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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Components of Income and Income Tax Expense
The domestic and foreign components of income before income taxes for the years ended December 31 were as follows:
202420232022
(in millions)
United States$6,168 $4,506 $4,228 
Foreign9,086 9,133 7,504 
Income before income taxes$15,254 $13,639 $11,732 
The total income tax provision for the years ended December 31 was comprised of the following components:
202420232022
(in millions)
Current
Federal$1,093 $991 $1,024 
State and local144 127 133 
Foreign1,670 1,563 1,296 
Total current
2,907 2,681 2,453 
Deferred
Federal(197)(180)(661)
State and local(14)(18)(40)
Foreign(316)(39)50 
Total deferred
(527)(237)(651)
Income tax expense$2,380 $2,444 $1,802 
Effective Income Tax Rate
A reconciliation of the effective income tax rate to the U.S. federal statutory income tax rate for the years ended December 31, was as follows:
202420232022
AmountPercentAmountPercentAmountPercent
($ in millions)
Income before income taxes$15,254 $13,639 $11,732 
Federal statutory tax3,203 21.0 %2,864 21.0 %2,464 21.0 %
State tax effect, net of federal benefit90 0.6 %82 0.6 %72 0.6 %
Foreign tax effect(649)(4.3)%(393)(2.9)%(347)(3.0)%
Valuation allowance - U.S. foreign tax credit— — %327 2.4 %(333)(2.8)%
U.S. tax expense on foreign operations82 0.5 %39 0.3 %111 0.9 %
Foreign-derived intangible income deduction(195)(1.3)%(144)(1.1)%(129)(1.1)%
Windfall benefit(93)(0.6)%(88)(0.6)%(68)(0.6)%
Other, net(58)(0.4)%(243)(1.8)%32 0.3 %
Income tax expense$2,380 15.6 %$2,444 17.9 %$1,802 15.4 %
Note: Table may not sum due to rounding.
The effective income tax rates for the years ended December 31, 2024, 2023 and 2022 were 15.6%, 17.9% and 15.4%, respectively. The effective income tax rate for 2024 was lower than the effective income tax rate for 2023, primarily due to a discrete tax expense in 2023 related to changes in the valuation allowance associated with the U.S. foreign tax credits deferred tax asset. In 2023, the treatment of foreign taxes paid under the U.S. tax regulations published in 2022 changed due to the foreign tax legislation enacted in Brazil and Notice 2023-55 (the “Notice”), released by the U.S. Department of Treasury (“Treasury”). Therefore, the Company recognized a total $327 million discrete tax expense in 2023 to establish the valuation allowance. This discrete tax expense was partially offset by the Company’s ability to claim more U.S. foreign tax credits generated in 2022 and 2023 due to the Notice. Additionally, a change in the Company’s geographic mix of earnings in 2024 contributed to the lower effective income tax rate compared to the prior year.
The effective income tax rate for 2023 was higher than the effective income tax rate for 2022, primarily due to changes in the valuation allowance associated with the deferred tax asset related to U.S. foreign tax credits. In 2022, the Company recognized a discrete tax benefit of $333 million to release the valuation allowance resulting from U.S. tax regulations published in the first quarter of 2022 (the “2022 Regulations”). In 2023, the treatment of foreign taxes paid under the 2022 Regulations changed due to foreign tax legislation enacted in Brazil and the Notice released by Treasury. Therefore, the Company recognized a total $327 million discrete tax expense in 2023 to establish the valuation allowance. The discrete tax expense recognized in 2023 was partially offset by the Company’s ability to claim more U.S. foreign tax credits generated in 2022 and 2023 due to the Notice.
Singapore Income Tax Rate
In connection with the expansion of the Company’s operations in the Asia Pacific, Middle East and Africa region, the Company’s subsidiary in Singapore, Mastercard Asia Pacific Pte. Ltd. (“MAPPL”) received an incentive grant from the Singapore Ministry of Finance in 2010. The incentive had provided MAPPL with, among other benefits, a reduced income tax rate for the 10-year period commencing January 1, 2010 on taxable income in excess of a base amount. The Company continued to explore business opportunities in this region, resulting in an expansion of the incentives being granted by the Ministry of Finance, including a further reduction to the income tax rate on taxable income in excess of a revised fixed base amount commencing July 1, 2011 and continuing through December 31, 2025. Without the incentive grant, MAPPL would have been subject to the statutory income tax rate on its earnings. For 2024, 2023 and 2022, the impact of the incentive grant received from the Ministry of Finance resulted in a reduction of MAPPL’s income tax liability of $644 million, or $0.69 per diluted share, $571 million, or $0.60 per diluted share, and $454 million, or $0.47 per diluted share, respectively.
Indefinite Reinvestment
As of December 31, 2024 the Company does not accrue taxes on $3.8 billion of foreign earnings that remain permanently reinvested outside the U.S. The Company expects that taxes associated with any future repatriation of these earnings are immaterial.
Deferred Income Taxes
Deferred tax assets and liabilities represent the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. The components of deferred tax assets and liabilities at December 31 were as follows:
20242023
(in millions)
Deferred tax assets
Accrued liabilities$939 $863 
Compensation and benefits371 335 
Net operating losses468 149 
U.S. foreign tax credits736 635 
Property and equipment
432 277 
Intangible assets160 182 
Lease liabilities
134 158 
Other items236 203 
Less: Valuation allowance(871)(758)
Total deferred tax assets
2,605 2,044 
Deferred tax liabilities
Prepaid expenses and other accruals195 211 
Gains on equity investments112 112 
Goodwill and intangible assets760 518 
Right-of-use lease assets
116 138 
Other items125 79 
Total deferred tax liabilities
1,308 1,058 
Net deferred tax assets
$1,297 $986 
The changes in the Company’s valuation allowance on deferred tax assets were as follows:
Balance at December 31, 2021
Changes to Related Gross Deferred Tax Assets
Change/(Release)
Balance at December 31, 2022
Changes to Related Gross Deferred Tax Assets
Change/(Release)
Balance at December 31, 2023
Changes to Related Gross Deferred Tax Assets
Change/(Release)
Balance at December 31, 2024
(in millions)
U.S. foreign tax credit carryforward 1
$333 $— $(333)$— $308 $327 $635 $101 $— $736 
Net operating and capital losses 2
82 23 9 114 12 (3)123 11 1 135 
Total$415 $23 $(324)$114 $320 $324 $758 $112 $1 $871 
1The 2022 activity resulted in a full release of the valuation allowance associated with the U.S. foreign tax credit carryforward due to final U.S. tax regulations published in 2022. The 2023 activity resulted in the establishment of the valuation allowance associated with the U.S. foreign tax credit carryforward due to foreign tax legislation enacted in Brazil and the Notice released by Treasury.
2Capital losses are included within other items in the deferred tax assets section of the components of the Deferred Income Taxes table above.
The recognition of foreign tax credits is dependent upon the realization of future foreign source income in the appropriate foreign tax credit basket in accordance with U.S. federal income tax law. The recognition of the net operating and capital losses is dependent on the timing and character of future taxable income in the applicable jurisdictions. As of December 31, 2024, the Company had a foreign tax credit carryforward and tax effected net operating loss carryforwards of $736 million and $468 million, respectively. The foreign tax credits begin to expire in 2029 and the majority of the net operating losses can be carried forward indefinitely.
A reconciliation of the beginning and ending balance for the Company’s unrecognized tax benefits for the years ended December 31, is as follows:
202420232022
(in millions)
Beginning balance$431 $414 $360 
Additions:
Current year tax positions37 23 22 
Prior year tax positions 1
34 16 65 
Reductions:
Prior year tax positions 1
(189)(7)(14)
Settlements with tax authorities— — (13)
Expired statute of limitations(9)(15)(6)
Ending balance$304 $431 $414 
1Includes immaterial translational impact of currency.
As of December 31, 2024, the amount of unrecognized tax benefit was $304 million. This amount, if recognized, would reduce income tax expense by $246 million. In 2024, the decrease in the Company’s unrecognized tax benefits was primarily due to the withdrawal of a prior year refund claim, which had no impact on the consolidated results of operations or financial condition.
The Company is subject to tax in the United States, Belgium, Singapore, the United Kingdom and various other foreign jurisdictions, as well as state and local jurisdictions. Uncertain tax positions are reviewed on an ongoing basis and are adjusted after considering facts and circumstances, including progress of tax audits, developments in case law and closing of statutes of limitation. Within the next twelve months, the Company believes that the resolution of certain federal, foreign and state and local examinations is reasonably possible and that a change in estimate, reducing unrecognized tax benefits, may occur.  While such a change may be significant, it is not possible to provide a range of the potential change until the examinations progress further or the related statutes of limitation expire. The Company has effectively settled its U.S. federal income tax obligations through 2014. With limited exception, the Company is no longer subject to state and local or foreign examinations by tax authorities for years before 2014.