EL · 10-K · 2026A · Full report

Income Tax Rate Changes

ESTEE LAUDER COMPANIES INC · 2026-08-19 · Importance 83 · Surprise 82

The reported effective income tax rate increased to 64.8% in fiscal 2026 from negative 8.9% in fiscal 2025, a 7,370-basis-point change; the company said the fiscal 2025 pretax loss broadly affected the comparison. Foreign-operations tax rates and geographic earnings mix, including new valuation allowances on certain foreign deferred tax assets, contributed about 5,630 basis points. The One Big Beautiful Bill Act contributed about 1,010 basis points through increased deductible interest expense and valuation allowances on excess foreign tax credits; transfer-pricing-related unrecognized tax benefits added about 820 basis points, and previously issued U.S. stock-based compensation added about 590 basis points. Favorable year-over-year utilization of U.S. general foreign tax credits, net of prior-year valuation allowances, offset about 550 basis points.

Key facts

• Fiscal 2026 effective tax rate increased approximately 7,370 basis points, broadly impacted by the fiscal 2025 loss before income taxes. source
• The fiscal 2026 effective tax rate increase included approximately 5,630 basis points from the higher effective tax rate on foreign operations, due to geographical earnings mix and new valuation allowances on certain foreign deferred tax assets. source
• Previously issued U.S. stock-based compensation had an unfavorable fiscal 2026 effective tax rate impact of approximately 590 basis points. source
• Year-over-year utilization of U.S. general foreign tax credits, net of the prior-year valuation allowance on U.S. general foreign tax credits and research and development tax credit carryforwards, favorably offset the effective tax rate increase by approximately 550 basis points. source