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INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES
INCOME TAXES
Income (Loss) Before Income Tax Expense (Benefit) by Category
years ended December 31 (in millions)202520242023
United States$(1,345)$(1,499)$(1,057)
Foreign840 1,210 1,299 
Income (loss) from continuing operations before income taxes$(505)$(289)$242 
Income Tax Expense (Benefit)
years ended December 31 (in millions)202520242023
Current
United States
Federal$118 $19 $1 
State and local29 21 9 
Foreign171 259 307 
Current income tax expense (benefit)318 299 317 
Deferred
United States
Federal(34)(197)(123)
State and local37 (21)(25)
Foreign74 (44)(108)
Deferred income tax expense (benefit)77 (262)(256)
Income tax expense (benefit)$395 $37 $61 
On July 4, 2025, the United States enacted the One Big Beautiful Bill Act (OBBBA), which includes significant tax provisions, including extensions of key provisions from the 2017 Tax Cuts and Jobs Act and modifications to the U.S. international tax framework. The legislation has multiple effective dates, with certain provisions effective in 2025 and others to be implemented through 2027. The impact of the OBBBA legislation on our income tax expense for the year ending December 31, 2025 was not material. We will continue to monitor regulatory guidance and interpretations as they are issued.
Deferred Tax Assets and Liabilities
as of December 31 (in millions)20252024
Deferred tax assets
Accrued liabilities and other$403 $310 
Pension and other postretirement benefits124 131 
Tax credit and net operating loss carryforwards433 750 
Swiss tax reform net asset basis step-up103 92 
Operating lease liabilities66 139 
Valuation allowances(543)(536)
Total deferred tax assets586 886 
Deferred tax liabilities
Unremitted earnings of subsidiaries33 21 
Long-lived assets and other536 632 
Operating lease right-of-use assets62 132 
Total deferred tax liabilities631 785 
Net deferred tax asset (liability)$(45)$101 
At December 31, 2025, we had U.S. state operating loss carryforwards totaling $70 million, U.S. federal operating loss carryforwards totaling $9 million and tax credit carryforwards totaling $277 million, which includes a U.S. foreign tax credit carryforward of $235 million. The U.S. federal and state operating loss and tax credit carryforwards expire between 2026 and 2045, with $13 million of the operating loss carryforwards having no expiration date.
At December 31, 2025, with respect to our operations outside the U.S., we had operating loss carryforwards totaling $69 million and tax credit carryforwards totaling $16 million. The non-U.S. operating loss carryforwards expire between 2026 and 2044 with $47 million having no expiration date. All of the non-U.S. tax credit carryforwards have no expiration date.
Realization of the U.S. and foreign operating loss and tax credit carryforwards depends on generating sufficient future earnings. During 2025, because of a cumulative history of operating losses in the U.S., we recorded a valuation allowance against our U.S. deferred tax assets, including certain federal and state tax attributes such as foreign tax credits. Additionally, we recorded additional valuation allowance against deferred tax assets in Switzerland related to the tax basis step-up we received in connection with the 2019 Swiss tax reform. We also determined that certain tax losses in Malta would not be realizable due to legal entity restructuring activities and reduced our tax attributes and valuation allowance for the Malta losses accordingly.
The following table is a summary of changes in our deferred tax valuation allowance for the years ended December 31, 2025, 2024 and 2023.
years ended December 31 (in millions)202520242023
Balance at beginning of period$536 $584 $631 
Charged to income tax expense309 48 87 
Deductions(349)(73)(139)
Currency translation adjustments47 (23)5 
Balance at end of period$543 $536 $584 
Income Tax Expense (Benefit) Reconciliation
As discussed in Note 1, Summary of Significant Accounting Policies, we have elected to prospectively adopt the guidance in ASU 2023-09. The following table is a reconciliation of the income tax expense (benefit) at the U.S. statutory rate to our income tax expense (benefit) for the year ended December 31, 2025.
year ended December 31 (in millions)2025%
Income tax expense (benefit) at U.S. statutory rate$(106)21.0 %
State and local income taxes, net of federal (national) income tax effect1
62 (12.3)%
Foreign tax effects
Costa Rica
Local tax incentive rate(23)4.6 %
Other10 (2.0)%
Netherlands26 (5.1)%
Puerto Rico
Local tax incentive rate(19)3.8 %
Other9 (1.8)%
Switzerland
Changes in valuation allowances54 (10.7)%
Other(5)1.0 %
Other jurisdictions37 (7.3)%
Effect of cross-border tax laws
Global intangible low taxed income, net of tax credits18 (3.6)%
Effect of internal reorganization(56)11.1 %
Other(8)1.6 %
Tax credits
Foreign tax credits(24)4.8 %
Research and development tax credits(18)3.6 %
Changes in valuation allowances88 (17.4)%
Nontaxable or Non-deductible items
Non-deductible goodwill impairment90 (17.8)%
Other, net15 (3.0)%
Changes in unrecognized tax benefits246 (48.7)%
Other adjustments
Other, net(1)0.2 %
Income tax expense (benefit)$395 (78.2)%
1 State taxes in IL, IN, CA, and PA made up the majority (greater than 50 percent) of the tax effect in this category.
The following table is a reconciliation of the income tax expense (benefit) at the U.S. statutory rate to our income tax expense (benefit) for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09.
years ended December 31 (in millions)20242023
Income tax expense (benefit) at U.S. statutory rate$(61)$51 
Tax incentives(176)(200)
State and local taxes, net of federal benefit(9)(2)
Impact of foreign taxes137 190 
Non-deductible goodwill impairments86 — 
Notional interest deduction expense (benefit)(37)31 
Valuation allowances(25)(51)
Stock compensation (windfall) shortfall tax expense (benefit)9 10 
Research and development tax credits(19)(17)
Uncertain tax positions9 6 
Unutilized foreign tax credits15 32 
Subpart F income18 26 
Foreign tax credits(5)(7)
Pillar Two taxes11 — 
Revaluation of Swiss basis step-up deferred tax asset58 — 
Tax law changes on Section 98717 — 
Other, net9 (8)
Income tax expense (benefit)$37 $61 
Our effective income tax rate can differ from the 21% U.S. federal statutory rate due to a number of factors, including tax incentives, foreign rate differences, state income taxes, non-deductible expenses, non-taxable income, increases or decreases in valuation allowances and liabilities for uncertain tax positions, excess tax benefits or shortfalls on stock compensation awards, audit developments and legislative changes.
In 2025, the difference between our effective income tax rate and the U.S. federal statutory rate was primarily driven by an increase in liabilities for uncertain tax positions, an increase in the valuation allowance related to the realizability of our deferred tax assets, changes in the treatment of accumulated earnings that are considered indefinitely reinvested as of December 31, 2025 and a tax benefit driven by an entity classification election that we made for U.S. tax purposes, which resulted in a capital loss for the period.
In 2024, the difference between our effective income tax rate and the U.S. federal statutory rate was adversely impacted by a non-deductible impairment of goodwill and legislative changes under IRC Section 987 (which is the exchange gain or loss on foreign branch remittances in the U.S., effective in 2024), and a net revaluation of the Swiss basis step-up deferred tax asset and related valuation allowance that arose from Swiss tax reform legislation in 2019, partially offset by a favorable geographic earnings mix, a decrease in valuation allowance mainly related to U.S. foreign tax credit carryforward, and a tax benefit related to research and development tax credits.

In 2023, our effective income tax rate was impacted favorably by geographic earnings mix, a $50 million net tax benefit after related valuation allowances from notional interest deductions that are received by certain wholly-owned foreign subsidiaries that have financed their operations with equity capital and a $17 million tax benefit related to research and development tax credits, partially offset by tax shortfalls on stock compensation awards.
Certain of our unremitted foreign earnings are considered to be indefinitely reinvested. The determination of taxes that would be incurred upon the future remittance of such earnings is not practicable.
Our tax provisions for 2025, 2024 and 2023 do not include any significant tax charges related to either the Base Erosion and Anti-Abuse Tax (BEAT) or Global Intangible Low Taxed Income (GILTI) provisions, except for the inability to fully utilize foreign tax credits against such GILTI. Our accounting policy is to recognize any GILTI charge as a period cost.
Unrecognized Tax Benefits
We classify interest and penalties associated with income taxes in income tax expense (benefit) within the consolidated statements of income (loss). Net interest and penalties recognized were not significant during 2025, 2024 and 2023. The liability recognized related to interest and penalties was $15 million and $21 million as of December 31, 2025 and 2024, respectively. The total amount of gross unrecognized tax benefits that, if recognized, would impact the effective tax rate are $110 million, $51 million and $47 million as of December 31, 2025, 2024 and 2023, respectively.
The following table is a reconciliation of our unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023. 
as of and for the years ended (in millions)202520242023
Balance at beginning of the year$96 $89 $87 
Increase associated with tax positions taken during the current year5 10 9 
Increase (decrease) associated with tax positions taken during a prior year258 5 3 
Settlements— (1)(2)
Decrease associated with lapses in statutes of limitations(30)(7)(8)
Balance at end of the year$329 $96 $89 
Of the gross unrecognized tax benefits, $109 million and $39 million were recognized as liabilities in the consolidated balance sheets as of December 31, 2025 and 2024, respectively.
Tax Incentives
We have received tax incentives in Puerto Rico, Dominican Republic, Costa Rica, and Switzerland. The financial impact of the reductions as compared to the statutory tax rates is indicated in the income tax expense (benefit) reconciliation table above. The tax reductions as compared to the local statutory rate favorably impacted earnings (loss) by $57 million in 2025, $176 million in 2024, and $200 million in 2023, and favorably impacted earnings (loss) per diluted share by $0.11 in 2025, $0.34 in 2024 and $0.39 in 2023. The Switzerland incentive program expired at the end of 2024 and therefore did not provide any benefit in 2025, however did contribute to the benefits recognized in 2024 and 2023. The other tax incentives provide that our manufacturing operations are and will be partially exempt from local taxes with varying expirations from 2025 to 2034.
Examinations of Tax Returns
As of December 31, 2025, we had ongoing audits in the United States, Belgium, Germany, Italy and other jurisdictions. We are currently under examination by the Internal Revenue Service (IRS) for transfer pricing matters related to transactions with our manufacturing operations in Costa Rica and Puerto Rico for the 2019 and 2020 tax years. While we have not yet received a final Notice of Proposed Adjustment (NOPA) from the IRS, the examination is ongoing, and we are in the process of responding to inquiries from, and engaging in ongoing discussions with, the IRS related to certain intercompany transactions between our U.S. entities and these foreign manufacturers. As a result, we have recorded reserves for uncertain tax positions related to these transfer pricing matters for tax years 2019 through 2025. These reserves in aggregate are recorded to expense for approximately $280 million, exclusive of any potential penalties and interest. While we believe that our transfer pricing positions are well documented, properly supported, and adequate amounts have been reserved to account for any adjustments that may ultimately result from this examination, the ultimate outcome of this matter is uncertain (upon the receipt of a final NOPA or otherwise).
Tax years 2012 and forward remain open to examination by various foreign taxing authorities. While the final outcome of these matters is inherently uncertain, we believe we have made adequate tax provisions for all years subject to examination.