TENET HEALTHCARE CORPTHC

TENET HEALTHCARE CORP Income Taxes Disclosure

10-KFiled Feb 17, 20267 min read
INCOME TAXES
Income before income taxes for continuing operations for the years ended December 31, 2025, 2024 and 2023 consisted of the following:
 Years Ended December 31,
 202520242023
Domestic$2,805 $5,251 $1,620 
Foreign(5)(3)(3)
 $2,800 $5,248 $1,617 
The provision for income taxes for the years ended December 31, 2025, 2024 and 2023 consisted of the following:
 Years Ended December 31,
 202520242023
Current tax expense:   
Federal$305 $926 $208 
State119 361 46 
 424 1,287 254 
Deferred tax expense (benefit):   
Federal18 (92)55 
State(9)(11)(3)
 9 (103)52 
Total tax expense$433 $1,184 $306 
A reconciliation between the amount of reported income tax expense and the amount computed by multiplying income before income taxes by the statutory federal tax rate is presented below.
 Years Ended December 31,
 202520242023
AmountPercentAmountPercentAmountPercent
Tax expense at statutory federal rate$588 21.0 %$1,102 21.0 %$340 21.0 %
Domestic federal tax
Nontaxable or nondeductible items:
Tax benefit attributable to noncontrolling interests(202)(7.2)%(181)(3.4)%(147)(9.1)%
Nondeductible goodwill— — %161 3.1 %— — %
Other(2)(0.1)%7 0.1 %7 0.4 %
Stock-based compensation tax benefit(11)(0.4)%(9)(0.2)%(2)(0.1)%
Other(21)(0.7)%(5)(0.1)%4 0.2 %
State and local income taxes, net of federal income tax effect82 2.9 %278 5.3 %11 0.7 %
Changes in valuation allowances(3)(0.1)%(184)(3.5)%68 4.2 %
Changes in prior year unrecognized tax benefits2 0.1 %15 0.3 %25 1.6 %
Income tax expense$433 15.5 %$1,184 22.6 %$306 18.9 %
During the year ended December 31, 2025, state and local income taxes in California, Michigan and Texas comprised the majority of state and local income taxes, net of federal effect category. During 2024, state and local income taxes in California and South Carolina comprised the majority of state and local income taxes, net of federal effect category. During 2023, state and local income taxes in California and Florida comprised the majority of state and local income taxes, net of federal effect category.
Deferred income taxes reflect the tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amount used for income tax purposes. The following table presents those significant components of our deferred tax assets and liabilities, including any valuation allowance:
 December 31, 2025December 31, 2024
 AssetsLiabilitiesAssetsLiabilities
Depreciation and fixed-asset differences$3 $419 $— $373 
Reserves related to restructuring charges6 — 4 — 
Receivables (doubtful accounts and adjustments)222 1 245 — 
Accruals for retained insurance risks271 — 253 — 
Intangible assets— 512 — 504 
Other long-term liabilities34 — 34 — 
Benefit plans240 — 235 — 
Other accrued liabilities42 — 50 — 
Investments and other assets— 185 — 160 
Interest expense limitation84 — 57 — 
Net operating loss carryforwards126 — 122 — 
Stock-based compensation24 — 13 — 
Right-of-use lease assets and obligations123 109 123 107 
Other items55 — 19 — 
 1,230 1,226 1,155 1,144 
Valuation allowance(160)(158)— 
 $1,070 $1,226 $997 $1,144 
The table below presents a reconciliation of the deferred tax assets and liabilities and the corresponding amounts reported in the accompanying Consolidated Balance Sheets:
 December 31,
 20252024
Deferred income tax assets$84 $80 
Deferred tax liabilities(240)(227)
Net deferred tax liability$(156)$(147)
During the year ended December 31, 2025, the valuation allowance increased by $2 million, including an increase of $11 million due to limitations on the tax deductibility of interest expense, and a decrease of $9 million due to changes in the expected realizability of deferred tax assets. The balance in the valuation allowance as of December 31, 2025 was $160 million. During the year ended December 31, 2024, the valuation allowance decreased by $90 million, including a decrease of $180 million primarily for utilization of interest expense carryforwards due to gains from sales of facilities, an increase of $92 million due to an acquisition, and a decrease of $2 million due to changes in the expected realizability of deferred tax assets. The balance in the valuation allowance as of December 31, 2024 was $158 million. During the year ended December 31, 2023, the valuation allowance increased by $71 million, including an increase of $73 million due to limitations on the tax deductibility of interest expense, and a decrease of $2 million due to changes in the expected realizability of deferred tax assets. The balance in the valuation allowance as of December 31, 2023 was $248 million.
Income taxes paid during the years ended December 31, 2025, 2024 and 2023 consisted of the following:
 Years Ended December 31,
 202520242023
U.S Federal income taxes$324 $943 $194 
U.S. state and local income taxes:
California39 72 — (1)
South Carolina— (1)118 — (1)
Texas— (1)— (1)12 
Other87 138 37 
126 328 49 
Total income taxes paid$450 $1,271 $243 
(1)The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.
We account for uncertain tax positions in accordance with FASB ASC 740-10-25, which prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns. The following table summarizes the total changes in unrecognized tax benefits during the years ended December 31, 2025, 2024 and 2023. The additions and reductions for tax positions include the impact of items for which the ultimate deductibility is highly certain, but for which there is uncertainty about the timing of such deductions. Such amounts include unrecognized tax benefits that have impacted deferred tax assets and liabilities at December 31, 2025, 2024 and 2023.
 Unrecognized
Tax Benefits
Balance at December 31, 2022$34 
Increases due to tax positions taken in prior periods31 
Reductions due to a lapse of statute of limitations(1)
Balance at December 31, 202364 
Increases due to tax positions taken in prior periods10 
Reductions due to settlements with taxing authorities(3)
Balance at December 31, 202471 
Increases due to tax positions taken in prior periods2 
Reductions due to settlements with taxing authorities(4)
Balance at December 31, 2025$69 
The total amount of unrecognized tax benefits as of December 31, 2025 was $69 million, all of which, if recognized, would affect our effective tax rate and income tax benefit. Income tax expense in the year ended December 31, 2025 included a benefit of $1 million attributable to a decrease in our estimated liabilities for uncertain tax positions, net of related deferred tax effects. The total amount of unrecognized tax benefits as of December 31, 2024 was $71 million, of which $69 million, if recognized, would affect our effective tax rate and income tax benefit. Income tax expense in the year ended December 31, 2024 included expense of $9 million attributable to an increase in our estimated liabilities for uncertain tax positions, net of related deferred tax effects. The total amount of unrecognized tax benefits as of December 31, 2023 was $64 million, of which $63 million, if recognized, would affect our effective tax rate and income tax benefit from continuing operations. Income tax expense in the year ended December 31, 2023 included expense of $24 million attributable to an increase in our estimated liabilities for uncertain tax positions, net of related deferred tax effects.
Our practice is to recognize interest and penalties related to income tax matters in income tax expense in our consolidated statements of operations. Approximately $4 million of interest and penalties related to accrued liabilities for uncertain tax positions are included in the accompanying Consolidated Statement of Operations for the year ended December 31, 2025. Total accrued interest and penalties on unrecognized tax benefits as of December 31, 2025 were $10 million.
The IRS has completed audits of our tax returns for all tax years ended on or before December 31, 2007. All disputed issues with respect to these audits have been resolved and all related tax assessments (including interest) have been paid. Our tax returns for years ended after December 31, 2007 and USPI’s tax returns for years ended after December 31, 2021 remain subject to audit by the IRS.
At December 31, 2025, our carryforwards available to offset future taxable income consisted of (1) federal net operating loss (“NOL”) carryforwards of approximately $291 million pre‑tax, $140 million of which expires in 2026 to 2037 and $151 million of which has no expiration date, for which the associated deferred tax benefit net of valuation allowance is $2 million, (2) capital loss carryforwards of $100 million, for which the deferred tax benefit net of valuation allowance is $23 million and (3) state NOL carryforwards of approximately $2.937 billion expiring in 2026 through 2045 for which the associated deferred tax benefit, net of valuation allowance and federal tax impact, is approximately $23 million. Most of the federal net operating loss carryforward is subject to separate return limitation year restrictions under the Internal Revenue Code and may only be utilized to offset taxable income of certain entities. Our ability to utilize NOL carryforwards to reduce future taxable income may be limited under Section 382 of the Internal Revenue Code if certain ownership changes in our company occur during a rolling three‑year period. These ownership changes include purchases of common stock under share repurchase programs, the offering of stock by us, the purchase or sale of our stock by 5% shareholders, as defined in the Treasury regulations, or the issuance or exercise of rights to acquire our stock. If such ownership changes by 5% shareholders result in aggregate increases that exceed 50 percentage points during the three‑year period, then Section 382 imposes an annual limitation on the amount of our taxable income that may be offset by the NOL carryforwards or tax credit carryforwards at the time of ownership change.

Historical Timeline

Fiscal YearFiled
2025Feb 17, 2026Showing above
2024Feb 18, 2025
2023Feb 16, 2024
2022Feb 21, 2023
2021Feb 18, 2022
2020Feb 19, 2021
2019Feb 24, 2020
2018Feb 25, 2019
2017Feb 26, 2018
2016Feb 27, 2017
2015Feb 22, 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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