Annual report [Section 13 and 15(d), not S-K Item 405]

Income Taxes

v3.26.1
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income tax expense consisted of the following:
Years ended December 31,
(in millions) 2025 2024 2023
Current:
U.S. Federal $ (1) (126) (72)
State and local 3  (24) 6 
Foreign (71) (78) (84)
Total (69) (228) (150)
Deferred:
U.S. Federal 187  189  (21)
State and local 38  39  (7)
Foreign (3) (3) (27)
Total 222  225  (55)
Income tax benefit (expense) $ 153  (3) (205)
Pre-tax income (loss) was as follows:
Years ended December 31,
(in millions) 2025 2024 2023
QxH $ (2,454) (1,253) 114 
QVC-International 174  234  302 
Consolidated QVC $ (2,280) (1,019) 416 
Total income tax expense differs from the amounts computed by applying the U.S. federal income tax rate of 21% in 2025, 2024 and 2023, as a result of the following:
Year ended December 31, 2025
amounts in millions percent
US Federal statutory income tax rate $ 479  21.0  %
Domestic federal
Tax Credits 5 0.2%
Nontaxable and non-deductible items, net
Goodwill impairment (308) (13.5)%
Other nondeductible items (9) (0.4)%
Cross-border tax laws (23) (1.0)%
Other (1) (0.1)%
Domestic state and local income taxes, net of federal tax effect (1) 25 1.1%
Foreign tax effects (14) (0.6)%
Worldwide changes in unrecognized tax benefits (1) —%
Total tax benefit (expense) $ 153  6.7  %
(1) The following jurisdictions make up greater than 50% of the state income tax expense for 2025: Delaware, Florida, Illinois, Massachusetts, New York and Pennsylvania.
Years ended December 31,
2024 2023
Provision at statutory rate $ (214) 87
State income taxes, net of federal benefit (12) 1
Foreign taxes 16  24
Goodwill impairment 189  68
Foreign net operating losses (245) — 
Valuation allowance 243  7
Tax on foreign earnings, net of federal tax benefits 20  6
Other permanent differences 5  12
Other, net 1  — 
Total income tax expense $ 3  205
For the years ended December 31, 2025, 2024 and 2023, respectively, income tax expense differs from the U.S. statutory rate of 21% primarily due to an impairment of goodwill of $1,465 million, $902 million and $326 million, that are not deductible for tax purposes, in addition to state income tax expense and foreign tax expense.
The tax effects of temporary differences that gave rise to significant portions of the deferred income tax assets and deferred income tax liabilities are presented below:
December 31,
(in millions) 2025 2024
Deferred tax assets:
Trade and other receivables, principally due to the allowance for credit losses and related reserves for the uncollectible accounts $ 15  18 
Inventories, principally due to obsolescence reserves and additional costs of inventories for tax purposes pursuant to the Tax Reform Act of 1986
 37  37 
Allowance for sales returns
 15  19 
Deferred revenue
 27  43 
Debt - Original Issuance Discount (OID) 21  26 
Deferred compensation
 10  13 
Unrecognized federal and state tax benefits
 7  9 
Foreign net operating loss and other carryforwards 409  362 
Foreign tax credits carryforward
 56  57 
Lease obligations
 121  123 
Cumulative translation of foreign currencies
 5  6 
Accrued liabilities
 9  15 
Subtotal
 732  728 
Valuation allowance
 (436) (420)
Total deferred tax assets
 296  308 
Deferred tax liabilities:
Depreciation and amortization
 (331) (556)
Lease assets
 (114) (117)
Other
 (2) (4)
Total deferred tax liabilities
 (447) (677)
Net deferred tax liability
 $ (151) (369)

In the above table, valuation allowances exist due to the uncertainty of whether or not the benefit of certain U.S. foreign tax credits and foreign net operating losses will ultimately be utilized for income tax purposes. The 2025 net deferred tax liability above includes deferred tax assets of $22 million relating to foreign jurisdictions which are included within other noncurrent assets in the consolidated balance sheet and deferred tax liabilities of $170 million in domestic jurisdictions and $3 million in foreign jurisdictions, which are included within deferred income taxes in the consolidated balance sheet. The 2024 net deferred tax liability above includes deferred tax assets of $25 million relating to foreign jurisdictions which are included within other noncurrent assets in the consolidated balance sheet and deferred tax liabilities of $391 million in domestic jurisdictions and $3 million in foreign jurisdictions, which are included within deferred income taxes in the consolidated balance sheet.
The Company is party to the Tax Agreement with QVC Group. The Tax Agreement establishes the methodology for the calculation and payment of income taxes in connection with the consolidation of the Company with QVC Group for income tax purposes. Generally, the Tax Agreement provides that the Company will pay QVC Group an amount equal to the tax liability, if any, that it would have if it were to file as a consolidated group separate and apart from QVC Group, with exceptions for the treatment and timing of certain items, including but not limited to deferred intercompany transactions, credits, and net operating and capital losses. To the extent that the separate company tax expense is different from the payment terms of the Tax Agreement, the difference is recorded as either a dividend or capital contribution. These differences are related primarily to foreign tax credits recognized by QVC that are creditable under the Tax Agreement when and if utilized in QVC Group’s consolidated tax return. The difference recorded during the year ended December 31, 2025 was a capital contribution of less than $1 million, primarily related to foreign tax credit carryovers being utilized in QVC Group's consolidated tax return in excess of those recognized by QVC. The differences recorded during the years ended December 31, 2024 and 2023 were dividends of $1 million and $3 million respectively, primarily related to foreign tax credits recognized by QVC and not utilized in QVC Group's consolidated tax return. The amount of the tax-related net receivable balance due from QVC Group at December 31, 2025 is $10 million, of which $15 million is included in other current assets and $5 million is included in the accrued liabilities, respectively, in the consolidated balance sheet. The amounts of the tax-related payable balance due to QVC Group as of December 31, 2024 was $32 million and is included in accrued liabilities in the consolidated balance sheet.

A reconciliation of the 2024 and 2025 beginning and ending amount of the liability for unrecognized tax benefits is as follows:
(in millions)
Balance at January 1, 2024 $ 47 
Increases related to prior year tax positions 1 
Decreases related to prior year tax positions (8)
Decreases related to settlements with taxing authorities — 
Increases related to current year tax positions 2 
Balance at December 31, 2024 42 
Increases related to prior year tax positions 9 
Decreases related to prior year tax positions (10)
Decreases related to settlements with taxing authorities — 
Increases related to current year tax positions — 
Balance at December 31, 2025 $ 41 
Included in the balance of unrecognized tax benefits as of December 31, 2025 and 2024 are potential benefits of $34 million (net of a $7 million federal tax effect) and $33 million (net of a $9 million federal tax effect), respectively, that if recognized, would be reflected in income tax expense and affect the effective rate.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits in interest expense in the consolidated statements of operations. The Company did not have a material amount of interest or tax penalties accrued related to unrecognized tax benefits for each of the years ended December 31, 2025, 2024 or 2023.
Income taxes paid during 2025 by taxing jurisdiction are as follows:
Year ended December 31, 2025
amounts in millions
US Federal $ 35 
US state and local 15
Foreign
Japan 51
Other 19
Total $ 120 
The Company participates in a consolidated federal return filing with QVC Group. As of December 31, 2025, the Internal Revenue Service ("IRS") has completed its examination of QVC Group’s tax years through 2023. The Company's 2024 and 2025 tax years are being examined currently as part of the QVC Group consolidated return under the IRS's Compliance Assurance Process program. The Company files income tax returns in various states and foreign jurisdictions. As of December 31, 2025, the Company was under examination in Arizona, Massachusetts, Minnesota, Pennsylvania, Texas, Utah, Wisconsin, New York City, and Germany.