RECENT POSTS
Friday, April 3, 2020
A Q&A on Using Calcbench Data for Corporate Reporting

Wednesday, April 1, 2020
Coronavirus and Lines of Credit

Monday, March 30, 2020
Some Recent Coronavirus Disclosures

Thursday, March 26, 2020
GILTI Tax Data: Yeah, We Got That

Monday, March 23, 2020
Exec Comp: Another Interesting Trend

Thursday, March 19, 2020
Trends in Executive Comp, 2010-2018

Wednesday, March 18, 2020
Another Look at Strength of Balance Sheets

Wednesday, March 11, 2020
Studying Debt Levels

Wednesday, March 4, 2020
A Q&A on Using Calcbench Data for Academic Research

Monday, March 2, 2020
Calcbench Talkin’ Shop!

Thursday, February 27, 2020
A Broader Look at Coronavirus Risk

Thursday, February 20, 2020
Yum Brands and Coronovirus Damage

Wednesday, February 12, 2020
Another Calcbench Use Case: Benchmarking DPO Changes

Tuesday, February 11, 2020
Updated Calcbench Excel Add-In

Monday, February 10, 2020
Hot Take on Cooling PPE Outlays

Monday, February 3, 2020
A Brief History of Juul Impairment Charges

Thursday, January 30, 2020
Research Note: Impairment of Leased Assets

Tuesday, January 28, 2020
Tracking Coronavirus Risk, Disclosures

Thursday, January 23, 2020
How to Find a Material Weakness

Sunday, January 19, 2020
Calcbench Tip: Email Alerts

Archive  |  Search:
Kraft-Heinz’s Crazy Tax Rate
Thursday, April 26, 2018

Readers of the Calcbench blog know that we have been keeping one eye on tax disclosures this spring, as companies continue to report new and interesting implications of the tax reform law Congress enacted last year.

We have quite an interesting example today, from Kraft Heinz Co.

Kraft has a lot to say about tax reform: 1,656 words, plus four detailed charts. The company reconciles its statutory taxes to its effective tax rate in both dollar and percentage terms, so it wins points for being thorough. Still — we have much to unpack here.

Foremost, Kraft gets a huge benefit from reassessing the value of its deferred tax positions. As we noted in a previous post, deferred tax liabilities become more valuable as a result of tax reform (which lowered the tax rate on those assets from 35 to 21 percent). For Kraft, that reassessment led to a benefit of $7.5 billion. That benefit was offset by $312 million in new taxes for the one-time “deemed repatriation tax” on foreign earnings, plus another $125 million in other new taxes.

Still, that’s a net benefit of $7 billion. Not bad.

Also, given the repatriation of Kraft’s overseas earnings, the company “has reassessed our international investment assertions and no longer consider the historic earnings of our foreign subsidiaries as of December 30, 2017 to be indefinitely reinvested.” Those formerly reinvested foreign earnings totaled $1.2 billion; the decision to reclassify them as distributed profits cost Kraft $96 million in overseas taxes. (That amount is the lion’s share of the $125 million in new taxes we mentioned above.)

The reconciliation by percentage, however, is where things really start to get mind-bending.

That gigantic tax benefit of $7 billion is actually larger than all of Kraft’s 2017 income before taxes ($5.53 billion). So when you reconcile Kraft’s effective tax rate, the benefit of tax reform lowers the company’s rate by 127.3 percent — and the company’s overall effective tax rate is -98.7 percent. Take a look:

We’ve written several posts about unusual effective tax rates this year, as a result of one-time adjustments for repatriated foreign earnings and revalued deferred tax assets. Lots of companies are seeing their effective rates rise this year (before making gobs more money in future years), and some are seeing lower rates.

Kraft’s negative effective rate, however, takes the cake. Which seems fitting since, you know, it’s one of the largest food businesses in the world.


FREE Calcbench Premium
Two Week Trial

Research Financial & Accounting Data Like Never Before. More features and try our Excel add-in. Sign up now to try the Premium Suite.