TAPESTRY, INC.TPR
TAPESTRY, INC. Income Taxes Disclosure
INCOME TAXES
The provisions for income taxes, computed by applying the U.S. statutory rate to income before taxes, as reconciled to the actual provisions were:
| Fiscal Year Ended | |||||||||||||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | July 1, 2023 | |||||||||||||||||||||||||||||||||
| Amount | Percentage | Amount | Percentage | Amount | Percentage | ||||||||||||||||||||||||||||||
| (millions) | |||||||||||||||||||||||||||||||||||
| Income before provision for income taxes: | |||||||||||||||||||||||||||||||||||
United States(1) | $ | (655.8) | (303.5) | % | $ | 139.0 | 13.7 | % | $ | 421.5 | 36.9 | % | |||||||||||||||||||||||
| Foreign | 871.9 | 403.5 | 872.9 | 86.3 | 721.6 | 63.1 | |||||||||||||||||||||||||||||
| Total income before provision for income taxes | $ | 216.1 | 100.0 | % | $ | 1,011.9 | 100.0 | % | $ | 1,143.1 | 100.0 | % | |||||||||||||||||||||||
| Tax expense at U.S. statutory rate | $ | 45.3 | 21.0 | % | $ | 212.5 | 21.0 | % | $ | 240.0 | 21.0 | % | |||||||||||||||||||||||
| State taxes, net of federal benefit | 5.5 | 2.5 | 18.1 | 1.8 | 23.2 | 2.0 | |||||||||||||||||||||||||||||
Effects of foreign operations(2) | 19.8 | 9.2 | 20.5 | 2.0 | 4.3 | 0.4 | |||||||||||||||||||||||||||||
| Effects of tax credits, acquisition costs and reorganization costs | (95.5) | (44.2) | (64.6) | (6.4) | (61.3) | (5.4) | |||||||||||||||||||||||||||||
Effects of impairment(3) | 51.3 | 23.7 | — | — | — | — | |||||||||||||||||||||||||||||
| Share-based compensation | (7.8) | (3.6) | 2.3 | 0.2 | (1.3) | (0.1) | |||||||||||||||||||||||||||||
| Other, net | 14.3 | 6.6 | 7.1 | 0.8 | 2.2 | 0.2 | |||||||||||||||||||||||||||||
| Taxes at effective worldwide rates | $ | 32.9 | 15.2 | % | $ | 195.9 | 19.4 | % | $ | 207.1 | 18.1 | % | |||||||||||||||||||||||
(1)The United States jurisdiction includes foreign pre-tax earnings allocated to the Company from its interest in a foreign partnership.
(2)This includes the tax related to the Global Intangible Low-Taxed Income ("GILTI"). The Company has elected to account for the tax associated with GILTI as a period cost, and accordingly, the Company has not recorded deferred taxes associated with GILTI.
(3)This item represents the effective tax rate impact of the Kate Spade goodwill impairment activity recorded in the U.S. in fiscal 2025.
Current and deferred tax provision (benefit) was:
| Fiscal Year Ended | |||||||||||||||||||||||||||||||||||
| June 28, 2025 | June 29, 2024 | July 1, 2023 | |||||||||||||||||||||||||||||||||
| Current | Deferred | Current | Deferred | Current | Deferred | ||||||||||||||||||||||||||||||
| (millions) | |||||||||||||||||||||||||||||||||||
| Federal | $ | 60.6 | $ | (144.1) | $ | 71.0 | $ | 14.2 | $ | 111.6 | $ | 24.7 | |||||||||||||||||||||||
| Foreign | 88.8 | 16.3 | 103.5 | (14.6) | 48.0 | 3.6 | |||||||||||||||||||||||||||||
| State | 23.3 | (12.0) | 18.9 | 2.9 | 6.3 | 12.9 | |||||||||||||||||||||||||||||
| Total current and deferred tax provision (benefit) | $ | 172.7 | $ | (139.8) | $ | 193.4 | $ | 2.5 | $ | 165.9 | $ | 41.2 | |||||||||||||||||||||||
The components of deferred tax assets and liabilities were:
| June 28, 2025 | June 29, 2024 | ||||||||||
| (millions) | |||||||||||
| Share-based compensation | $ | 17.4 | $ | 20.6 | |||||||
| Reserves not deductible until paid | 44.4 | 46.7 | |||||||||
| Employee benefits | 41.9 | 30.1 | |||||||||
| Net operating loss | 29.2 | 45.5 | |||||||||
| Other | 66.9 | 44.8 | |||||||||
| Inventory | 16.4 | 17.6 | |||||||||
| Lease liability | 332.1 | 316.2 | |||||||||
| Gross deferred tax assets | 548.3 | 521.5 | |||||||||
| Valuation allowance | 17.6 | 32.1 | |||||||||
| Deferred tax assets after valuation allowance | $ | 530.7 | $ | 489.4 | |||||||
| Goodwill | 55.5 | 48.6 | |||||||||
| Other intangibles | 163.4 | 308.6 | |||||||||
| Property and equipment | 15.2 | 15.1 | |||||||||
| Foreign investments | 38.7 | 43.3 | |||||||||
| Right-of-use | 302.7 | 279.3 | |||||||||
| Prepaid expenses | 1.2 | 1.7 | |||||||||
| Gross deferred tax liabilities | 576.7 | 696.6 | |||||||||
| Net deferred tax (liabilities) assets | $ | (46.0) | $ | (207.2) | |||||||
| Consolidated Balance Sheets Classification | |||||||||||
| Deferred income taxes – non-current asset | 33.8 | 44.1 | |||||||||
| Deferred income taxes – non-current liability | (79.8) | (251.3) | |||||||||
| Net deferred tax (liabilities) assets | $ | (46.0) | $ | (207.2) | |||||||
Significant judgment is required in determining the worldwide provision for income taxes, and there are many transactions for which the ultimate tax outcome is uncertain. It is the Company’s policy to establish provisions for taxes that may become payable in future years, including those due to an examination by tax authorities. The Company establishes the provisions based upon management’s assessment of exposure associated with uncertain tax positions. The provisions are analyzed at least quarterly and adjusted as appropriate based on new information or circumstances in accordance with the requirements of ASC 740.
A reconciliation of the beginning and ending gross amount of unrecognized tax benefits is as follows:
| June 28, 2025 | June 29, 2024 | July 1, 2023 | |||||||||||||||
| (millions) | |||||||||||||||||
| Balance at beginning of fiscal year | $ | 115.8 | $ | 91.8 | $ | 96.1 | |||||||||||
| Gross increase due to tax positions related to prior periods | 15.9 | 20.5 | 4.3 | ||||||||||||||
| Gross decrease due to tax positions related to prior periods | (15.5) | (0.9) | (7.7) | ||||||||||||||
| Gross increase due to tax positions related to current period | 4.5 | 6.5 | 5.2 | ||||||||||||||
| Decrease due to lapse of statutes of limitations | (2.4) | (2.1) | (6.1) | ||||||||||||||
| Decrease due to settlements with taxing authorities | (7.6) | — | — | ||||||||||||||
| Balance at end of fiscal year | $ | 110.7 | $ | 115.8 | $ | 91.8 | |||||||||||
Of the $110.7 million ending gross unrecognized tax benefit balance as of June 28, 2025, $107.1 million relates to items which, if recognized, would impact the effective tax rate. Of the $115.8 million ending gross unrecognized tax benefit balance as of June 29, 2024, $112.1 million relates to items which, if recognized, would impact the effective tax rate. As of June 28, 2025 and June 29, 2024, gross interest and penalties payable was $26.9 million and $19.7 million, respectively, which are included in Other liabilities. During fiscal 2025, fiscal 2024 and fiscal 2023, the Company recognized gross interest and penalty expense of $7.1 million, gross interest and penalty expense of $9.5 million and gross interest and penalty expense of $2.3 million, respectively.
The Company files income tax returns in the U.S. federal jurisdiction, as well as various state and foreign jurisdictions. Tax examinations are currently in progress in select foreign and state jurisdictions that are extending the years open under the statutes of limitation. Fiscal years 2018 to present are open to examination in the U.S. federal jurisdiction, fiscal 2019 to present in select state jurisdictions and fiscal 2018 to present in select foreign jurisdictions. The Company is currently under U.S. federal audit for fiscal 2018 to 2020. The IRS is examining carryback claims to fiscal 2014 through fiscal 2020 as part of Joint Committee procedures for tax refund claims. The Company anticipates that one or more of these audits may be finalized and certain statutes of limitation may expire in the foreseeable future. However, based on the status of these examinations and the average time typically incurred in finalizing audits with the relevant tax authorities, the Company cannot reasonably estimate the impact these audits may have in the next 12 months, if any, to previously recorded uncertain tax positions. The Company accrues for certain known and reasonably anticipated income tax obligations after assessing the likely outcome based on the weight of available evidence. Although the Company believes that the estimates and assumptions used are reasonable and legally supportable, the final determination of tax audits could be different than that which is reflected in historical income tax provisions and recorded assets and liabilities. With respect to all jurisdictions, the Company has made adequate provision for all income tax uncertainties.
As of June 28, 2025, the Company had the following tax loss carryforwards available: U.S. state tax loss carryforwards of $370.0 million and tax loss carryforwards of various foreign jurisdictions of $38.3 million. As of June 29, 2024, the Company had the following tax loss carryforwards available: U.S. state tax loss carryforwards of $534.5 million and tax loss carryforwards of various foreign jurisdictions of $78.7 million. The state net operating loss carryforwards generally start to expire in fiscal 2026. The majority of the foreign net operating loss can be carried forward indefinitely. Deferred tax assets, including the deferred tax assets recognized on these net operating losses, have been reduced by a valuation allowance of $17.6 million as of June 28, 2025 and $32.1 million as of June 29, 2024.
The Company is not permanently reinvested with respect to the earnings of a limited number of foreign entities and has recorded the tax consequences of remitting earnings from these entities. The Company is permanently reinvested with respect to all other earnings. The total estimated amount of unremitted earnings of foreign subsidiaries as of June 28, 2025 and June 29, 2024 was $1.33 billion and $750.0 million, respectively. The Company intends to distribute $1.20 billion of earnings that were previously subject to U.S. Federal Tax and has recorded a deferred tax liability of $2.9 million during fiscal 2025 for U.S. state taxes and foreign withholding taxes related to the future distribution. Based on the Company's current analysis, there is further unrecognized deferred tax liability of approximately $4.0 million to $6.0 million on the remaining unremitted earnings.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Aug 14, 2025 | Showing above |
| 2024 | Aug 15, 2024 | |
| 2023 | Aug 17, 2023 | |
| 2022 | Aug 18, 2022 | |
| 2021 | Aug 19, 2021 | |
| 2020 | Aug 13, 2020 | |
| 2019 | Aug 15, 2019 | |
| 2018 | Aug 16, 2018 | |
| 2017 | Aug 18, 2017 | |
| 2016 | Aug 19, 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.