YUM · 10-Q · 2026Q2 · Full report

Income Tax Rate Changes

YUM BRANDS INC · 2026-08-05 · Importance 96 · Surprise 100 · In source text

The GAAP effective tax rate was negative 60.1% in the quarter versus 25.1% a year earlier and negative 22.5% year to date versus 32.4%, reflecting significant tax benefits. YUM recorded a $359 million net deferred tax benefit after signing the Pizza Hut sale agreements, triggered by recognition of tax basis in entities expected to be sold. An internal Pizza Hut reorganization and intellectual-property transfers generated $91 million of quarterly tax benefits and $113 million year to date, partly offset by a $12 million Swiss valuation-allowance expense. Excluding special items, the effective tax rate was 22.3% in the quarter and 20.3% year to date.

Key facts

• Special Items Tax (Benefit) Expense for the quarter included Tax (Benefit) on Special Items Expense - Operating Profit of $(11) million and Tax (Benefit) - Income tax impacts from planned sale of Pizza Hut of $(359) million, totaling Special Items Tax (Benefit) Expense of $(449) million for the quarter. source
• A $359 million net deferred tax benefit was recorded upon entering into definitive agreements during the quarter ended June 30, 2026 to sell Pizza Hut. source
• The Pizza Hut sales are expected to close at significant book gains in the quarter ended September 30, 2026 resulting in the utilization of deferred tax benefits. source
• Tax benefits from intra-entity transfers and valuations of intellectual property in the quarter and year to date ended June 30, 2026 were $91 million and $113 million, respectively. source
• Quarter ended 6/30/2026 Effective tax rate: (60.1)% source
• Included in the intra-entity IP tax impacts is $12 million of tax expense representing an adjustment to the valuation allowance on tax credits previously granted by Swiss tax authorities. source
• Tax Expense - Other Income tax impacts recorded as Special in the year to date ended June 30, 2026 includes a $13 million adjustment to tax expense associated with our decision to exit Russia. source
• Year to date 6/30/2026 Effective tax rate: 25.1% source

Impact estimates