YUM · 10-Q · 2026Q2 · Full report

IRS Tax Dispute

YUM BRANDS INC · 2026-08-05 · Importance 71 · Surprise 60 · No source text

Following an IRS audit of fiscal years 2013 through 2015, the IRS proposed approximately $2.1 billion of additional tax and $418 million of penalties for fiscal year 2014, plus approximately $2.3 billion of accrued interest through June 30, 2026. The IRS asserts that 2014 reorganizations produced taxable distributions of approximately $6.0 billion. YUM filed a petition in the United States Tax Court on June 4, 2025, and the IRS filed its Answer on September 12, 2025; the litigation remains ongoing. YUM believes its tax position is more likely than not to be sustained and has recorded no reserve, but an unfavorable resolution could materially adversely affect future financial statements.

Key facts

• Following an IRS audit for 2013-2015, the IRS asserts an underpayment of tax of approximately $2.1 billion plus $418 million in penalties for fiscal year 2014 source
• Interest of approximately $2.3 billion was accruing through June 30, 2026 related to the IRS proposed adjustments source
• The IRS asserts the 2014 transactions resulted in taxable distributions of approximately $6.0 billion source
• YUM filed a petition in the United States Tax Court on June 4, 2025 disputing the IRS's position and the litigation is ongoing source
• The Company believes it is more likely than not the Company’s tax position will be sustained; therefore, no reserve is recorded with respect to this IRS matter source
• During the quarter ended March 31, 2026, Yum received approximately $44 million, net of legal expenses, related to a credit card interchange fee litigation settlement recorded as Other (income) expense and reflected as a Special Item. source

Impact estimates