KVUE · 10-Q · 2026Q3 · Full report

Income Tax Rate Changes

Kenvue Inc. · 2026-10-30 · Importance 35 · Surprise 48

For the nine months ended September 27, 2026, tax provision increased $87 million to $519 million, up 20.1%, primarily because of higher year-to-date pretax income and fewer favorable U.S. return-to-provision adjustments. The increase was partly offset by favorable U.S. tax treatment of foreign earnings following the One Big Beautiful Bill Act and related guidance, plus a valuation-allowance release. The nine-month worldwide effective tax rate was 27.6%, compared with 27.5% in the prior-year period. For the third quarter, the effective rate increased to 29.4% from 24.3%, as tax provision rose $51 million to $179 million, reflecting higher pretax income, jurisdictional mix, and fewer favorable return-to-provision adjustments, partly offset by tax benefits and favorable audit outcomes.

Key facts

• On January 5, 2026, the OECD announced a Pillar Two Side-by-Side package that provides new safe harbors and would fully exempt U.S.-parented groups from Income Inclusion Rule and Undertaxed Profits Rule top-up taxes if domestic and international tax systems meet robust coexistence requirements. source
• On May 18, 2026, the OECD released guidance providing additional relief for Pillar Two Global Minimum Tax and GIR filing compliance, including qualification of 53-week fiscal years ending on or before January 3, 2027 for the Transitional Undertaxed Profits Rule Safe Harbour exemption. source
• The OECD's January 5, 2026 Side-by-Side package extended the Transitional Country-by-Country Reporting Safe Harbour by one year. source
• Pillar Two legislation could unfavorably affect Kenvue's tax provision as it becomes effective in countries where Kenvue conducts business, although current analysis found no significant impact from currently enacted laws on the condensed consolidated financial statements. source
• For the fiscal three months ended September 27, 2026, Kenvue’s tax provision increased $51 million to $179 million; the increase primarily reflected higher pretax income, reduced favorable U.S. return-to-provision adjustments, and jurisdictional income mix, partly offset by One Big Beautiful Bill Act benefits and tax-reserve releases following favorable audits. source
• The EU's Pillar Two Directive generally provides for a 15% minimum effective tax rate, with EU effective dates of January 1, 2024 and January 1, 2025 for different aspects; OECD guidance proposed safe harbors effectively extending certain dates to January 1, 2027. source
• Kenvue’s worldwide effective income tax rate was 29.4% for the fiscal three months ended September 27, 2026, versus 24.3% in the comparable 2025 period. source
• Kenvue’s worldwide effective income tax rate was 27.6% for the fiscal nine months ended September 27, 2026, versus 27.5% in the comparable 2025 period. source