QCOM · 10-Q · 2026Q2 · Full report
Income Tax Rate Changes
QUALCOMM INC/DE · 2026-07-29 · Importance 44 · Surprise 60 · From source text
The U.S. One Big Beautiful Bill Act (OBBB), enacted in the fourth quarter of fiscal 2025, changed the foreign-derived deduction eligible income regime and allowed domestic R&D expenditures to be deducted as incurred beginning in fiscal 2026. Treasury and the IRS issued Notice 2026-07 in the second quarter of fiscal 2026, allowing Qualcomm to reduce CAMT by certain previously capitalized domestic R&D expenditures. Qualcomm therefore no longer expects to be subject to CAMT in the foreseeable future and released a $5.7 billion valuation allowance on federal deferred tax assets, creating a $5.7 billion income tax benefit. The company estimates a 40% benefit annual effective tax rate for fiscal 2026 and expects the R&D deduction change to reduce future cash tax payments and improve operating cash flow.
Key facts
- In the second quarter of fiscal 2026 we released our valuation allowance on our federal deferred tax assets resulting in a $5.7 billion income tax benefit. source
- We established a $5.7 billion valuation allowance on our federal deferred tax assets in fiscal 2025 because we expected to be perpetually subject to CAMT prior to Notice 2026-07. source
- During the first nine months of fiscal 2026, income taxes paid were greater than our provision, primarily driven by the $5.7 billion release of our valuation allowance and our final installment payment for a one-time U.S. repatriation tax accrued in fiscal 2018 of $663 million. source
- In the fourth quarter of fiscal 2025, the One Big Beautiful Bill Act (OBBB) was enacted in the United States and included changes allowing domestic R&D expenditures to be deducted as incurred beginning in fiscal 2026. source
- The U.S. Department of Treasury and the IRS issued Notice 2026-07 which allows Qualcomm to reduce CAMT by certain previously capitalized domestic R&D expenditures. source
- We estimate our annual effective income tax rate to be 40% benefit for fiscal 2026. source
- Investment and other income, net increased by $656 million compared to the year ago quarter, primarily due to higher net gains from initial public offerings of certain QSI equity investments. source
- Unrecognized tax benefits were $3.0 billion at June 28, 2026 and $2.7 billion at September 28, 2025. source
Impact estimates
| metric | direction | stage | expected | basis |
|---|---|---|---|---|
| net_income | positive | realized | +57.3% | In the second quarter of fiscal 2026 we released our valuation allowance on our federal deferred tax assets resulting in a $5.7 billion… |
| net_income | positive | realized | +6.6% | Investment and other income, net increased by $656 million compared to the year ago quarter, primarily due to higher net gains from… |
| liability | negative | realized | -0.5% | Unrecognized tax benefits were $3.0 billion at June 28, 2026 and $2.7 billion at September 28, 2025. |
| net_income | positive | realized | — | In the fourth quarter of fiscal 2025, the One Big Beautiful Bill Act (OBBB) was enacted in the United States and included changes allowing… |
| net_income | positive | committed | — | We estimate our annual effective income tax rate to be 40% benefit for fiscal 2026. |