v3.26.3
Taxes on Earnings
 12 Months Ended
Aug. 02, 2026
Income Tax Disclosure [Abstract]  
Taxes on Earnings Taxes on Earnings
The provision for income taxes on earnings consists of the following:
(Millions)202620252024
Income taxes:
Currently payable:
Federal$59 $202 $190 
State22 42 41 
Non-U.S. 10 4 6 
91 248 237 
Deferred:
Federal42 (40)(37)
State(5)(14)(9)
Non-U.S. (4)— (1)
33 (54)(47)
$124 $194 $190 

(Millions)202620252024
Earnings before income taxes:
United States$510 $784 $735 
Non-U.S. 19 12 22 
$529 $796 $757 
The following is a reconciliation of the effective income tax rate to the U.S. federal statutory income tax rate for 2026:
2026
($ in Millions)AmountPercent
Federal statutory income tax rate$111 21.0 %
State income taxes (net of federal tax benefit)(1)
12 2.3 
Foreign tax effects4 0.7 
Effect of changes in tax laws or rates enacted in current period— — 
Effect of cross-border tax laws(1)(0.2)
Tax credits(3)(0.6)
Changes in valuation allowance(2)(0.4)
Nontaxable or nondeductible items3 0.6 
Changes in unrecognized tax benefits— — 
Other— — 
Effective income tax rate$124 23.4 %
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(1)During the year ended August 2, 2026, state taxes in California, Illinois, Texas and Minnesota made up the majority (greater than 50%) of the tax effect in this category.
The following table reconciles the U.S. federal statutory income tax rate with our effective income tax rate for 2025 and 2024:
20252024
Federal statutory income tax rate21.0 %21.0 %
State income taxes (net of federal tax benefit)2.8 3.2 
Tax effect of international items— (0.1)
State income tax law changes
(0.4)(0.1)
Divestitures1.8 — 
Nondeductible executive compensation(1)
0.4 1.5 
Other(1.2)(0.4)
Effective income tax rate24.4 %25.1 %
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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 effective tax rate in 2026 or 2025. Certain provisions of the OBBBA impact the timing of cash tax payments, which resulted in a reduction of our taxes paid in 2026.
Deferred tax liabilities and assets are comprised of the following:
(Millions)20262025
Depreciation$367 $353 
Amortization1,174 1,197 
Operating lease ROU assets73 81 
Pension30 30 
Other17 12 
Deferred tax liabilities1,661 1,673 
Benefits and compensation88 98 
Pension benefits21 23 
Tax loss carryforwards4 5 
Capital loss carryforwards6 18 
Operating lease liabilities80 88 
Capitalized research and development3 44 
Other80 69 
Gross deferred tax assets282 345 
Deferred tax asset valuation allowance(11)(23)
Deferred tax assets, net of valuation allowance271 322 
Net deferred tax liability$1,390 $1,351 
As of August 2, 2026, our U.S. and non-U.S. subsidiaries had tax loss carryforwards of approximately $103 million. Of these carryforwards, $9 million may be carried forward indefinitely, and $94 million expire between 2028 and 2044. As of August 2, 2026, our net deferred liability included $4 million of tax effected loss carryforwards, of which $2 million was offset by a deferred tax asset valuation allowance. Additionally, as of August 2, 2026, our U.S. and non-U.S. subsidiaries had capital loss carryforwards of approximately $46 million, all of which may be carried forward indefinitely. As of August 2, 2026, our net deferred liability included $6 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 2026 was a decrease of $12 million. The decrease was primarily due to the expiration of capital loss carryforwards in 2026. 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.
As of August 2, 2026, other deferred tax assets included $3 million of tax credit carryforwards with the majority expiring between 2029 and 2039. As of August 2, 2026, deferred tax asset valuation allowances had been established to offset $3 million of the tax credit carryforwards.
As of August 2, 2026, we had certain foreign earnings that 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)202620252024
Balance at beginning of year$18 $17 $15 
Increases related to prior-year tax positions2 1 2 
Decreases related to prior-year tax positions— — — 
Increases related to current-year tax positions2 1 2 
Settlements(7)— — 
Lapse of statute— (1)(2)
Balance at end of year$15 $18 $17 
The amount of unrecognized tax benefits that, if recognized, would impact the annual effective tax rate was $13 million as of August 2, 2026, $15 million as of August 3, 2025, and $14 million as of July 28, 2024. 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.
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 2026, 2025, and 2024. The total amount of interest and penalties recognized in the Consolidated Balance Sheets in Other liabilities was $7 million as of August 2, 2026 and August 3, 2025.
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 2025 and in Canada through 2018. In addition, several state income tax examinations are in progress for the years 2017 to 2024.
Income taxes paid, net of refunds, were as follows:
(Millions)2026
U.S. federal$50 
U.S. state and local
Illinois7 
California5 
Other16 
Total U.S. state and local28 
Foreign
Italy11 
Other 4 
Total foreign15 
Total$93 
We paid income taxes, net of refunds, of $268 million and $252 million in 2025 and 2024, respectively.