TE Connectivity plc Income Taxes Disclosure

15. Income Taxes

Income Tax Expense (Benefit)

Significant components of the income tax expense (benefit) were as follows:

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The U.S. and non-U.S. components of income from continuing operations before income taxes were as follows:

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The reconciliation between U.S. federal income taxes at the statutory rate and income tax expense (benefit) was as follows:

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The income tax expense for fiscal 2025 included $574 million of income tax expense related to a net increase in the valuation allowance for certain deferred tax assets associated with a ten-year tax credit obtained by a Swiss subsidiary in fiscal 2024. See “Global Minimum Tax” below for additional information regarding the impact of guidance issued by the Organisation for Economic Co-operation and Development (“OECD”) in January 2025 on the ten-year tax credit obtained by a Swiss subsidiary. In addition, the income tax expense for fiscal 2025 included $44 million of income tax expense related to an increase in the valuation allowance for certain U.S. tax loss and credit carryforwards.

The income tax benefit for fiscal 2024 included a $636 million net income tax benefit associated with the $972 million ten-year tax credit obtained by a Swiss subsidiary discussed above, reduced by a $336 million valuation allowance related to the amount of the tax credit that was not expected to be realized. In addition, the income tax benefit for fiscal 2024 included a $262 million income tax benefit related to the revaluation of deferred tax assets as a result of a corporate tax rate increase in Switzerland, as well as a $118 million income tax benefit associated with the tax impacts of a legal entity restructuring with related costs of $4 million recorded in selling, general, and administrative expenses for other non-income taxes.

The income tax expense for fiscal 2023 included a $49 million income tax benefit related to a decrease in the valuation allowance for certain U.S. tax loss and credit carryforwards.

Deferred Tax Assets and Liabilities

Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The components of the net deferred income tax asset were as follows:

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Our tax loss, credit, and other tax attribute carryforwards (tax effected) at fiscal year end 2025 were as follows:

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The valuation allowance for deferred tax assets of $8,821 million and $8,285 million at fiscal year end 2025 and 2024, respectively, related principally to the uncertainty of the utilization of certain deferred tax assets, primarily tax loss, credit, and other tax attribute carryforwards in various jurisdictions. During fiscal 2025, the valuation allowance increased primarily, as discussed above, by $574 million related to the portion of a tax credit obtained by a Swiss subsidiary in fiscal 2024 not expected to be realized as a result of new guidance issued by the OECD in January 2025. We believe that we will generate sufficient future taxable income to realize the income tax benefits related to the remaining net deferred tax assets on the Consolidated Balance Sheet.

We have provided income taxes for earnings that are currently distributed as well as the taxes associated with several subsidiaries’ earnings that are expected to be distributed in the future. No additional provision has been made for Irish or non-Irish income taxes on the undistributed earnings of subsidiaries or for unrecognized deferred tax liabilities for temporary differences related to basis differences in investments in subsidiaries, as such earnings are expected to be permanently reinvested, the investments are essentially permanent in duration, or we have concluded that no additional tax liability will arise as a result of the distribution of such earnings. As of fiscal year end 2025, certain subsidiaries had approximately $37.7 billion of cumulative undistributed earnings that have been retained indefinitely and reinvested in our global manufacturing operations, including working capital; property, plant, and equipment; intangible assets; and research and development activities. A liability could arise if our intention to permanently reinvest such earnings were to change and amounts are distributed by such subsidiaries or if such subsidiaries are ultimately disposed. It is not practicable to estimate the additional income taxes related to permanently reinvested earnings or the basis differences related to investments in subsidiaries. As of fiscal year end 2025, we had approximately $3.5 billion of cash, cash equivalents, and intercompany deposits, principally in our subsidiaries, that we have the ability to distribute to TEGSA, our Luxembourg subsidiary, which is the obligor of substantially all of our debt, and to TE Connectivity plc, our Irish parent company, but we consider to be permanently reinvested. We estimate that an immaterial amount of tax expense would be recognized on the Consolidated Financial Statements if our intention to permanently reinvest these amounts were to change. Our current plans do not demonstrate a need to repatriate cash, cash equivalents, and intercompany deposits that are designated as permanently reinvested in order to fund our operations, including investing and financing activities.

Uncertain Tax Positions

The following table summarizes the activity related to unrecognized income tax benefits:

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The total amount of unrecognized tax benefits that, if recognized, would reduce income tax expense and the effective tax rate were $533 million, $485 million, and $327 million at fiscal year end 2025, 2024, and 2023, respectively.

We record accrued interest and penalties related to uncertain tax positions as part of income tax expense (benefit). As of fiscal year end 2025 and 2024, we had $89 million and $80 million, respectively, of accrued interest and penalties related to uncertain tax positions on the Consolidated Balance Sheets, recorded primarily in income taxes. During fiscal 2025, 2024, and 2023, we recognized income tax expense of $9 million, $15 million, and $11 million, respectively, related to interest and penalties on the Consolidated Statements of Operations.

We file income tax returns on a unitary, consolidated, or stand-alone basis in multiple state and local jurisdictions, which generally have statutes of limitations ranging from 3 to 4 years. Various state and local income tax returns are currently in the process of examination or administrative appeal.

Our non-U.S. subsidiaries file income tax returns in the countries in which they have operations. Generally, these countries have statutes of limitations ranging from 3 to 10 years. Various non-U.S. subsidiary income tax returns are currently in the process of examination by taxing authorities.

As of fiscal year end 2025, under applicable statutes, the following tax years remained subject to examination in the major tax jurisdictions indicated:

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In most jurisdictions, taxing authorities retain the ability to review prior tax years and to adjust any net operating loss and tax credit carryforwards from these years that are utilized in a subsequent period.

Although it is difficult to predict the timing or results of our worldwide examinations, we estimate that approximately $130 million of unrecognized income tax benefits, excluding the impact relating to accrued interest and penalties, could be resolved within the next twelve months.

We are not aware of any other matters that would result in significant changes to the amount of unrecognized income tax benefits reflected on the Consolidated Balance Sheet as of fiscal year end 2025.

Other Income Tax Matters

Global Minimum Tax

The OECD and participating countries continue to enact the 15% global minimum tax. The global minimum tax is a significant structural change to the international taxation framework and more than 50 countries have thus far enacted some or all elements of the tax. Ireland has implemented elements of the OECD’s global minimum tax rules, which were effective for us beginning in fiscal 2025.

In January 2025, the OECD released new guidance for the global minimum tax rules which impacted the realizability of certain deferred tax assets associated with a ten-year tax credit obtained by a Swiss subsidiary in fiscal 2024. The January 2025 OECD guidance was enacted into law in Switzerland and as a result, as discussed above, during fiscal 2025, we recorded income tax expense of $574 million related to a net increase in the valuation allowance for deferred tax assets representing the amount of the Swiss subsidiary’s tax credits not expected to be realized.

We anticipate further legislative activity and administrative guidance. We continue to closely monitor the evolving global minimum tax framework and assess the implications in the jurisdictions in which we operate.

One Big Beautiful Bill Act (“OBBBA”)

On July 4, 2025, the OBBBA was enacted. The OBBBA includes significant changes to U.S. tax law, including modifications to international tax provisions, making bonus depreciation permanent, enabling domestic research cost expensing, and adjusting the business interest expense limitation. We do not believe the implications of the OBBBA will have a material impact on our Consolidated Financial Statements.