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INCOME TAXES
 12 Months Ended
May 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of the provision for income taxes for the years ended May 31 were as follows (in millions):
202520242023
Current provision
Domestic:
Federal$891 $1,184 $579 
State and local146 218 157 
Foreign359 265 209 
1,396 1,667 945 
Deferred provision
Domestic:
Federal(302)(82)369 
State and local20 60 37 
Foreign235 (140)40 
(47)(162)446 
Total Provision$1,349 $1,505 $1,391 
Pre-tax earnings of foreign operations for 2025, 2024, and 2023 were $1.8 billion, $0.5 billion, and $0.6 billion, respectively. These amounts represent only a portion of total results associated with international shipments and do not represent our international results of operations.
A reconciliation of total income tax expense and the amount computed by applying the statutory federal income tax to income before income taxes for the years ended May 31 is as follows (dollars in millions):
202520242023
Taxes computed at federal statutory rate$1,143 $1,226 $1,126 
Increases (decreases) in income tax from:
U.S. and foreign return-to-provision adjustments5 11 (44)
State and local income taxes, net of federal benefit137 177 152 
Foreign operations101 65 96 
Non-deductible expenses72 48 40 
Uncertain tax positions(5)(21)60 
Benefits from share-based payments(18)(26)(18)
Valuation allowance21 59 59 
Foreign tax rate enactments6 — 3 
State deferred tax remeasurement— 54 — 
Goodwill impairment charges— — 8 
Corporate structuring transactions(66)— — 
Other, net(47)(88)(91)
Provision for income taxes$1,349 $1,505 $1,391 
Effective Tax Rate24.8 %25.8 %25.9 %
The 2025 tax provision includes an income tax benefit of $66 million from the write-off of U.S. deferred tax balances due to corporate structuring transactions.
The 2024 tax provision includes an unfavorable income tax expense of $54 million from the remeasurement of U.S. state deferred tax balances to reflect aggregate temporary differences at the expected applicable tax rates after the merger of FedEx Ground and FedEx Services into Federal Express Corporation.
The 2023 tax provision was negatively impacted by an expense of $46 million related to a write-down and valuation allowance on certain foreign tax credit carryforwards due to operational changes which impacted the determination of the realizability of the deferred tax asset. The 2023 tax provision was also negatively impacted by lower earnings in certain non-U.S. jurisdictions.
We regularly assess the need for cash in the U.S., as well as in our foreign subsidiaries, and will occasionally repatriate back to the U.S. excess earnings above working capital needs that can be repatriated with an immaterial tax cost. We assert all other earnings, both historical and current in our foreign subsidiaries, are permanently reinvested and therefore no deferred taxes or withholding taxes have been provided, including deferred taxes on any additional outside basis difference (e.g., stock basis differences attributable to acquisition or other permanent differences). Determination of the amount of unrecognized deferred income tax liability related to any remaining undistributed foreign earnings and additional outside basis differences is not practicable.
The significant components of deferred tax assets and liabilities as of May 31 were as follows (in millions):
20252024
Deferred Tax
Assets		Deferred Tax
Liabilities		Deferred Tax
Assets		Deferred Tax
Liabilities
Property, equipment, leases, and intangibles$4,515 $10,434 $4,597 $10,815 
Employee benefits725 291 744 68 
Self-insurance accruals1,247 — 1,183 — 
Other591 42 561 140 
Net operating loss/credit carryforwards1,123 — 1,306 — 
Valuation allowances(523)— (537)— 
$7,678 $10,767 $7,854 $11,023 
The net deferred tax liabilities as of May 31 have been classified in the balance sheets as follows (in millions):
20252024
Noncurrent deferred tax assets(1)
$1,116 $1,313 
Noncurrent deferred tax liabilities(4,205)(4,482)
$(3,089)$(3,169)
(1)Noncurrent deferred tax assets are included within “Other Assets” in the accompanying consolidated balance sheets.
We have approximately $3.2 billion of net operating loss carryovers in various foreign jurisdictions, $1.4 billion of state operating loss carryovers, and $139 million of U.S. federal operating loss and capital loss carryovers. The valuation allowances primarily represent amounts reserved for operating loss carryforwards, which expire over varying periods starting in 2026. Therefore, we establish valuation allowances if it is more likely than not that deferred income tax assets will not be realized. The total change in the valuation allowance reflects certain balance sheet items. Income statement impacts are reflected in our effective tax rate reconciliation. The decrease in the valuation allowance during 2025 includes a $42 million increase related to foreign net operating losses, which includes a $21 million increase in a branch valuation allowance which has been offset by a corresponding deferred tax asset in the U.S. We believe that we will generate sufficient future taxable income to realize the tax benefits related to the remaining net deferred tax assets in the consolidated balance sheets. See Note 1 for more information on our policy for assessing the recoverability of deferred tax assets and valuation allowances.
We are subject to taxation in the U.S. and various U.S. state, local, and foreign jurisdictions. We are currently under examination by the Internal Revenue Service for the 2016 through 2021 tax years. It is reasonably possible that certain income tax return proceedings will be completed during the next 12 months and could result in a change in our balance of unrecognized tax benefits. However, we believe we have recorded adequate amounts of tax, including interest and penalties, for any adjustments expected to occur.
During 2021, we filed suit in U.S. District Court for the Western District of Tennessee challenging the validity of a tax regulation related to the one-time transition tax on unrepatriated foreign earnings, which was enacted as part of the Tax Cuts and Jobs Act (“TCJA”). Our lawsuit sought to have the court declare this regulation invalid and order the refund of overpayments of U.S. federal income taxes for 2018 and 2019 attributable to the denial of foreign tax credits under the regulation. We have recorded a cumulative benefit of $249 million attributable to our interpretation of the TCJA and the Internal Revenue Code. In March 2023, the District Court ruled that the regulation is invalid and contradicts the plain terms of the tax code. On February 13, 2025, the District Court ruled again in our favor with regard to a new argument raised by the U.S. government. On June 4, 2025, the District Court validated the amount of refunds owed for 2018 and 2019, which includes the foreign tax credits previously denied. The U.S. government has until August 4, 2025, to appeal the decision to the U.S. Court of Appeals for the Sixth Circuit. If we are ultimately unsuccessful in defending our position, we may be required to reverse the benefit previously recorded.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended May 31 is as follows (in millions):
202520242023
Balance at beginning of year$186 $212 $169 
Increases for tax positions taken in the current year31 5 3 
Increases for tax positions taken in prior years33 4 68 
Decreases for tax positions taken in prior years(11)(3)(7)
Settlements(87)(31)(15)
Changes due to currency translation3 (1)(6)
Balance at end of year$155 $186 $212 
Our liabilities recorded for uncertain tax positions include $149 million at May 31, 2025 and $184 million at May 31, 2024 associated with positions that, if favorably resolved, would provide a benefit to our income tax expense. We classify interest related to income tax liabilities as interest expense and, if applicable, penalties are recognized as a component of income tax expense. The balance of accrued interest and penalties was $35 million at May 31, 2025 and $59 million at May 31, 2024.
It is difficult to predict the ultimate outcome or the timing of resolution for tax positions. Changes may result from the conclusion of ongoing audits, appeals, or litigation in state, local, federal, and foreign tax jurisdictions, or from the resolution of various proceedings between U.S. and foreign tax authorities. It is reasonably possible that the amount of the benefit with respect to certain of our unrecognized tax positions will increase or decrease within the next 12 months. However, estimates of the amounts or ranges for individual matters where a material change is reasonably possible cannot be made. We believe we have recorded adequate amounts of tax reserves, including interest and penalties, for any adjustments that may occur.