What explains the significant variance in KDP's income tax expenses across quarters?

The significant variance in Keurig Dr Pepper's (KDP) income tax expenses across quarters can be attributed to several factors: 1. **Tax Rate Variations**: The tax rate that KDP pays on its income can fluctuate from quarter to quarter due to changes in the company's tax strategy or the application of different tax rates in different jurisdictions. For instance, the tax rate for the most recent quarter (2024 Q4) was 0.07, which resulted in a tax expense of -$10 million, while the previous quarter (2024 Q3) had a tax rate of 0.15, leading to a tax expense of $186 million. 2. **Income Variations**: The net income of KDP can vary significantly from quarter to quarter, which directly impacts the income tax expense. For example, in the recent quarter (2024 Q4), KDP reported a net income of -$144 million, while in the previous quarter (2024 Q3), the net income was $902 million. A lower net income leads to a lower income tax expense, even with the same tax rate. 3. **Non-Deductible Expenses**: The presence of non-deductible expenses, such as those related to capitalized interest or certain executive compensation, can also affect the income tax expense. These expenses are not deductible, thus reducing the taxable income and the corresponding tax expense. 4. **Tax Planning Strategies**: Companies often employ tax planning strategies to minimize their tax burden, which can involve timing income or expenses to offset against future income in higher-tax years. KDP's use of life insurance for tax planning, as described in the abstract of the article, is an example of such a strategy. The effectiveness of these strategies can vary from quarter to quarter, influencing the income tax expense. 5. **One-Time Items**: Occasionally, income tax expenses can be influenced by one-time items such as the recognition of capital gains or losses, which are not recurring and can lead to significant fluctuations in the income tax expense. In conclusion, the variance in income tax expenses for KDP can be attributed to a combination of factors including changes in tax rates, variations in income, non-deductible expenses, tax planning strategies, and one-time items. These factors can lead to significant fluctuations in the income tax expense from quarter to quarter.