v3.25.2
Taxes on Earnings
 12 Months Ended
Aug. 03, 2025
Income Tax Disclosure [Abstract]  
Taxes on Earnings Taxes on Earnings
The provision for income taxes on earnings consists of the following:
(Millions)202520242023
Income taxes:
Currently payable:
Federal$202 $190 $229 
State42 41 39 
Non-U.S. 4 6 7 
248 237 275 
Deferred:
Federal(40)(37)(8)
State(14)(9)2 
Non-U.S. — (1)1 
(54)(47)(5)
$194 $190 $270 

(Millions)202520242023
Earnings before income taxes:
United States$784 $735 $1,105 
Non-U.S. 12 22 23 
$796 $757 $1,128 
The following is a reconciliation of the effective income tax rate to the U.S. federal statutory income tax rate:
 202520242023
Federal statutory income tax rate21.0 %21.0 %21.0 %
State income taxes (net of federal tax benefit)2.8 3.2 2.9 
Tax effect of international items— (0.1)— 
State income tax law changes
(0.4)(0.1)0.1 
Divestitures1.8 — 0.2 
Nondeductible executive compensation(1)
0.4 1.5 0.4 
Other(1.2)(0.4)(0.7)
Effective income tax rate24.4 %25.1 %23.9 %
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(1)The increase in 2024 is associated with the acquisition of Sovos Brands.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. The OBBBA makes certain provisions of the Tax Cuts and Jobs Act of 2017 permanent and makes changes to some U.S. corporate tax provisions, many of which have different effective dates. The provisions of the OBBBA did not have a material impact on our consolidated financial statements in 2025. We do not expect the OBBBA to have a material impact on our effective tax rate. However, we do anticipate future cash tax benefits due to changes in the tax laws for depreciation and research and development expenses.
On August 16, 2022, the Inflation Reduction Act (IRA) was signed into law. The IRA introduces a corporate alternative minimum tax beginning in 2024, a 1% excise tax on share repurchases in excess of issuances after January 1, 2023, and several tax incentives to promote clean energy. Any excise tax incurred is recognized as part of the cost basis of the shares acquired in the Consolidated Statements of Equity. The provisions of the IRA did not have a material impact on our consolidated financial statements.
Deferred tax liabilities and assets are comprised of the following:
(Millions)20252024
Depreciation$353 $353 
Amortization1,197 1,260 
Operating lease ROU assets81 86 
Pension30 34 
Other12 10 
Deferred tax liabilities1,673 1,743 
Benefits and compensation98 113 
Pension benefits23 24 
Tax loss carryforwards5 7 
Capital loss carryforwards18 24 
Operating lease liabilities88 91 
Capitalized research and development44 34 
Other69 55 
Gross deferred tax assets345 348 
Deferred tax asset valuation allowance(23)(29)
Deferred tax assets, net of valuation allowance322 319 
Net deferred tax liability$1,351 $1,424 
As of August 3, 2025, our U.S. and non-U.S. subsidiaries had tax loss carryforwards of approximately $114 million. Of these carryforwards, $10 million may be carried forward indefinitely, and $104 million expire between 2026 and 2044, with the majority expiring after 2028. As of August 3, 2025, our net deferred liability included $5 million of tax effected loss carryforwards, of which $3 million was offset by a deferred tax asset valuation allowance. Additionally, as of August 3, 2025, our U.S. and non-U.S. subsidiaries had capital loss carryforwards of approximately $98 million. Of these capital loss carryforwards, $52 million expire in 2026, and $46 million may be carried forward indefinitely. As of August 3, 2025, our net deferred liability included $18 million of tax effected capital loss carryforwards, all of which was offset by a deferred tax asset valuation allowance.
The net change in the deferred tax asset valuation allowance in 2025 was a decrease of $6 million. The decrease was primarily due to the sale of our Pop Secret popcorn business. The net change in the deferred tax asset valuation allowance in 2024 was a decrease of $100 million. The decrease was primarily due to the expiration of capital loss carryforwards in 2024. The net change in the deferred tax asset valuation allowance in 2023 was a decrease of $2 million. The decrease was primarily due to state tax loss carryforwards.
As of August 3, 2025, other deferred tax assets included $3 million of state tax credit carryforwards with the majority expiring between 2029 and 2039. As of August 3, 2025, deferred tax asset valuation allowances had been established to offset $2 million of the tax credit carryforwards.
As of August 3, 2025, we had approximately $11 million of undistributed earnings of foreign subsidiaries which are deemed to be permanently reinvested and for which we have not recognized a deferred tax liability. We estimate that the tax liability that might be incurred if permanently reinvested earnings were remitted to the U.S. would not be material. Foreign subsidiary earnings in 2021 and thereafter are not considered permanently reinvested and we have therefore recognized a deferred tax liability and expense.
A reconciliation of the activity related to unrecognized tax benefits follows:
(Millions)202520242023
Balance at beginning of year$17 $15 $14 
Increases related to prior-year tax positions1 2 — 
Decreases related to prior-year tax positions— — — 
Increases related to current-year tax positions1 2 2 
Settlements— — — 
Lapse of statute(1)(2)(1)
Balance at end of year$18 $17 $15 
The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was $15 million as of August 3, 2025, $14 million as of July 28, 2024, and $12 million as of July 30, 2023. The total amount of unrecognized tax benefits can change due to audit settlements, tax examination activities, statute expirations and the recognition and measurement criteria under accounting for uncertainty in income taxes. We reasonably expect reductions in the liability for unrecognized tax benefits of approximately $4 million within the next 12 months due to settlement of tax examinations.
Our accounting policy for interest and penalties attributable to income taxes is to reflect any expense or benefit as a component of our income tax provision. The total amount of interest and penalties recognized in the Consolidated Statements of Earnings was not material in 2025, 2024, and 2023. The total amount of interest and penalties recognized in the Consolidated Balance Sheets in Other liabilities was $7 million as of August 3, 2025, and $6 million as of July 28, 2024.
We file income tax returns in the U.S. federal jurisdiction and various state and non-U.S. jurisdictions. In the normal course of business, we are subject to examination by taxing authorities, including the U.S. and Canada. With limited exceptions, we have been audited for income tax purposes in the U.S. through 2023 and in Canada through 2017. In addition, several state income tax examinations are in progress for the years 2017 to 2023.