v3.26.1
INCOME TAXES
 12 Months Ended
May 31, 2026
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of the provision for income taxes for the years ended May 31 were as follows (in millions):
202620252024
Current provision
Domestic:
Federal$1,335 $891 $1,184 
State and local186 146 218 
Foreign384 359 265 
$1,905 $1,396 $1,667 
Deferred provision
Domestic:
Federal$(534)$(302)$(82)
State and local(2)20 60 
Foreign(9)235 (140)
(545)(47)(162)
Total Provision$1,360 $1,349 $1,505 
Income from operations before income taxes for the years ended May 31 were as follows (in millions):
202620252024
United States$4,287 $3,614 $5,289 
Foreign1,506 1,827 547 
Total$5,793 $5,441 $5,836 
Cash paid for income taxes, net of refunds for the year ended May 31, 2026 were as follows (in millions):
2026
Federal$1,370 
State and local140 
Foreign402 
Total$1,912 
A reconciliation of total income tax expense and the amount computed by applying the statutory federal income tax to income before income taxes for the years ended May 31 is as follows (dollars in millions):
2026
AmountPercent
Statutory U.S. federal income tax rate$1,217 21.0 %
State and local income taxes - net of federal benefit (1)
118 2.0 %
Foreign tax effects
  Brazil   
     Other3 — %
     Valuation allowances(97)(1.6)%
  Other jurisdictions   120 2.0 %
Effect of cross-border tax laws(1)— %
Tax credits(47)(0.8)%
Nontaxable or nondeductible items14 0.3 %
Changes in unrecognized tax benefits45 0.8 %
Other adjustments(12)(0.2)%
Effective Tax Rate$1,360 23.5 %
(1)State taxes in Tennessee, Alaska, California, Pennsylvania, Missouri, and Florida made up the majority (greater than 50 percent) of this category.
20252024
Taxes computed at federal statutory rate$1,143 $1,226 
Increases (decreases) in income tax from:
U.S. and foreign return-to-provision adjustments5 11 
State and local income taxes, net of federal benefit137 177 
Foreign operations101 65 
Non-deductible expenses72 48 
Uncertain tax positions(5)(21)
Benefits from share-based payments(18)(26)
Valuation allowance21 59 
Foreign tax rate enactments6 — 
State deferred tax remeasurement— 54 
Corporate structuring transactions(66)— 
Other, net(47)(88)
Provision for income taxes$1,349 $1,505 
Effective Tax Rate24.8 %25.8 %
The 2026 tax provision includes an income tax benefit of approximately $100 million from the reduction of a Brazil valuation allowance on certain foreign tax loss carryforwards due to operational changes which impacted the determination of the realizability of the deferred tax asset in that jurisdiction.
The 2025 tax provision includes an income tax benefit of $66 million from the write-off of U.S. deferred tax balances due to corporate structuring transactions.
The 2024 tax provision includes an unfavorable income tax expense of $54 million from the remeasurement of U.S. state deferred tax balances to reflect aggregate temporary differences at the expected applicable tax rates after the merger of FedEx Ground Package System, Inc. (“FedEx Ground”) and FedEx Corporate Services, Inc. (“FedEx Services”) into Federal Express Corporation.
We regularly assess the need for cash in the U.S., as well as in our foreign subsidiaries, and will occasionally repatriate back to the U.S. excess earnings above working capital needs that can be repatriated with an immaterial tax cost. We assert all other earnings, both historical and current in our foreign subsidiaries, are permanently reinvested and therefore no deferred taxes or withholding taxes have been provided, including deferred taxes on any additional outside basis difference (e.g., stock basis differences attributable to acquisition or other permanent differences). Determination of the amount of unrecognized deferred income tax liability related to any remaining undistributed foreign earnings and additional outside basis differences is not practicable.
The significant components of deferred tax assets and liabilities as of May 31 were as follows (in millions):
20262025
Deferred Tax
Assets		Deferred Tax
Liabilities		Deferred Tax
Assets		Deferred Tax
Liabilities
Property, equipment, leases, and intangibles$4,555 $10,045 $4,515 $10,434 
Employee benefits862 424 725 291 
Self-insurance accruals1,367 — 1,247 — 
Other637 56 591 42 
Net operating loss/credit carryforwards1,035 — 1,123 — 
Valuation allowances(438)— (523)— 
$8,018 $10,525 $7,678 $10,767 
The net deferred tax liabilities as of May 31 have been classified in the balance sheets as follows (in millions):
20262025
Noncurrent deferred tax assets(1)
$1,157 $1,116 
Noncurrent deferred tax liabilities(3,664)(4,205)
$(2,507)$(3,089)
(1)Noncurrent deferred tax assets are included within “Other assets” in the accompanying consolidated balance sheets.
We have approximately $3.0 billion of net operating loss carryovers in various foreign jurisdictions, $1.1 billion of state operating loss carryovers, and $130 million of U.S. federal operating loss and capital loss carryovers. The valuation allowances primarily represent amounts reserved for operating loss carryforwards, which expire over varying periods starting in the Transition Period. Therefore, we establish valuation allowances if it is more likely than not that deferred income tax assets will not be realized. The total change in the valuation allowance reflects certain balance sheet items. Income statement impacts are reflected in our effective tax rate reconciliation. The decrease in the valuation allowance during 2026 includes $100 million related to foreign tax loss carryforwards described above. We believe that we will generate sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets in the consolidated balance sheets. See Note 1 for more information on our policy for assessing the recoverability of deferred tax assets and valuation allowances.
We are subject to taxation in the U.S. and various U.S. state, local, and foreign jurisdictions. We are currently under examination by the IRS for the 2016 through 2021 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next 12 months and could result in a change in our balance of unrecognized tax benefits. However, we believe we have recorded adequate amounts of tax, including interest and penalties, for any adjustments expected to occur.
During 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit sought to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $249 million attributable to our interpretation of the TCJA and the Internal Revenue Code. In March 2023, the District Court ruled that the regulation is invalid and contradicts the plain terms of the tax code. On February 13, 2025, the District Court ruled again in our favor with regard to a new argument raised by the U.S. government. On June 4, 2025, the District Court validated the amount of refunds owed for 2018 and 2019, which includes the foreign tax credits previously denied.
On August 1, 2025, the U.S. government filed a notice to appeal the decision to the U.S. Court of Appeals for the Sixth Circuit. The government submitted its opening brief on January 7, 2026, and FedEx filed its response on March 23, 2026. The government filed its reply brief on May 13, 2026. Oral arguments are scheduled for July 30, 2026. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended May 31 is as follows (in millions):
202620252024
Balance at beginning of year$155 $186 $212 
Increases for tax positions taken in the current year37 31 5 
Increases for tax positions taken in prior years22 33 4 
Decreases for tax positions taken in prior years(23)(11)(3)
Settlements(20)(87)(31)
Changes due to currency translation3 3 (1)
Balance at end of year$174 $155 $186 
Our liabilities recorded for uncertain tax positions include $161 million at May 31, 2026 and $149 million at May 31, 2025 associated with positions that, if favorably resolved, would provide a benefit to our income tax expense. We classify interest related to income tax liabilities as interest expense and, if applicable, penalties are recognized as a component of income tax expense. The balance of accrued interest and penalties was $48 million at May 31, 2026 and $35 million at May 31, 2025.
It is difficult to predict the ultimate outcome or the timing of resolution for tax positions. Changes may result from the conclusion of ongoing audits, appeals, or litigation in state, local, federal, and foreign tax jurisdictions, or from the resolution of various proceedings between U.S. and foreign tax authorities. It is reasonably possible that the amount of the benefit with respect to certain of our unrecognized tax positions will increase or decrease within the next 12 months. However, estimates of the amounts or ranges for individual matters where a material change is reasonably possible cannot be made. We believe we have recorded adequate amounts of tax reserves, including interest and penalties, for any adjustments that may occur.