects of cross-border tax laws(2)
7 0.2 
Tax Credits(3)
(68)(1.8)
Nontaxable or nondeductible items(27)(0.8)
Changes in unrecognized tax benefits(35)(0.9)
Effective tax rate$786 21.1 %
(1) State taxes in Massachusetts, New York State and New York City made up the majority (greater than 50%) of the tax effect in this category.
(2) Effects of cross-border tax laws includes the period expense for global intangible low-taxed income.
(3) Business tax credits include research, low-income housing, production and investment tax credits.
The following table presents a reconciliation of the U.S. statutory income tax rate to our effective tax rate based on income before income tax expense for the periods indicated:
Years Ended December 31,
20242023
U.S. federal income tax rate21.0 %21.0 %
Changes from statutory rate:
State taxes, net of federal benefit1.8 2.4 
Tax-exempt income(1.0)(1.5)
Business tax credits(1)
(2.0)(3.6)
Foreign tax differential1.0 (0.6)
Foreign tax credit (benefits)/ limitations(2)
0.6 (2.0)
Change in Valuation Allowance(0.5)(0.2)
Other, net(0.1)0.6 
Effective tax rate20.8 %16.1 %
(1) Business tax credits include research, low-income housing, production and investment tax credits.
(2) Foreign tax credit (benefits)/limitations includes the period expense for global intangible low-taxed income.
Certain earnings of our foreign subsidiaries are considered indefinitely reinvested, and no state, local, or foreign withholding tax liabilities have been recorded on these amounts as the related tax effects are not practicable to estimate. Any future distribution of these earnings is expected to be exempt from U.S. federal income tax but could result in state, local, and foreign withholding taxes. Although foreign withholding taxes may be creditable for U.S. federal income tax purposes, limitations on foreign tax credit utilization could result in a net tax cost.
The following table presents significant components of our gross deferred tax assets and gross deferred tax liabilities as of the dates indicated:
December 31,
(In millions)20252024
Deferred tax assets:
Other amortizable assets$176 $189 
Tax credit carryforwards656 577 
Lease obligations248 214 
Deferred compensation229 111 
Restructuring charges and other reserves166 227 
NOL and other carryforwards154 147 
Pension plan13 21 
Foreign currency translation24 63 
Unrealized losses on investment securities, net52 184 
Total deferred tax assets 1,718 1,733 
Valuation allowance for deferred tax assets(198)(172)
Deferred tax assets, net of valuation allowance$1,520 $1,561 
Deferred tax liabilities:
Fixed and intangible assets$654 $634 
Investment basis differences45 47 
Right-of-use assets
240 198 
Other33 40 
Total deferred tax liabilities$972 $919 
The table below summarizes the deferred tax assets, carryforwards and related valuation allowances recognized as of December 31, 2025:
(In millions)Deferred Tax AssetValuation AllowanceExpiration
Other amortizable assets$176 $(69)None
Tax credits656 — 
2042-2045
NOLs - Non-U.S.130 (110)2026-2042, None
NOLs - U.S.21 (17)
2026-2041, None
Other carryforwards2 (2)None
Management considers the valuation allowance adequate to reduce the total deferred tax assets to an aggregate amount that will more likely than not be realized. Management has determined that a valuation allowance is not required for the remaining deferred tax assets because it is more likely than not that there will be sufficient taxable income of the appropriate nature within the carryforward periods to realize these assets.
At December 31, 2025, 2024 and 2023, the gross unrecognized tax benefits, excluding interest,
were $248 million, $237 million and $237 million, respectively. Of this, the amounts that would reduce the effective tax rate, if recognized, are $230 million, $220 million and $197 million, respectively. The reduction in the effective tax rate includes the federal benefit for unrecognized state tax benefits.
The following table presents activity related to unrecognized tax benefits as of the dates indicated:
December 31,
(In millions)202520242023
Beginning balance$237 $237 $285 
Decrease related to agreements with tax authorities(2)(22)(32)
Increase related to tax positions taken during current year48 36 39 
Increase/(Decrease) related to tax positions taken during prior years23 11 (34)
Decreases related to a lapse of the applicable statute of limitations(58)(25)(21)
Ending balance$248 $237 $237 
Management believes that we have sufficient accrued liabilities as of December 31, 2025 for tax exposures and related interest expense.
Income tax expense included related interest and penalties of approximately $9 million, $8 million and $7 million in 2025, 2024 and 2023, respectively. Total accrued interest and penalties were approximately $29 million as of December 31, 2025, and $21 million as of both December 31, 2024 and 2023.
The table below summarizes income taxes paid for the year ended December 31, 2025 (after adoption of ASU 2023-09):
(In millions)
Year Ended December 31, 2025
U.S. Federal$78 
U.S. State:
    New York State28 
    Other33 
Total U.S. State61 
Foreign:
    United Kingdom110 
    Canada54 
    Luxembourg46 
    Ireland36 
    India34 
    Italy31 
    Other144 
Total Foreign455 
Total income taxes paid$594 
Total income taxes paid for the years ended December 31, 2024 and 2023, were $451 million and $423 million, respectively.
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Historical Timeline

Fiscal YearFiled
2025Feb 19, 2026Showing above
2024Feb 13, 2025
2023Feb 15, 2024
2022Feb 16, 2023
2021Feb 17, 2022
2020Feb 19, 2021
2019Feb 20, 2020
2018Feb 21, 2019
2017Feb 26, 2018
2016Feb 17, 2017
2015Feb 19, 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.

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