KVUE · 10-Q · 2026Q2 · Full report
Income Tax Rate Changes
Kenvue Inc. · 2026-08-06 · Importance 48 · Surprise 40 · In source text
The six-month provision for income taxes increased $36 million to $340 million because of higher pretax income and a stock-based compensation tax shortfall, partly offset by a lower effective tax rate. The worldwide effective tax rate declined to 26.8% from 29.1%, a 230-basis-point reduction, due to jurisdictional income mix, favorable U.S. tax treatment of foreign earnings under the One Big Beautiful Bill Act, and a valuation-allowance release. Quarterly tax expense decreased $26 million to $142 million, and the quarterly effective tax rate fell to 23.7% from 28.6%. The quarterly reduction was primarily attributable to the valuation-allowance release, jurisdictional mix, and favorable U.S. tax effects.
Key facts
- On January 5, 2026, the OECD announced the Side-by-Side ("SbS") package which introduces simplifications and new safe harbors for U.S. and other multinational companies where domestic and international tax systems meet robust requirements to coexist with Pillar Two, which would fully exempt U.S.-parented groups from the application of the Income Inclusion Rule and Undertaxed Profits Rule Pillar Two top up taxes. source
- On May 18, 2026, the OECD released additional administrative guidance including a clarification that 53-week fiscal years ending on or before January 3, 2027 qualified for the Transitional Undertaxed Profits Rule Safe Harbour exemption. source
- Provision for taxes for the fiscal six months ended June 28, 2026: $340 million versus $304 million in prior-year period, an increase of $36 million; worldwide effective tax rates were 26.8% (2026) and 29.1% (2025) source
- Provision for taxes for the fiscal three months ended June 28, 2026: $142 million versus $168 million in prior-year quarter, a decrease of $26 million; worldwide effective tax rates were 23.7% (2026) and 28.6% (2025) source
- Release of a valuation allowance contributed to the decrease in Provision for taxes in the fiscal three months ended June 28, 2026 source
- Based on our current analysis, currently enacted laws for Pillar Two do not have a significant impact on the Condensed Consolidated Financial Statements. source
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| net_income | negative | realized | -0.9% | Provision for taxes for the fiscal six months ended June 28, 2026: $340 million versus $304 million in prior-year period, an increase of… |
| net_income | positive | contingent | — | On January 5, 2026, the OECD announced the Side-by-Side ("SbS") package which introduces simplifications and new safe harbors for U.S. and… |
| net_income | positive | contingent | — | On May 18, 2026, the OECD released additional administrative guidance including a clarification that 53-week fiscal years ending on or… |