CONSTELLATION BRANDS, INC.STZ
CONSTELLATION BRANDS, INC. Income Taxes Disclosure
INCOME TAXES
Income (loss) before income taxes was generated as follows:
| For the Years Ended | |||||||||||||||||
| February 28, 2026 | February 28, 2025 | February 29, 2024 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Domestic | $ | (83.9) | $ | (2,633.0) | $ | (140.2) | |||||||||||
| Foreign | 2,461.7 | 2,550.2 | 2,362.0 | ||||||||||||||
| $ | 2,377.8 | $ | (82.8) | $ | 2,221.8 | ||||||||||||
The income tax provision (benefit) consisted of the following:
| For the Years Ended | |||||||||||||||||
| February 28, 2026 | February 28, 2025 | February 29, 2024 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 161.7 | $ | 16.7 | $ | 152.6 | |||||||||||
| State | 15.9 | 25.9 | 16.4 | ||||||||||||||
| Foreign | (67.1) | 116.0 | 139.7 | ||||||||||||||
| Total current | 110.5 | 158.6 | 308.7 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | 94.9 | (436.4) | 27.7 | ||||||||||||||
| State | 19.2 | (73.1) | (19.0) | ||||||||||||||
| Foreign | 396.4 | 299.2 | 139.2 | ||||||||||||||
| Total deferred | 510.5 | (210.3) | 147.9 | ||||||||||||||
| Income tax provision (benefit) | $ | 621.0 | $ | (51.7) | $ | 456.6 | |||||||||||
A reconciliation of the total tax provision (benefit) to the amount computed by applying the statutory U.S. federal income tax rate to income before provision for (benefit from) income taxes for the year ended February 28, 2026, is as follows:
| Amount | % of Pretax Income (Loss) | ||||||||||
| (in millions, except % of pretax income (loss) data) | |||||||||||
| Income tax provision (benefit) at statutory rate | $ | 499.3 | 21.0% | ||||||||
State and local income taxes, net of federal income tax provision (benefit) (1) | 24.9 | 1.0% | |||||||||
Earnings taxed at other than U.S. statutory rate: | |||||||||||
| Switzerland | |||||||||||
| Statutory income tax difference between Switzerland and U.S. | (62.5) | (2.6%) | |||||||||
Canton income tax | 81.0 | 3.4% | |||||||||
Changes in valuation allowances | 184.7 | 7.8% | |||||||||
| Other | (14.0) | (0.6%) | |||||||||
| Malta | |||||||||||
| Statutory income tax difference between Malta and U.S. | 121.6 | 5.1% | |||||||||
Changes in valuation allowances | 353.6 | 14.9% | |||||||||
Interest limitation | (353.6) | (14.9%) | |||||||||
Nontaxable or nondeductible items, net | (297.2) | (12.5%) | |||||||||
| Amount | % of Pretax Income (Loss) | ||||||||||
| (in millions, except % of pretax income (loss) data) | |||||||||||
Other foreign jurisdictions | |||||||||||
| Other | (21.3) | (0.9%) | |||||||||
Effect of cross-border tax laws: | |||||||||||
| Global intangible low-taxed income | 187.8 | 7.9% | |||||||||
| Other | 53.9 | 2.3% | |||||||||
Tax credits | (3.4) | (0.1%) | |||||||||
Changes in valuation allowances | 51.0 | 2.1% | |||||||||
| Nontaxable or nondeductible items, net | 60.6 | 2.5% | |||||||||
Changes in unrecognized tax benefits | (245.4) | (10.3%) | |||||||||
Income tax provision (benefit) at effective rate | $ | 621.0 | 26.1% | ||||||||
(1)State taxes in California, New York, and Illinois are attributable to greater than 50% of the net income tax provision (benefit) for the year ended February 28, 2026.
A reconciliation of the total tax provision (benefit) to the amount computed by applying the statutory U.S. federal income tax rate to income before provision for (benefit from) income taxes is as follows:
| February 28, 2025 | February 29, 2024 | ||||||||||||||||||||||
| Amount | % of Pretax Income (Loss) | Amount | % of Pretax Income (Loss) | ||||||||||||||||||||
| (in millions, except % of pretax income (loss) data) | |||||||||||||||||||||||
| Income tax provision (benefit) at statutory rate | $ | (17.4) | 21.0 | % | $ | 466.6 | 21.0 | % | |||||||||||||||
State and local income taxes, net of federal income tax provision (benefit) (1) | (31.2) | 37.7 | % | 35.9 | 1.6 | % | |||||||||||||||||
| Net income tax benefit from a tax entity classification change | — | — | % | (31.2) | (1.4 | %) | |||||||||||||||||
Earnings taxed at other than U.S. statutory rate (2) | (241.0) | 291.1 | % | (75.9) | (3.4 | %) | |||||||||||||||||
Net income tax provision (benefit) from legislative changes (3) | — | — | % | (9.6) | (0.4 | %) | |||||||||||||||||
| Wine and Spirits-related impairments including the non-deductible portion of the wine and spirits goodwill impairment | 253.3 | (306.0 | %) | — | — | % | |||||||||||||||||
Excess tax benefits from stock-based compensation awards (4) | (5.3) | 6.4 | % | (8.0) | (0.4 | %) | |||||||||||||||||
Net income tax provision (benefit) recognized for adjustment to valuation allowance (5) | 24.1 | (29.1 | %) | 86.2 | 3.9 | % | |||||||||||||||||
| Net income tax provision (benefit) in connection with sale of the remaining assets at the canceled Mexicali Brewery | (22.2) | 26.8 | % | — | — | % | |||||||||||||||||
| Net income tax provision (benefit) for various U.S. income tax credits | (14.1) | 17.0 | % | — | — | % | |||||||||||||||||
| Net income tax provision (benefit) in connection with the SVEDKA Divestiture | 6.0 | (7.2 | %) | — | — | % | |||||||||||||||||
| Miscellaneous items, net | (3.9) | 4.7 | % | (7.4) | (0.3 | %) | |||||||||||||||||
| Income tax provision (benefit) at effective rate | $ | (51.7) | 62.4 | % | $ | 456.6 | 20.6 | % | |||||||||||||||
(1)Includes differences resulting from adjustments to the current and deferred state effective tax rates.
(2)Consists of the following (i) difference between the U.S. statutory rate and local jurisdiction tax rates, (ii) the provision for incremental U.S. taxes on earnings of certain foreign subsidiaries offset by foreign tax credits, (iii) the non-U.S. portion of tax provision (benefit) recorded on the unrealized net gain (loss) from the changes in fair value of our investment in Canopy, and (iv) the non-U.S. portion of tax benefits recorded on the Canopy equity in earnings (losses) and related activities.
(3)The year ended February 29, 2024, represents a net income tax benefit resulting from the remeasurement of our deferred tax assets in connection with a legislative update in Switzerland.
(4)Represents the recognition of the income tax effect of stock-based compensation awards in the income statement when the awards vest or are settled.
(5)The year ended February 28, 2025, consists primarily of valuation allowances related to net operating losses and the year ended February 29, 2024, consists primarily of valuation allowances related to our investment in Canopy.
The liability for income taxes associated with uncertain tax positions, excluding interest and penalties, and a reconciliation of the beginning and ending unrecognized tax benefit liabilities is as follows:
| For the Years Ended | |||||||||||||||||
| February 28, 2026 | February 28, 2025 | February 29, 2024 | |||||||||||||||
| (in millions) | |||||||||||||||||
| Balance as of March 1 | $ | 318.9 | $ | 416.1 | $ | 344.3 | |||||||||||
| Increases as a result of tax positions taken during a prior period | 46.9 | 51.8 | 48.1 | ||||||||||||||
| Decreases as a result of tax positions taken during a prior period | (102.2) | (124.7) | (2.5) | ||||||||||||||
| Increases as a result of tax positions taken during the current period | 50.6 | 28.0 | 31.5 | ||||||||||||||
| Decreases related to settlements with tax authorities | (46.3) | (43.9) | (2.8) | ||||||||||||||
| Decreases related to lapse of applicable statute of limitations | (13.8) | (8.4) | (2.5) | ||||||||||||||
| Balance as of last day of February | $ | 254.1 | $ | 318.9 | $ | 416.1 | |||||||||||
As of February 28, 2026, and February 28, 2025, we had $310.6 million and $438.4 million, respectively, of unrecognized tax benefit liabilities, including interest and penalties, recognized on our balance sheets. These liabilities are primarily recorded as non-current as of the balance sheet date.
As of February 28, 2026, we had $254.1 million of unrecognized tax benefit liabilities, if recognized these liabilities net of indirect impacts, would decrease the effective tax rate in the year of resolution by $200.4 million. As of February 28, 2025, we had $318.9 million of unrecognized tax benefit liabilities, if recognized these liabilities net of indirect impacts, would decrease the effective tax rate in the year of resolution by $183.4 million.
We file U.S. federal income tax returns and various state, local, and foreign income tax returns. Major tax jurisdictions where we are subject to examination by tax authorities include Italy, Mexico, New Zealand, Switzerland, and the U.S. Various U.S. federal, state, and foreign income tax examinations are currently in progress. With few exceptions, we are no longer subject to U.S. federal, state, local, or foreign income tax examinations for fiscal years prior to February 28, 2023.
We provide for additional tax expense based on probable outcomes of ongoing tax examinations and assessments in various jurisdictions. While it is often difficult to predict the outcome or the timing of resolution of any tax matter, we believe the reserves reflect the probable outcome of known tax contingencies. Unfavorable settlement of any particular issue would require the use of cash.
Income taxes paid
A summary income taxes paid (net of refunds) for the year ended February 28, 2026 is as follows:
(in millions) | |||||
U.S. federal | $ | 78.1 | |||
U.S. state and local (1) | 16.4 | ||||
Foreign | |||||
| Mexico | 66.7 | ||||
| Other | 12.4 | ||||
Total foreign | 79.1 | ||||
Total | $ | 173.6 | |||
(1)No single U.S. state or local jurisdiction accounts for more than 5% of total income taxes paid.
Additionally, we paid $197.1 million and $333.5 million in income taxes (net of refunds), for the years ended February 28, 2025, and February 29, 2024, respectively.
Deferred tax assets and liabilities
Deferred tax assets and liabilities reflect the future income tax effects of temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are measured using enacted tax rates that apply to taxable income. Additionally, we have provided deferred income taxes, consisting primarily of foreign withholding and state taxes, on all applicable unremitted earnings of our foreign subsidiaries, except for those earnings that we consider to be indefinitely reinvested. Significant components of deferred tax assets (liabilities) consist of the following:
| February 28, 2026 | February 28, 2025 | ||||||||||
| (in millions) | |||||||||||
| Deferred tax assets | |||||||||||
| Intangible assets | $ | 1,540.2 | $ | 1,716.1 | |||||||
| Loss carryforwards | 676.9 | 619.3 | |||||||||
Interest limitation | 432.4 | 121.7 | |||||||||
| Lease liabilities | 104.0 | 102.3 | |||||||||
| Investments in unconsolidated investees | 635.0 | 652.2 | |||||||||
| Other accruals | 286.3 | 212.2 | |||||||||
| Gross deferred tax assets | 3,674.8 | 3,423.8 | |||||||||
| Valuation allowances | (1,860.8) | (1,170.0) | |||||||||
| Deferred tax assets, net | 1,814.0 | 2,253.8 | |||||||||
| Deferred tax liabilities | |||||||||||
| Intangible assets | (337.5) | (264.9) | |||||||||
| Property, plant, and equipment | (122.7) | (122.7) | |||||||||
| Right-of-use assets | (92.6) | (88.3) | |||||||||
| Derivative instruments | (43.3) | (6.9) | |||||||||
| Other accruals | (51.5) | (58.3) | |||||||||
| Total deferred tax liabilities | (647.6) | (541.1) | |||||||||
| Deferred tax assets (liabilities), net | $ | 1,166.4 | $ | 1,712.7 | |||||||
In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some or all of the deferred tax assets will not be realized. In making this assessment, we consider the projected reversal of deferred tax liabilities and projected future taxable income as well as tax planning strategies. Based upon this assessment, we
believe it is more likely than not that we will realize the benefits of these deductible differences, net of any valuation allowances.
As of February 28, 2026, operating loss carryforwards, which are primarily state and foreign, totaling $3.8 billion are being carried forward in a number of jurisdictions where we are permitted to use tax operating losses from prior periods to reduce future taxable income. Of these operating loss carryforwards, $2.2 billion will expire by fiscal 2033, $800.0 million will expire between fiscal 2034 and fiscal 2050, and $750.0 million may be carried forward indefinitely in certain jurisdictions. Additionally, as of February 28, 2026, federal capital losses totaling $1.4 billion are being carried forward in multiple jurisdictions; and will expire, if unused, between Fiscal 2029 and fiscal 2035. Interest limitation carryforwards totaling $1.8 billion may be carried forward indefinitely in certain jurisdictions.
We have recognized valuation allowances for operating loss carryforwards and other deferred tax assets when we believe it is more likely than not that these items will not be fully realized. The increase in our valuation allowances as of February 28, 2026, is primarily related to tax attributes.
Tax Legislation
OB3 Act
On July 4, 2025, the OB3 Act was signed into U.S. law. The OB3 Act extends and modifies several provisions originally introduced under the Tax Cuts and Jobs Act of 2017, while also implementing additional changes to U.S. federal tax law. Key provisions of the OB3 Act include (i) the permanent extension of 100% bonus depreciation for qualifying assets, (ii) the elimination of the requirement to capitalize and amortize U.S.-based research and experimental expenditures, allowing for immediate expensing, (iii) changes to the limitation on the deductibility of interest expense, and (iv) modifications to the taxation of foreign earnings and other international income tax provisions. The OB3 Act contains multiple effective dates, with certain provisions taking effect beginning in calendar year 2025 and others phased in through calendar year 2027.
We have performed an evaluation of the impact of the OB3 Act on our consolidated financial statements, including the effects on our annual effective tax rate, deferred tax assets and liabilities, and cash flows. Based on this analysis and activities performed in response to the legislation, there will continue to be a negative impact on our effective tax rate for Fiscal 2027, primarily driven by modifications to the taxation of foreign earnings and other international income tax provisions.
Additionally, for the year ended February 28, 2026, we recognized a valuation allowance against our deferred tax asset related to prior year interest expense limitations. We will continue to assess the implications of the OB3 Act, and our income tax provision may continue to be impacted as additional clarifications or interpretive guidance related to the OB3 Act is released.
Pillar Two
The OECD introduced a framework under Pillar Two which includes a 15% global minimum tax rate. Many jurisdictions in which we do business have started to enact laws implementing Pillar Two. We are monitoring these developments and currently do not believe these rules will have a material impact on our financial condition and/or consolidated results.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2026 | Apr 22, 2026 | Showing above |
| 2025 | Apr 23, 2025 | |
| 2024 | Apr 23, 2024 | |
| 2023 | Apr 20, 2023 | |
| 2022 | Apr 21, 2022 | |
| 2021 | Apr 20, 2021 | |
| 2020 | Apr 21, 2020 | |
| 2019 | Apr 23, 2019 | |
| 2018 | Apr 23, 2018 | |
| 2017 | Apr 27, 2017 | |
| 2016 | Apr 25, 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.