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INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
Components of the Company’s income tax provision are as follows:
Year Ended December 31,
202520242023
Current:
Federal$231 $280 $76 
State and Local99 106 67 
Non-U.S.355 316 222 
Total current685 702 365 
Deferred:
Federal35 (21)(14)
State and Local8 (6)(4)
Non-U.S.(60)(35)(20)
Total deferred(17)(62)(38)
Total provision for income taxes$668 $640 $327 
A reconciliation of the U.S. federal statutory tax rate to the Company’s ETR on income before provision for income taxes is as follows:
Year Ended December 31,
202520242023
U.S. statutory tax rate$657 21.0 %$567 21.0 %$406 21.0 %
State and local taxes, net of federal tax benefit (1)
93 3.0 %74 2.7 %49 2.5 %
Net U.S. tax effect of cross-border tax laws(4)(0.1)%(14)(0.5)%2 0.1 %
Other nontaxable or nondeductible items30 1.0 %22 0.9 %4 0.2 %
Excess tax benefits on share-based payments(33)(1.1)%(27)(1.0)%(15)(0.8)%
Tax credits - research credit(12)(0.4)%(15)(0.6)%(19)(0.9)%
Domestic state and local income taxes, net of federal effect731 23.4 %607 22.5 %427 22.1 %
Foreign Tax Expense
Belgium
     Innovation deduction(37)(1.2)%(25)(0.9)%(26)(1.3)%
     Other15 0.4 %3 0.1 %10 0.5 %
United Kingdom11 0.4 %34 1.3 %25 1.2 %
Other foreign jurisdictions3 0.1 %1 — %7 0.4 %
Tax expense (benefit) relating to foreign operations(8)(0.3)%13 0.5 %16 0.8 %
Changes in unrecognized tax benefits(55)(1.8)%20 0.7 %(116)(6.0)%
Total$668 21.3 %$640 23.7 %$327 16.9 %
(1) For all years presented, state taxes in California, New York and New York City made up the majority (greater than 50 percent) of the tax effect in this category.

Components of the Company’s income tax paid are as follows:
Year Ended December 31,
202520242023
U.S. Federal$353 $223 $59 
U.S. State and Local132 88 23 
Total U.S.485 311 82 
Belgium32 39 32 
Canada68 63 44 
Germany43 30 35 
United Kingdom79 93 64 
Other foreign jurisdictions118 77 87 
Total non-U.S.340 302 262 
Total Income Tax Paid$825 $613 $344 

The source of income before provision for income taxes is as follows:
Year Ended December 31,
202520242023
U.S.$1,743 $1,446 $892 
Non-U.S.1,387 1,253 1,043 
Income before provision for income taxes$3,130 $2,699 $1,935 
The components of deferred tax assets and liabilities are as follows:
December 31,
20252024
Deferred tax assets:
Account receivable allowances$10 $10 
Stock-based compensation69 60 
Accrued compensation and benefits52 50 
Capitalized costs43 24 
Operating lease liabilities87 84 
Deferred revenue217 211 
Net operating loss64 58 
Uncertain tax positions30 33 
Loss on net investment hedges - OCI

83 — 
Interest expense carryforward25 20 
Other25 30 
Total deferred tax assets705 580 
Deferred tax liabilities:
Accumulated depreciation and amortization of intangible assets and capitalized software(563)(522)
ROU Assets(67)(56)
Capital gains(14)(13)
Deferred tax on unremitted foreign earnings(21)(20)
Gain on net investment hedges - OCI(4)(82)
Other(16)(18)
Total deferred tax liabilities(685)(711)
Net deferred tax asset and (liabilities)
20 (131)
Valuation allowance(30)(25)
Total net deferred tax liabilities$(10)$(156)
The Company regularly evaluates which entities it will indefinitely reinvest earnings. The Company has provided deferred taxes for those entities whose earnings are not considered indefinitely reinvested.
The Company had valuation allowances of $30 million and $25 million at December 31, 2025 and 2024, respectively, related to foreign net operating losses, for which realization is uncertain.
A reconciliation of the beginning and ending amount of UTPs is as follows:
Year Ended December 31,
202520242023
Balance as of January 1$211 $196 $322 
Additions for tax positions related to the current year22 33 21 
Additions for tax positions of prior years— 11 3 
Reductions for tax positions of prior years(5)(11)(17)
Settlements with taxing authorities— (3)(108)
Lapse of statute of limitations(70)(15)(25)
Balance as of December 31$158 $211 $196 
As of December 31, 2025, the Company had $158 million of UTPs of which $145 million represents the amount that, if recognized, would impact the ETR in future periods.
Moody’s Corporation and subsidiaries are subject to U.S. federal income tax as well as income tax in various state, local and multiple foreign jurisdictions. The Company’s U.S. federal income tax returns for 2022 through 2024 remain open to examination. Currently, the Company's New York State tax returns for 2022 through 2024 are under examination. Additionally, New York City tax returns for the years 2018 through 2022 are also under examination, while returns for 2023 and 2024 are open for examination. Furthermore, the Company's U.K. corporate income tax returns are under audit for the years 2017 through 2023, with the 2024 return still open for examination.
The Company classifies interest related to UTPs in interest expense in its consolidated statements of operations. Penalties, if incurred, are recognized in other non-operating (expense) income, net. Refer to Note 16 for disclosure of interest (expense) income relating to UTPs and other tax-related liabilities. As of December 31, 2025, 2024, and 2023 the amount of accrued interest recorded in the Company’s consolidated balance sheets related to UTPs was $43 million, $47 million and $36 million, respectively.
In the fourth quarter of 2025, pursuant to a lapse of a statute of limitations, the Company reversed $64 million in reserves (and $15 million in related interest accruals) for uncertain tax positions that were assumed as part of a prior year M&A transaction, for which the sellers had indemnified Moody's. This tax benefit and related reduction to Interest expense, net is offset by the release of the related indemnification asset within Other non-operating income, net, with no impact to net income. In 2023, settlements with taxing authorities were primarily attributable to the favorable resolution of UTPs across various U.S. and non-U.S. jurisdictions.
Tax Legislation
Effective in 2024, multiple foreign jurisdictions in which the Company operates have enacted legislation to adopt a minimum tax rate described in the Global Anti-Base Erosion tax model rules (referred to as GloBE or Pillar II) issued by the OECD. A minimum ETR of 15% would apply to multinational companies with consolidated revenue above €750 million. Under the GloBE rules, a company would be required to determine a combined ETR for all entities located in a jurisdiction. If the jurisdictional tax rate is less than 15%, an additional tax generally will be due to bring the jurisdictional effective tax rate up to 15%. The Pillar II minimum tax did not have a material impact on the Company's results of operations or financial position.
On July 4, 2025, the One Big Beautiful Bill Act was enacted in the U.S. Key provisions of the OBBBA include making permanent certain aspects of the Tax Act, modifying certain international tax rules, and restoring provisions that accelerate deductions for certain business investments and expenditures. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented in subsequent years. The OBBBA did not have material impact on the Company’s consolidated financial statements for the year ended December 31, 2025, and the Company does not expect the changes to have a material impact on the provision for income taxes or net income in future periods.