INCOME TAXES

12 Months Ended

Nov. 02, 2025

INCOME TAXES

INCOME TAXES

NOTE 14. INCOME TAXES

We are subject to income taxes in a number of jurisdictions. We determine our income tax provision using the asset and liability method. The provision for income taxes by taxing jurisdiction and by significant component consisted of the following:

	2025		2024		2023
Current:
U.S.:
Federal	$	54.2	$	234.4	$	(98.6)
State		13.0		24.8		(33.7)
Foreign		47.8		50.8		41.0
Total current		115.0		310.0		(91.3)
Deferred:
U.S.:
Federal		91.8		(138.0)		230.6
State		(1.1)		(16.5)		29.1
Foreign		(3.8)		(4.7)		(2.5)
Total deferred		86.9		(159.2)		257.2
Provision for income taxes	$	201.9	$	150.8	$	165.9

Based upon the location of our operations, the consolidated income before income taxes in the U.S. in 2025, 2024, and 2023 was $803.2, $643.2, and $675.9, respectively, and in foreign countries was $97.3, $84.2, and $57.9, respectively.

Our taxable income is included in the consolidated U.S. income tax return and various state returns of Deere & Company. Under tax sharing arrangements with Deere & Company, our provision for income taxes is generally recorded as if Capital Corporation and each of our subsidiaries filed separate income tax returns, with a modification for realizability of certain tax benefits. In 2025, we recorded a tax benefit under the tax sharing agreement that was $21.1 higher than an unmodified, separate return basis. The additional tax benefit is related to foreign tax credits which could not be utilized now or in the future on a separate return basis. The difference between the provision for income taxes recorded by us and the provision for income taxes calculated on an unmodified, separate return basis was not significant in 2024 or 2023.

The amounts due from (payable to) Deere & Company under the tax sharing arrangements at November 2, 2025 and October 27, 2024 were as follows:

	2025		2024
Tax sharing receivables	$	.2
Tax sharing payables		(47.1)	$	(42.4)

The tax sharing receivables are included in “Other receivables” and the payables are included in “Accounts payable and accrued expenses.”

A comparison of the statutory and effective income tax provision and reasons for related differences follows:

	2025		2024		2023
U.S. federal income tax provision at a statutory rate (21%)	$	189.1	$	152.8	$	154.1
Increase (decrease) resulting from:
Rate differential on foreign subsidiaries		5.7		3.5		1.4
State and local taxes, net of federal effect		9.8		3.4		.4
Other - net		(2.7)		(8.9)		10.0
Provision for income taxes	$	201.9	$	150.8	$	165.9

At November 2, 2025, undistributed profits of subsidiaries outside the U.S. of approximately $164.5 are considered indefinitely reinvested. Determination of the amount of foreign withholding tax liability on these unremitted earnings is not practicable.

Deferred income taxes arise because there are certain items that are treated differently for financial accounting than for income tax reporting purposes. An analysis of deferred income tax assets and liabilities at November 2, 2025 and October 27, 2024 was as follows:

	2025				2024
	Deferred		Deferred		Deferred		Deferred
	Tax		Tax		Tax		Tax
	Assets		Liabilities		Assets		Liabilities
Lease transactions	$	.3	$	532.5	$	.2	$	437.1
Accrual for retirement and other benefits				4.1		1.0
Accrual for other employee benefits		12.5				19.7
Allowance for credit losses		83.7				71.1
Net unrealized gain/loss on derivatives/investments		6.7				6.5
Tax loss and tax credit carryforwards		14.9				14.8
Federal taxes on deferred state tax deductions		11.6				8.4
Miscellaneous accruals and other		66.4		7.1		76.5		12.2
Less valuation allowances						(4.6)
Total	$	196.1	$	543.7	$	193.6	$	449.3

At November 2, 2025, tax loss and tax credit carryforwards of $14.9 were available, with $13.1 expiring from 2026 through 2045 and $1.8 with an indefinite carryforward period.

A reconciliation of unrecognized tax benefits at November 2, 2025, October 27, 2024, and October 29, 2023 was as follows:

	2025		2024		2023
Beginning of year balance	$	59.8	$	44.4	$	36.5
Increases to tax positions taken during the current year		18.1		19.2		15.0
Increases to tax positions taken during prior years		3.5		4.4		3.2
Decreases to tax positions taken during prior years		(22.2)		(7.7)		(6.9)
Decreases due to lapse of statute of limitations						(2.6)
Settlements				(.5)		(.8)
End of year balance	$	59.2	$	59.8	$	44.4

The amount of unrecognized tax benefits at November 2, 2025 and October 27, 2024 that would impact the effective tax rate if the tax benefits were recognized was $24.5 and $31.9, respectively. The remaining liability was related to tax positions for which there are offsetting tax receivables, or the uncertainty was only related to timing. We expect that any reasonably possible change in the amounts of unrecognized tax benefits in the next twelve months would not be significant.

We file our tax returns according to the tax laws of the jurisdictions in which we operate, which includes the U.S. federal jurisdiction and various state and foreign jurisdictions. We are included in the consolidated U.S. income tax return and various state returns of Deere & Company. The U.S. Internal Revenue Service has completed the examination of Deere & Company’s federal income tax returns for periods prior to 2015. The federal income tax returns for years 2015 to 2020 are currently under examination. Various state and foreign income tax returns also remain subject to examination by taxing authorities.

Our policy is to recognize interest related to income taxes in “Interest expense” and “Other income,” and recognize penalties in “Administrative and operating expenses.” The amount of interest and penalties recognized was not significant for any of the periods presented. At November 2, 2025 and October 27, 2024, the liability for accrued interest and penalties totaled $12.7 and $11.7, respectively.