Smurfit Westrock plcSW
Smurfit Westrock plc Income Taxes Disclosure
18. Income Taxes
The components of income before income taxes are as follows:
Years ended December 31, | |||||
2025 | 2024 | 2023 | |||
Income before income taxes: | |||||
Domestic (Ireland) | $315 | $197 | $173 | ||
Foreign (U.S.) | (73) | (111) | (17) | ||
Foreign (Other) | 717 | 474 | 982 | ||
Total income before income taxes | $959 | $560 | $1,138 | ||
Income tax expense consists of the following components: | |||||
Current tax expense (net of investment tax credits of $6, $8 and $10) | |||||
Domestic (Ireland) | $71 | $64 | $44 | ||
Foreign (U.S., Federal & State) | 42 | 66 | 4 | ||
Foreign (Other) | 337 | 248 | 292 | ||
Total current tax expense | $450 | $378 | $340 | ||
Deferred tax expense (benefit): | |||||
Domestic (Ireland) | $(4) | $19 | $2 | ||
Foreign (U.S., Federal & State) | (108) | (123) | 1 | ||
Foreign (Other) | (78) | (33) | (31) | ||
Total deferred tax benefit | (190) | (137) | (28) | ||
Total income tax expense | $260 | $241 | $312 | ||
Total income tax expense consists of the following components: | |||||
Domestic (Ireland) | $67 | $83 | $46 | ||
Foreign (U.S., Federal & State) | (66) | (57) | 5 | ||
Foreign (Other) | 259 | 215 | 261 | ||
Total income tax expense | $260 | $241 | $312 | ||
The differences between income tax expense and the amount computed by applying the Republic of Ireland statutory trading income
tax rate of 12.5% (the primary rate of our country of domicile) to income before income taxes for the year ended December 31, 2025 is
as follows:
2025 | |||
Income before income taxes | $959 | ||
Ireland corporate tax rate | 120 | 12.5% | |
Foreign tax effects | |||
Nontaxable or nondeductible items | |||
Nondeductible interest expense | 16 | 1.7% | |
Changes in unrecognized tax benefits | (49) | (5.1)% | |
Other | |||
Other | 8 | 0.8% | |
Effective tax rate | $260 | 27.1% | |
The differences between income tax expense and the amount computed by applying the Republic of Ireland statutory trading income
tax rate of 12.5% to income before income taxes for the years ended December 31, 2024 and December 31, 2023 are as follows:
Years ended December 31, | |||
2024 | 2023 | ||
Income before income taxes | $560 | $1,138 | |
Income before income taxes multiplied by the statutory income tax rate | 70 | 142 | |
Effects of: | |||
Income subject to different rates of tax | 104 | 171 | |
Change related to outside basis difference in foreign subsidiaries | 9 | 8 | |
Change in valuation allowance | 14 | (1) | |
Uncertain tax positions | 10 | 12 | |
U.S. state and local taxes | (10) | — | |
Ireland non-deductible interest | 12 | 11 | |
Non-deductible U.S. executive compensation | 12 | — | |
Non-deductible transaction costs | 21 | 11 | |
Other items | (1) | (42) | |
Income tax expense | $241 | $312 | |
The tax effects of temporary differences and carryforwards that give rise to deferred tax assets and liabilities consist of the following:
December 31, | |||
2025 | 2024 | ||
Deferred tax assets: | |||
Pension liabilities and other postretirement benefits | $35 | $45 | |
Carryforwards | 648 | 570 | |
Lease liabilities | 223 | 196 | |
Accrued expenses | 230 | 341 | |
Stock-based compensation | 27 | 33 | |
Other | 179 | 144 | |
Total | 1,342 | 1,329 | |
Deferred tax liabilities: | |||
Property, plant and equipment | (3,071) | (3,338) | |
Investments in subsidiaries | (209) | (179) | |
Prepaid pension asset | (103) | (124) | |
Intangibles | (159) | (183) | |
Inventory reserves | (206) | (203) | |
Other non-current assets | (89) | (91) | |
Other | (131) | (114) | |
Total | (3,968) | (4,232) | |
Valuation allowances | (429) | (372) | |
Net deferred tax liability | $(3,055) | $(3,275) | |
At December 31, 2025, we had net operating loss carryforwards of $2,432 million. Of these net operating losses, $1,392 million expire
between 2026 and 2044 and $1,040 million of losses carryforward indefinitely. At December 31, 2025, we also had other
carryforwards of $116 million of tax credit carryforwards. Of these tax credits, $89 million expire between 2030 and 2035 and
$27 million of tax credits carry forward indefinitely.
The following table represents a summary of the change in the valuation allowances against deferred tax assets for each year:
2025 | 2024 | 2023 | |||
Balance at January 1 | $372 | $67 | $68 | ||
Increases through continuing operations | 60 | 21 | 9 | ||
Reductions through continuing operations | (3) | (7) | (10) | ||
Net change in the valuation allowance through continuing operations | 57 | 14 | (1) | ||
Valuation allowances assumed as part of the Combination | — | 291 | — | ||
Net change in the valuation allowance | 57 | 305 | (1) | ||
Balance at December 31 | $429 | $372 | $67 |
We consider a portion of earnings from certain foreign subsidiaries as subject to repatriation and have recognized deferred taxes
accordingly. However, we consider that all other outside basis differences from all other foreign subsidiaries to be indefinitely
reinvested. Accordingly, we have not provided for any deferred taxes for amounts that would be due upon recovery of those
investments.
In the event of a distribution in the form of dividends or dispositions of the subsidiaries, we may be subject to incremental foreign tax,
subject to an adjustment for foreign tax credits, withholding taxes or income taxes payable to the foreign jurisdictions. As of
December 31, 2025, the determination of the amount of unrecognized deferred tax liability related to investments in foreign
subsidiaries that are indefinitely reinvested is not practicable.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years presented is as follows:
2025 | 2024 | 2023 | |||
Balance at January 1 | $472 | $50 | $40 | ||
Additions for tax positions taken in current year | 5 | 11 | 12 | ||
Unrecognized tax benefits acquired as part of the Combination | 10 | 427 | — | ||
Additions for tax positions taken in prior years | 72 | 1 | — | ||
Reductions for tax positions taken in prior years | — | — | (1) | ||
Reductions due to settlements | (8) | (8) | — | ||
Currency translation adjustments | 4 | (6) | — | ||
Reductions as a result of a lapse of the applicable statute of limitations | (75) | (3) | (1) | ||
Balance at December 31 | $480 | $472 | $50 |
As of December 31, 2025 and 2024, the total amount of unrecognized tax benefits was $480 million and $472 million, respectively,
exclusive of interest and penalties. Of these balances, as of December 31, 2025 and 2024, if all unrecognized tax benefits recorded
were to prevail, $402 million and $429 million, respectively, would benefit the effective tax rate.
For interest and penalties related to income taxes, we recognized a tax benefit of $7 million in the year ended December 31, 2025 and
a tax expense of $8 million and $1 million in the years ended December 31, 2024 and 2023, respectively. As of December 31, 2025,
and 2024, we have liabilities of $151 million and $127 million, respectively, related to estimated interest and penalties for income
taxes.
See “Note 21. Commitments and Contingencies — Brazil Tax Liability” for additional information.
We file tax returns in Ireland and foreign jurisdictions. With limited exceptions, we are no longer subject to income tax examinations
by tax authorities for years prior to 2016.
During the years ended December 31, 2025, 2024 and 2023, cash paid for income taxes, net of refunds, was $521 million,
$383 million and $439 million, respectively.
Income taxes paid, net of refunds, exceeds 5% of the total in the following jurisdictions during the year ended December 31, 2025:
Year ended December 31, | |
2025 | |
Domestic | |
Ireland | $67 |
Foreign | |
Netherlands | 70 |
Mexico | 49 |
France | 40 |
Colombia | 39 |
United States, Federal | 36 |
Brazil | 34 |
Sweden | 32 |
Spain | 31 |
Austria | 29 |
Other | 94 |
Total Foreign | 454 |
Total income tax paid, net of refunds | $521 |
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 7, 2025 | |
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.