Income tax provision in EBIT
The income tax provision is added back when bridging Net Income to EBIT because EBIT is a pre-tax measure. Use the provision as reported (current plus deferred). Disclose any one-off items if computing Adjusted EBIT[FASB ASC].
Current vs deferred
- Current tax: the amount payable to tax authorities for the current period.
- Deferred tax: the timing difference between book and tax, recorded on the balance sheet as a deferred tax asset or liability.
- The income statement provision is the sum of both.
One-off items
- DTA release: when a company becomes confident of future taxable income, it can recognise previously-reserved DTAs as a benefit. Lumpy.
- Repatriation tax: one-off transition charge on accumulated foreign earnings (TCJA 2017 was the big example).
- Settlement of tax disputes: lumpy benefit or charge.
Document any one-off in the Adjusted EBIT reconciliation[Reg G].
GILTI and BEAT
GILTI (Global Intangible Low-Taxed Income) and BEAT (Base Erosion and Anti-abuse Tax) are 2017 TCJA mechanisms that affect the consolidated US tax provision. Both flow into the "Provision for income taxes" line and are therefore inside the standard EBIT bridge. No special treatment.
See bottom-up method and Microsoft FY25.