Seagate Technology Holdings plcSTX
Seagate Technology Holdings plc Income Taxes Disclosure
Income Taxes
Income (loss) before income taxes consisted of the following:
| Fiscal Years Ended | ||||||||||||||||||||
| (Dollars in millions) | June 27, 2025 | June 28, 2024 | June 30, 2023 | |||||||||||||||||
| U.S. | $ | 233 | $ | 249 | $ | 300 | ||||||||||||||
| Non-U.S. | 1,280 | 196 | (796) | |||||||||||||||||
| $ | 1,513 | $ | 445 | $ | (496) | |||||||||||||||
The provision for income taxes consisted of the following:
| Fiscal Years Ended | ||||||||||||||||||||
| (Dollars in millions) | June 27, 2025 | June 28, 2024 | June 30, 2023 | |||||||||||||||||
| Current income tax expense: | ||||||||||||||||||||
| U.S. | $ | 16 | $ | 2 | $ | 6 | ||||||||||||||
| Non-U.S. | 32 | 30 | 17 | |||||||||||||||||
| Total Current | 48 | 32 | 23 | |||||||||||||||||
| Deferred income tax expense: | ||||||||||||||||||||
| U.S. | (5) | 71 | 9 | |||||||||||||||||
| Non-U.S. | 1 | 7 | 1 | |||||||||||||||||
| Total Deferred | (4) | 78 | 10 | |||||||||||||||||
| Provision for income taxes | $ | 44 | $ | 110 | $ | 33 | ||||||||||||||
The significant components of the Company’s deferred tax assets and liabilities were as follows:
| Fiscal Years Ended | ||||||||||||||
| (Dollars in millions) | June 27, 2025 | June 28, 2024 | ||||||||||||
| Deferred tax assets | ||||||||||||||
| Accrued warranty | $ | 32 | $ | 37 | ||||||||||
| Inventory carrying value adjustments | 37 | 32 | ||||||||||||
| Receivable allowances | 15 | 9 | ||||||||||||
| Accrued compensation and benefits | 66 | 36 | ||||||||||||
| Capitalized research expenses | 110 | — | ||||||||||||
| Depreciation | 4 | 19 | ||||||||||||
| Restructuring accruals | — | 2 | ||||||||||||
| Lease liabilities | 64 | 64 | ||||||||||||
| Other accruals and deferred items | 10 | 11 | ||||||||||||
| Net operating losses | 477 | 613 | ||||||||||||
| Tax credit carryforwards | 598 | 593 | ||||||||||||
| Capital loss carryforwards | 72 | 67 | ||||||||||||
| Other assets | 55 | 40 | ||||||||||||
| Gross: Deferred tax assets | 1,540 | 1,523 | ||||||||||||
| Less: Valuation allowance | (423) | (430) | ||||||||||||
| Net: Deferred tax assets | 1,117 | 1,093 | ||||||||||||
| Deferred tax liabilities | ||||||||||||||
| Unremitted earnings of certain non-U.S. entities | (5) | (4) | ||||||||||||
| Acquisition-related items | — | (1) | ||||||||||||
| Right-of-use assets | (59) | (63) | ||||||||||||
| Net: Deferred tax liabilities | (64) | (68) | ||||||||||||
| Total net deferred tax assets | $ | 1,053 | $ | 1,025 | ||||||||||
At June 27, 2025, the Company recorded $1.1 billion of net deferred tax assets. The realization of most of these deferred tax assets is primarily dependent on the Company’s ability to generate sufficient U.S. and certain non-U.S. taxable income in future periods. Although realization is not assured, the Company’s management believes it is more likely than not that these deferred tax assets will be realized. The amount of deferred tax assets considered realizable, however, may increase or decrease in subsequent periods when the Company re-evaluates the underlying basis for its estimates of future U.S. and certain non-U.S. taxable income.
The deferred tax asset valuation allowance decreased by $7 million in fiscal year 2025, which primarily relates to releases in valuation allowance, partially offset with acquired deferred tax balances which are not likely to be realized.
At June 27, 2025, the Company had U.S. tax net operating loss and credit carryforwards of approximately $3.0 billion and $726 million, respectively, of which approximately $7 million and $24 million, respectively, are scheduled to expire at various dates in fiscal year 2026, if not utilized. At June 27, 2025, the Company had non-U.S. tax net operating loss carryforwards of approximately $300 million, all of which are indefinite lived. As of June 27, 2025, the Company had gross U.S. capital loss carryforwards of $288 million, which if not utilized, will expire as of fiscal year 2029. As of June 27, 2025, the Company had gross non-U.S. capital loss carryforwards of $23 million, which have an indefinite carryforward period.
As of June 27, 2025, approximately $102 million and $41 million of the Company’s total U.S. net operating loss and tax credit carryforwards, respectively, are subject to annual limitations due to the ownership change limitations provided by the Internal Revenue Code.
The Company established Singapore as its principal executive offices in fiscal year 2024. The Singaporean statutory tax rate of 17% is used for purposes of the reconciliation between the provision for income taxes at the statutory rate and the effective tax rate. For fiscal year 2023, a notional Irish statutory rate of 25% was used.
| Fiscal Years Ended | ||||||||||||||||||||
| (Dollars in millions) | June 27, 2025 | June 28, 2024 | June 30, 2023 | |||||||||||||||||
| Provision (benefit) at statutory rate | $ | 257 | $ | 76 | $ | (124) | ||||||||||||||
| Permanent differences | 4 | 5 | 8 | |||||||||||||||||
| Valuation allowance | (18) | 47 | (18) | |||||||||||||||||
| Effect of rates different than statutory | (190) | (2) | 178 | |||||||||||||||||
| Research credit | (6) | (9) | (18) | |||||||||||||||||
| Capital loss carryforward | (2) | (11) | — | |||||||||||||||||
| Other individually immaterial items | (1) | 4 | 7 | |||||||||||||||||
| Provision for income taxes | $ | 44 | $ | 110 | $ | 33 | ||||||||||||||
A substantial portion of the Company's operations in Singapore and Thailand operate under various tax incentive programs, which expire in whole or in part at various dates into fiscal year 2036. Certain tax incentives may be extended if specific conditions are met. The net impact of these tax incentive programs was to increase the Company’s net income by approximately $285 million in fiscal year 2025 ($1.32 per share, diluted), to increase the Company's net income by approximately $40 million in fiscal year 2024 ($0.19 per share, diluted) and to decrease the Company’s net loss by approximately $14 million in fiscal year 2023 ($0.07 per share, basic).
The Company analyzes the potential needs for deferred tax liabilities with respect to the accumulated earnings of foreign subsidiaries annually. The analysis focuses on the outside basis differences in the stock of the foreign subsidiaries as well as the withholding tax obligations those subsidiaries may have with respect to any distribution. The undistributed earnings for which taxes are not provided are permanently reinvested or can be repatriated without incremental tax liability.
As of June 27, 2025 and June 28, 2024, the Company had approximately $107 million and $112 million, respectively, of unrecognized tax benefits excluding interest and penalties. These amounts, if recognized, would impact the effective tax rate subject to certain future valuation allowance offsets.
The following table summarizes the activities related to the Company’s gross unrecognized tax benefits:
| Fiscal Years Ended | ||||||||||||||||||||
| (Dollars in millions) | June 27, 2025 | June 28, 2024 | June 30, 2023 | |||||||||||||||||
| Balance of unrecognized tax benefits at the beginning of the year | $ | 112 | $ | 116 | $ | 114 | ||||||||||||||
| Gross increase for tax positions of prior years | 2 | 3 | — | |||||||||||||||||
| Gross decrease for tax positions of prior years | (17) | (12) | (4) | |||||||||||||||||
| Gross increase for tax positions of current year | 11 | 5 | 7 | |||||||||||||||||
| Gross decrease for tax positions of current year | — | — | (1) | |||||||||||||||||
| Balance of unrecognized tax benefits at the end of the year | $ | 107 | $ | 112 | $ | 116 | ||||||||||||||
It is the Company’s policy to include interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Consolidated Statements of Operations. Interest and penalties recorded on these tax positions were not material to any periods presented in the Consolidated Statements of Operations. As of June 27, 2025, accrued interest and penalties related to unrecognized tax benefits did not materially change compared to fiscal year 2024.
During the 12 months beginning June 28, 2025, the Company does not expect a material change to its unrecognized tax benefits as a result of the expiration of certain statutes of limitation.
The Company is required to file U.S. and non-U.S. income tax returns. The Company is no longer subject to examination of its U.S. income tax returns for years prior to fiscal year 2020 and prior to fiscal year 2013 for non-U.S. income tax returns.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 1, 2025 | Showing above |
| 2024 | Aug 2, 2024 | |
| 2023 | Aug 4, 2023 | |
| 2022 | Aug 5, 2022 | |
| 2020 | Aug 7, 2020 | |
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.