Warner Bros. Discovery, Inc.WBD
Warner Bros. Discovery, Inc. Income Taxes Disclosure
INCOME TAXES
The domestic and foreign components of income (loss) before income taxes were as follows (in millions).
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Domestic | $ | 744 | $ | (11,843) | $ | (4,702) | ||||||||||||||
| Foreign | 895 | 455 | 839 | |||||||||||||||||
| Income (loss) before income taxes | $ | 1,639 | $ | (11,388) | $ | (3,863) | ||||||||||||||
The components of the provision for income taxes were as follows (in millions).
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Current: | ||||||||||||||||||||
| Federal | $ | 1,025 | $ | 983 | $ | 753 | ||||||||||||||
| State and local | 131 | 321 | 57 | |||||||||||||||||
| Foreign | 444 | 522 | 750 | |||||||||||||||||
| 1,600 | 1,826 | 1,560 | ||||||||||||||||||
| Deferred: | ||||||||||||||||||||
| Federal | (601) | (1,488) | (1,845) | |||||||||||||||||
| State and local | (113) | (276) | (548) | |||||||||||||||||
| Foreign | 4 | 32 | 49 | |||||||||||||||||
| (710) | (1,732) | (2,344) | ||||||||||||||||||
| Income tax expense (benefit) | $ | 890 | $ | 94 | $ | (784) | ||||||||||||||
We adopted ASU 2023-09 on a prospective basis beginning with the year ended December 31, 2025. A reconciliation of the Company’s effective income tax rate to the 21% U.S. federal statutory income tax rate for the year ended December 31, 2025, reflecting the adoption of ASU 2023-09, is presented below (in millions):
| Year Ended December 31, 2025 | |||||||||||
| U.S. federal statutory tax rate | $ | 344 | 21 | % | |||||||
State and local income taxes, net of federal income tax effects(1) | (14) | (1) | % | ||||||||
| Foreign tax effects: | |||||||||||
| UK: | |||||||||||
| Statutory tax rate differential | 25 | 1 | % | ||||||||
| Tax incentives | (102) | (6) | % | ||||||||
| Other | 16 | 1 | % | ||||||||
| Canada withholding taxes | 61 | 4 | % | ||||||||
Withholding taxes from other foreign jurisdictions(2) | 256 | 15 | % | ||||||||
| Other foreign jurisdictions | 75 | 5 | % | ||||||||
| Effect of cross-border tax laws: | |||||||||||
| Foreign branch income | 62 | 4 | % | ||||||||
| Other | (19) | (1) | % | ||||||||
| Tax credits: | |||||||||||
| Foreign tax credits | (270) | (16) | % | ||||||||
| Research and development credit | (46) | (3) | % | ||||||||
| Changes in valuation allowances | 242 | 15 | % | ||||||||
| Nontaxable or nondeductible items: | |||||||||||
| Compensation | 89 | 5 | % | ||||||||
| Indemnification costs | 47 | 3 | % | ||||||||
| Transaction costs | 42 | 2 | % | ||||||||
| Other | 16 | 1 | % | ||||||||
| Change in unrecognized tax benefits | 84 | 5 | % | ||||||||
| Other adjustments | (18) | (1) | % | ||||||||
| Income tax expense | $ | 890 | 54 | % | |||||||
(1) State taxes in California contributed to the majority (greater than 50%) of the tax effect in this category.
(2) The majority of tax effect in this category is from Brazil (2%), China (2%), Mexico (2%), Spain (-1%), Italy (1%), Chile (1%), Australia (1%) and Argentina (1%).
A reconciliation of the Company’s effective income tax rate to the 21% U.S. federal statutory income tax rate for the years prior to the adoption of ASU 2023-09, is presented below:
| Year Ended December 31, | ||||||||||||||||||||||||||
| 2024 | 2023 | |||||||||||||||||||||||||
| Pre-tax income at U.S. federal statutory income tax rate | $ | (2,391) | 21 | % | $ | (811) | 21 | % | ||||||||||||||||||
| Non-deductible goodwill impairment | 1,881 | (17) | % | — | — | % | ||||||||||||||||||||
| State and local income taxes, net of federal tax benefit | 30 | — | % | (388) | 10 | % | ||||||||||||||||||||
| Effect of foreign operations | 331 | (3) | % | 342 | (9) | % | ||||||||||||||||||||
| Change in unrecognized tax benefits | 153 | (1) | % | 33 | (1) | % | ||||||||||||||||||||
| Other, net | 90 | (1) | % | 40 | (1) | % | ||||||||||||||||||||
| Income tax expense (benefit) | $ | 94 | (1) | % | $ | (784) | 20 | % | ||||||||||||||||||
Income tax expense was $890 million and $94 million, and the Company’s effective tax rate was 54% and (1)% for 2025 and 2024, respectively. The increase in income tax expense in 2025 was primarily attributable to an increase in pre-tax book income, including a $2,959 million gain recognized in connection with the Tender Offers in 2025, as well as the absence of a non-cash goodwill impairment charge of $9,147 million recorded in 2024, the majority of which was not deductible for tax purposes. (See Note 5 and Note 11).
Income tax expense (benefit) was $94 million and $(784) million, and the Company’s effective tax rate was (1)% and 20% for 2024 and 2023, respectively. In 2024, the Company recorded a non-cash goodwill impairment charge of $9,147 million, the majority of which was not deductible for tax purposes. (See Note 5.) For the year ended December 31, 2024, the increase in income tax expense compared to the same period in 2023 was primarily attributable to a decrease in pre-tax book loss (excluding the non-cash goodwill impairment charge), an increase in state and local income taxes (including a state deferred tax adjustment recorded in the year ended December 31, 2024 and a one-time favorable release of an unrecognized state tax benefit in 2023 that did not recur in 2024), and a one-time favorable release of an unrecognized U.S. tax benefit in 2023 that did not recur in 2024.
Components of deferred income tax assets and liabilities were as follows (in millions).
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Deferred income tax assets: | ||||||||||||||
| Tax attribute carry-forward | $ | 2,894 | $ | 2,661 | ||||||||||
| Lease liabilities | 937 | 793 | ||||||||||||
| Accrued liabilities and other | 1,144 | 1,180 | ||||||||||||
| Total deferred income tax assets | 4,975 | 4,634 | ||||||||||||
| Valuation allowance | (2,398) | (2,043) | ||||||||||||
| Net deferred income tax assets | 2,577 | 2,591 | ||||||||||||
| Deferred income tax liabilities: | ||||||||||||||
| Accounts receivable | (248) | (267) | ||||||||||||
| Intangible assets | (5,889) | (6,916) | ||||||||||||
| Right-of-use assets | (756) | (636) | ||||||||||||
| Property and equipment | (567) | (273) | ||||||||||||
| Content rights | (272) | (342) | ||||||||||||
| Equity method investments and other outside basis differences | (85) | (61) | ||||||||||||
| Other | (521) | (468) | ||||||||||||
| Total deferred income tax liabilities | (8,338) | (8,963) | ||||||||||||
| Net deferred income tax liabilities | $ | (5,761) | $ | (6,372) | ||||||||||
As of December 31, 2025, the company maintains a valuation allowance of $2,398 million to offset deferred tax assets attributable to certain foreign net operating losses, and to a lesser extent U.S. federal and state tax attribute carryforwards.
The Company’s net deferred income tax assets and liabilities were reported on the consolidated balance sheets as follows (in millions).
| December 31, | ||||||||||||||
| 2025 | 2024 | |||||||||||||
| Noncurrent deferred income tax assets (included within other noncurrent assets) | $ | 622 | $ | 613 | ||||||||||
| Deferred income tax liabilities | (6,383) | (6,985) | ||||||||||||
| Net deferred income tax liabilities | $ | (5,761) | $ | (6,372) | ||||||||||
The Company’s loss carry-forwards were reported on the consolidated balance sheets as follows (in millions).
| Federal | State | Foreign | ||||||||||||||||||
| Loss carry-forwards | $ | 56 | $ | 1,313 | $ | 7,903 | ||||||||||||||
| Deferred tax asset related to loss carry-forwards | 12 | 62 | 1,923 | |||||||||||||||||
| Valuation allowance against loss carry-forwards | (6) | (56) | (1,581) | |||||||||||||||||
| Earliest expiration date of loss carry-forwards | 2028 | 2026 | 2026 | |||||||||||||||||
A reconciliation of the beginning and ending amounts of unrecognized tax benefits (without related interest and penalty amounts) is as follows (in millions).
| Year Ended December 31, | ||||||||||||||||||||
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Beginning balance | $ | 2,371 | $ | 2,147 | $ | 1,929 | ||||||||||||||
| Additions based on tax positions related to the current year | 83 | 148 | 147 | |||||||||||||||||
| Additions for tax positions of prior years | 123 | 250 | 195 | |||||||||||||||||
| Additions for tax positions acquired in business combinations | — | — | 247 | |||||||||||||||||
| Reductions for tax positions of prior years | (101) | (76) | (275) | |||||||||||||||||
| Settlements | (37) | (30) | (46) | |||||||||||||||||
| Reductions due to lapse of statutes of limitations | (123) | (51) | (62) | |||||||||||||||||
| Changes due to foreign currency exchange rates | 40 | (17) | 12 | |||||||||||||||||
| Ending balance | $ | 2,356 | $ | 2,371 | $ | 2,147 | ||||||||||||||
As of December 31, 2025, if the Company were to recognize the full amount of unrecognized tax benefits, $2,156 million would reduce the Company’s income tax expense and effective tax rate after giving effect to interest deductions and offsetting benefits from other tax jurisdictions.
The Company and its subsidiaries file income tax returns in the U.S. and various state and foreign jurisdictions. The Company is currently under audit by the Internal Revenue Service for its 2015 to 2017 and 2023 consolidated federal income tax returns. It is difficult to predict the final outcome or timing of resolution of any particular tax matter. With few exceptions, the Company is no longer subject to audit by any jurisdiction for years prior to 2008. Adjustments that arose from the completion of audits for certain tax years have been included in the change in unrecognized tax benefits in the table above.
As of December 31, 2025, 2024, and 2023, the Company had accrued approximately $856 million, $732 million, and $571 million, respectively, of total interest and penalties payable related to unrecognized tax benefits. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense.
The 2017 Tax Cuts and Jobs Act features a participation exemption regime with current taxation of certain foreign income and imposed a mandatory repatriation toll tax on unremitted foreign earnings. As of December 31, 2025, the Company intends to remit certain previously undistributed foreign earnings to the United States. Accordingly, the Company has recorded deferred taxes for applicable foreign withholding associated with the expected remittance. The Company may continue to reinvest other foreign earnings outside of the United States. For those earnings, if any, that remain indefinitely reinvested, additional taxes would be recognized upon distribution. Determination of the amount of any unrecognized deferred income tax liability related to such earnings is not practicable.
The Organisation for Economic Co-operation and Development’s (“OECD”) Pillar Two Global Anti-Base Erosion (“GloBE”) model rules, issued under the OECD Inclusive Framework on Base Erosion and Profit Shifting, introduce a global minimum tax of 15% applicable to multinational enterprise groups with consolidated financial statement revenue in excess of €750 million. Numerous foreign jurisdictions have already enacted tax legislation based on the GloBE rules, with some effective as early as January 1, 2024. As of December 31, 2025, we recognized an immaterial income tax expense for Pillar Two GloBE minimum tax. The Company is continuously monitoring the evolving application of this legislation and assessing its potential impact on our future tax liability.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States, introducing a broad range of tax reform provisions. The impact of the OBBBA primarily affected the Company’s deferred tax liabilities and has been reflected in the Company’s financial statements for the period ended December 31, 2025. The Company continues to monitor regulatory guidance related to the implementation of the OBBBA and will update its tax positions as necessary in future periods.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 27, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 24, 2022 | |
| 2020 | Feb 22, 2021 | |
| 2019 | Feb 27, 2020 | |
| 2018 | Mar 1, 2019 | |
| 2017 | Feb 28, 2018 | |
| 2016 | Feb 14, 2017 | |
| 2015 | Feb 18, 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.