v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income before provision for income taxes are as follows (in millions):
 Year Ended December 31, 
 202520242023
Domestic$79,644 $66,342 $43,499 
Foreign6,288 4,321 3,929 
Income before provision for income taxes$85,932 $70,663 $47,428 

The provision for income taxes consists of the following (in millions):
 Year Ended December 31, 
 202520242023
Current:   
Federal$2,820 $9,569 $4,934 
State745 775 577 
Foreign3,154 2,696 2,688 
Total current tax expense6,719 13,040 8,199 
Deferred:   
Federal18,379 (4,709)67 
State395 (43)123 
Foreign(19)15 (59)
Total deferred tax (benefits) expense18,755 (4,737)131 
Provision for income taxes$25,474 $8,303 $8,330 
 
As a result of the implementation of the One Big Beautiful Bill Act (OBBBA) enacted in July 2025, we expect to incur Corporate Alternative Minimum Tax (CAMT) beginning in 2025. We recorded a $15.93 billion charge in the third quarter of 2025, of which $14.03 billion was a valuation allowance against our U.S. federal deferred tax assets as of the enactment date of OBBBA, and the remaining was mostly related to the reduction of the benefit of the foreign-derived intangible income deduction. In determining the valuation allowance, our accounting policy incorporates the expected impact of future years’ CAMT in assessing the realizability of our deferred tax assets.
Beginning in 2025 annual reporting, we adopted ASU 2023-09 prospectively. See Note 1 — Summary of Significant Accounting Policies – Recently Adopted Accounting Pronouncements for additional details on the adoption of ASU 2023-09. A reconciliation of the U.S. federal statutory income tax rate to our effective tax rate pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows (in millions, except percentages):
Year Ended December 31, 2025
U.S. federal statutory income tax rate$18,046 21.0 %
State and local income taxes, net of federal income tax effect (1)
(202)(0.2)
Foreign tax effects1,464 1.7 
Tax credits
Research and development tax credits(3,912)(4.6)
U.S. foreign tax credits(1,405)(1.6)
Valuation allowances (2)
11,974 13.9 
Changes in unrecognized tax benefits (3)
3,127 3.6 
Other adjustments
Excess tax benefits from share-based compensation(4,307)(5.0)
Other (4)
689 0.8 
Effective tax rate$25,474 29.6 %
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(1)California represents the majority of the tax effect in this category.
(2)Primarily related to the implementation of OBBBA.
(3)Changes in unrecognized tax benefits on an aggregated basis for all jurisdictions.
(4)Includes the tax effects of enactment of new tax laws (excluding implementation of OBBBA reflected in valuation allowances), effect of cross-border tax laws, and nontaxable or nondeductible items.

A reconciliation of the U.S. federal statutory income tax rates to our effective tax rate for the years ended December 31, 2024 and 2023 is as follows (in percentages):
 Year Ended December 31,
 20242023
U.S. federal statutory income tax rate21.0 %21.0 %
State income taxes, net of federal benefit0.7 1.1 
Share-based compensation(3.7)(0.6)
Research and development tax credits(2.9)(1.5)
Foreign-derived intangible income deduction(4.9)(4.3)
Effect of non-U.S. operations0.2 0.9 
Other1.4 1.0 
Effective tax rate11.8 %17.6 %
Cash paid for income taxes, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 is as follows (in millions):
Year Ended December 31, 2025
Federal$4,118 
State331 
Foreign
Brazil 884 
India 652 
Ireland567 
Other 1,026 
Cash paid for income taxes, net of refunds received$7,578 

Our deferred tax assets (liabilities) are as follows (in millions):
 December 31, 
 20252024
Deferred tax assets:  
Loss carryforwards$4,432 $289 
Tax credit carryforwards10,506 2,771 
Share-based compensation706 520 
Accrued expenses and other liabilities2,741 2,223 
Lease liabilities5,150 3,940 
Capitalized research and development4,138 16,743 
Unrealized losses in securities and investments143 115 
Other274 442 
Total deferred tax assets28,090 27,043 
Less: valuation allowance(15,895)(3,506)
Deferred tax assets, net of valuation allowance12,195 23,537 
Deferred tax liabilities:  
Depreciation and amortization(15,901)(10,959)
Right-of-use assets(4,453)(3,000)
Unrealized gains in securities and investments(621)— 
Other(387)— 
Total deferred tax liabilities(21,362)(13,959)
Net deferred tax assets (liabilities)$(9,167)$9,578 

The valuation allowance was approximately $15.90 billion as of December 31, 2025, mostly related to U.S. federal deferred tax assets, including certain tax credits and attributes that are not expected to be realized due to the anticipated impact of future years' CAMT, and state tax credit carryforwards. The valuation allowance was approximately $3.51 billion as of December 31, 2024, mostly related to U.S. state tax credit carryforwards, U.S. foreign tax credits, and unrealized losses in marketable securities.

As of December 31, 2025, our U.S. federal net operating loss carryforwards were $16.35 billion, most of which do not expire. Our state net operating loss carryforwards were $3.79 billion, which will begin to expire in 2031 if not utilized. As of December 31, 2025, we have federal and state tax credit carryforwards of $7.85 billion and $6.80 billion, respectively, most of which do not expire.
Utilization of our net operating loss and tax credit carryforwards may be subject to substantial annual limitations due to the ownership change limitations provided by the Internal Revenue Code and similar state provisions. Such annual limitations could result in the expiration of the net operating loss and tax credit carryforwards before their utilization. The events that may cause ownership changes include, but are not limited to, a cumulative stock ownership change of greater than 50% over a three‑year period.

We have not accrued taxes related to the outside basis difference in the contributed capital of our foreign subsidiaries, as we currently intend to indefinitely reinvest that capital. The determination of the amount of the deferred tax liability is not practicable.

The following table reflects changes in the gross unrecognized tax benefits (in millions):
 Year Ended December 31, 
 202520242023
Gross unrecognized tax benefits ‑ beginning of period$15,131 $11,666 $10,757 
Increases related to prior year tax positions900 685 168 
Decreases related to prior year tax positions(1,131)(6)(263)
Increases related to current year tax positions2,863 2,882 1,204 
Decreases related to settlements of prior year tax positions(1,264)(9)(199)
Decreases related to lapses of statute of limitations(49)(87)(1)
Gross unrecognized tax benefits ‑ end of period$16,450 $15,131 $11,666 

These unrecognized tax benefits were primarily accrued for the uncertainties with our research tax credits and transfer pricing with our foreign subsidiaries, which include licensing of intellectual property, providing services and other transactions. During all years presented, we recognized interest and penalties related to unrecognized tax benefits within the provision for income taxes on our consolidated statements of income. The amount of interest and penalties accrued as of December 31, 2025, 2024, and 2023 were $2.60 billion, $2.21 billion, and $1.48 billion, respectively.

If our gross unrecognized tax benefits of $16.45 billion as of December 31, 2025 were realized in a future period, this would result in a tax benefit of $11.25 billion within our provision of income taxes at such time.

Our long-term income tax liabilities include $11.23 billion related to the uncertain tax positions and $9.78 billion related to deferred tax liabilities as of December 31, 2025.

We are subject to taxation in the United States and various other state and foreign jurisdictions. The material jurisdictions in which we are subject to potential examination include the United States and Ireland. Our 2014 through 2016 tax years are with the Internal Revenue Service (IRS) Independent Office of Appeals for certain unresolved issues. Our 2020 and subsequent tax years remain open to examination by the IRS. Our 2021 and subsequent tax years remain open to examination by the Irish Revenue Commissioners.

Facebook, Inc. v. Comm'r of Internal Revenue

In July 2016, we received a Statutory Notice of Deficiency (Notice) from the IRS related to transfer pricing with our foreign subsidiaries in conjunction with the examination of the 2010 tax year. While the Notice applies only to the 2010 tax year, the IRS stated that it will also apply its position for tax years subsequent to 2010 and has done so in years covered by the second Notice described below. We did not agree with the position of the IRS and filed a petition in the Tax Court challenging the Notice (Facebook, Inc. v. Comm'r of Internal Revenue (2010 tax year)). On January 15, 2020, the IRS' amendment to answer was filed stating that it planned to assert at trial an adjustment that is higher than the adjustment stated in the Notice. The first session of the trial was completed in March 2020 and the final trial session was completed in August 2022.

In March 2018, we received a second Notice ("2011-2013 Notice") from the IRS in conjunction with the examination of our 2011 through 2013 tax years. The IRS applied its position from the 2010 tax year to each of these years and also
proposed new adjustments related to other transfer pricing with our foreign subsidiaries and certain tax credits that we claimed. We do not agree with the positions of the IRS in the second Notice and have filed a petition in the Tax Court challenging the second Notice (Facebook, Inc. v. Comm'r of Internal Revenue (2011-2013 tax years)).

On May 22, 2025, the Tax Court issued its opinion in Facebook, Inc. v. Comm'r of Internal Revenue (2010 tax year). The Tax Court opinion provided a value of $7.79 billion for the intellectual property transferred to our international subsidiary, which is $1.48 billion higher than we reported. We estimated the net tax effects based on the revised value, and our provision for income taxes increased due to the remeasurement of unrecognized tax benefits. The Tax Court will review tax estimates submitted by both parties and determine the tax due in its forthcoming Tax Court decision. We will reassess any remeasurement of unrecognized tax benefits in the period in which the Tax Court decision is entered. At that time, we and the IRS will each have the option to file an appeal to the Ninth Circuit U.S. Court of Appeals.

In September 2025, we received a Statutory Notice of Deficiency ("2017-2019 Notice") from the IRS, asserting an additional $15.89 billion in tax, plus interest and penalties for our 2017 through 2019 tax years. This 2017-2019 Notice primarily relates to transfer pricing with our foreign subsidiaries and other international tax adjustments. The largest issue in the 2017-2019 Notice relates to the same underlying transfer pricing transaction that we litigated in the 2010 tax year trial and for which we received a Tax Court opinion in May 2025. The IRS' proposed adjustments do not represent a final determination and do not reflect offsets, including reduction in tax we would owe under the mandatory transition tax on accumulated foreign earnings, global intangible low-taxed income tax, and foreign-derived intangible income deduction from the 2017 Tax Cuts and Jobs Act. We do not agree with the IRS' position and filed a petition with the Tax Court in December 2025 to challenge the 2017-2019 Notice. As of December 31, 2025, we believe our accrual for unrecognized tax benefits is adequate.

We believe that adequate amounts have been reserved in accordance with ASC 740 for any adjustments to the provision for income taxes or other tax items that may ultimately result from these examinations. We have a number of years remaining that are subject to examination, of which the timing of the resolution, settlement, and closure of any audits is highly uncertain. If the tax authorities prevail in the assessment of additional tax due, the assessed tax, interest, and penalties, if any, could have a material adverse impact on our financial position, results of operations, and cash flows.