Income Taxes

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The components of Earnings/(loss) before income taxes were:

Years ended December 31,	2025	2024	2023
U.S.	($3,492)	($12,813)	($2,512)
Non-U.S.	6,127	603	507
Total	$2,635	($12,210)	($2,005)

Income tax (benefit)/expense consisted of the following:

Years ended December 31,	2025	2024	2023
Current tax expense/(benefit)
U.S. federal	$2	($277)	$9
Non-U.S.	287	184	179
U.S. state	9	14	19
Total current	298	(79)	207
Deferred tax expense/(benefit)
U.S. federal	40	(71)	6
Non-U.S.	(25)	3	5
U.S. state	84	(234)	19
Total deferred	99	(302)	30
Total income tax expense/(benefit)	$397	($381)	$237

Net income tax payments in 2025 were as follows:

Year ended December 31,	2025
U.S. federal	$37
U.S. state	(5)
Non-U.S.
Germany	83
Other	160
Total Non-U.S.	243
Total net income tax payments	$275

Net income tax payments were $187 and $204 in 2024 and 2023.

The following is a reconciliation of the U.S. federal statutory tax to actual income tax expense:

Year ended December 31,	2025
	Amount	Rate
U.S. federal statutory tax	$553	21.0	%
State and local income tax, net of federal income tax effect (1)	73	2.8
Foreign tax effects
Germany - Digital Aviation Solutions Divestiture (2)	(751)	(28.5)
Sweden - Digital Aviation Solutions Divestiture (2)	(393)	(14.9)
Other foreign	121	4.6
Effect of cross-border tax laws - Global Intangible Low-Taxed Income - Digital Aviation Solutions Divestiture (3)	1,242	47.1
Tax Credits - Research and development credits	(559)	(21.2)
Changes in valuation allowances (4)	(50)	(1.9)
Nontaxable or nondeductible items
Non-prosecution agreement liability	93	3.5
Digital Aviation Solutions Divestiture	(61)	(2.3)
Changes in prior year worldwide unrecognized tax benefits	69	2.6
Other provision adjustments	60	2.3
Income tax expense	$397	15.1	%

(1)    During the year ended December 31, 2025, the tax effect in this category was primarily driven by state taxes in California (greater than 50 percent).

(2)    We recorded a tax expense of $59 in the foreign jurisdictions related to the Digital Aviation Solutions Divestiture. The German Digital Aviation Solutions Divestiture rate benefit was due to the statutory rate difference of ($203) (7.7)% and a participation exemption of ($548) (20.8)%. The Swedish rate benefit was entirely due to a participation exemption.

(3)    Related to the Digital Aviation Solutions Divestiture, in the U.S., we recorded a Global Intangible Low-Taxed Income inclusion, which is offset by a decrease in the federal valuation allowance, resulting in no federal tax expense.

(4)    The worldwide valuation allowance recorded in tax expense was $120 with $50 federal tax benefit shown on this line, $161 state tax expense included in State and Local Tax line item, and $9 foreign tax expense included in Foreign Tax Effects.

Years ended December 31,	2024			2023
	Amount	Rate		Amount	Rate
U.S. federal statutory tax	($2,564)	21.0	%	($421)	21.0	%
Valuation allowance	3,145	(25.8)		1,150	(57.3)
Federal audit settlement(1)	(490)	4.0
Research and development credits	(409)	3.3		(472)	23.6
State income tax provision, net of effects on U.S. federal tax	(223)	1.8		(75)	3.7
Tax on non-U.S. activities	113	(0.9)		35	(1.8)
Impact of subsidiary shares purchased from noncontrolling interests				(29)	1.5
Other provision adjustments	47	(0.3)		49	(2.5)
Income tax (benefit)/expense	($381)	3.1	%	$237	(11.8)	%

(1)     In the second quarter of 2024, we recorded a tax benefit of $490 related to the settlement of the 2018-2020 federal tax audit, which excludes an associated $155 valuation expense that is recorded in the Valuation allowance line.

Significant components of our deferred tax assets/(liabilities) at December 31 were as follows:

	2025	2024
Federal net operating loss, credit, interest and other carryovers(1)	$9,569	$4,719
Inventory and long-term contract methods of income recognition	(5,584)	(4,765)
State net operating loss, credit, interest and other carryovers(2)	2,035	1,353
Fixed assets, intangibles and goodwill	(1,847)	(1,526)
Accrued expenses and reserves	1,512	1,029
Other employee benefits	1,313	1,049
Pension benefits	880	1,045
International net operating loss, credit and capital loss carryovers	598	70
Other postretirement benefit obligations	562	587
Research Expenditures	278	3,936
Other	329	403
Gross deferred tax assets before valuation allowance	9,645	7,900
Valuation allowance	(9,754)	(7,837)
Net deferred tax (liabilities)/assets after valuation allowance	($109)	$63

(1)     Of the deferred tax asset for federal net operating loss, credit, interest and other carryovers, $2,332 expires on or before December 31, 2045 and $7,237 may be carried over indefinitely.

(2)     Of the deferred tax asset for state net operating loss, credit, interest and other carryovers, $1,035 expires on or before December 31, 2045 and $1,000 may be carried over indefinitely.

Net deferred tax (liabilities)/assets at December 31 were as follows:

	2025	2024
Deferred tax assets	$21,065	$17,991
Deferred tax liabilities	(11,420)	(10,091)
Valuation allowance	(9,754)	(7,837)
Net deferred tax (liabilities)/assets	($109)	$63

The Company’s deferred income tax assets of $21,065 can be used in future years to offset taxable income and reduce income taxes payable. The Company’s deferred income tax liabilities of $11,420 will partially offset deferred income tax assets and result in higher taxable income in future years and increase income taxes payable. Tax law determines whether future reversals of temporary differences will result in taxable and deductible amounts that offset each other in future years. The particular years in which temporary differences result in taxable or deductible amounts generally are determined by the timing of the recovery of the related asset or settlement of the related liability. The deferred income tax assets and liabilities relate primarily to U.S. federal and state tax jurisdictions. From a U.S. federal tax perspective, the Company generated tax net operating losses in 2021, 2024 and 2025 and interest carryovers in 2021 through 2025 that can be carried forward indefinitely and federal research and development credits that can be carried forward 20 years.

Throughout 2024 and 2025, the Company was in a three-year cumulative pre-tax loss position. For purposes of assessing the recoverability of deferred tax assets, the Company determined that it could not include future projected earnings in the analysis due to recent history of losses.

As of December 31, 2025 and 2024, the Company has recorded valuation allowances of $9,754 and $7,837 primarily for certain domestic deferred tax assets, and certain domestic net operating losses, tax credit and interest carryforwards. To measure the valuation allowance, the Company estimated in what year each of its deferred tax assets and liabilities would reverse using systematic and logical methods to estimate the reversal patterns. The valuation allowance results from not having sufficient income from deferred tax liability reversals in the appropriate future periods to support the realization of deferred tax assets.

In 2025, the Company’s valuation allowance increased by $1,917, primarily reflecting $1,833 recorded as part of acquisition accounting against acquired Spirit deferred tax assets, as well as tax credits and other carryforwards generated in 2025 that cannot be realized in 2025.

Until the Company generates sustained levels of profitability, additional valuation allowances may have to be recorded with corresponding adverse impacts on earnings and/or OCI.

Beginning in 2024, we determined that earnings from our non-U.S. subsidiaries are no longer considered to be indefinitely reinvested.

As of December 31, 2025 and 2024, the amounts accrued for the payment of income tax-related interest and penalties included in the Consolidated Statements of Financial Position were not significant. The amounts of interest included in the Consolidated Statements of Operations were not significant for 2025, 2024 and 2023.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2025	2024	2023
Unrecognized tax benefits – January 1	$688	$1,131	$915
Gross increases – tax positions in prior periods	84		38
Gross decreases – tax positions in prior periods	(4)	(453)	(3)
Gross increases – current period tax positions	253	216	181
Gross decreases – current period tax positions
Settlements		(206)
Unrecognized tax benefits – December 31	$1,021	$688	$1,131

As of December 31, 2025, 2024 and 2023, the total amount of unrecognized tax benefits include $975 $651 and $1,088, respectively, that would affect the effective tax rate, if recognized. As of December 31, 2025, these amounts were primarily associated with the amount of research tax credits claimed.

Federal income tax audits have been settled for all years prior to 2021. We expect the next cycle to cover the 2021-2023 tax years; however, the Internal Revenue Service has not confirmed a start date. We are also subject to examination in major state and international jurisdictions for the 2010-2024 tax years. We believe appropriate provisions for all outstanding tax issues have been made for all jurisdictions and all open years.

The Organization for Economic Co-operation and Development (OECD) has issued Pillar Two model rules, introducing a new global minimum tax of 15%. While the United States has not adopted Pillar Two, other countries have enacted such legislation or are considering implementation. Given our limited operations in low-tax jurisdictions, Pillar Two has not materially increased our global tax costs. On January 5, 2026, the OECD released a comprehensive package for a “side-by-side arrangement” with respect to Pillar Two. Notably, once adopted, this new guidance will prevent other countries from imposing tax on the U.S. profits of American companies. We will continue to monitor U.S. and international legislative developments, including further announcements on the Side-by-Side package, to assess any potential impacts on our operations.

On July 4, 2025, the President signed into law the One Big Beautiful Bill Act (OBBBA). The OBBBA maintains the 21 percent corporate tax rate and makes permanent many of the beneficial expired and expiring tax provisions originally enacted in the Tax Cuts and Jobs Act of 2017, including the immediate expensing of domestic research and development expenditures, more favorable interest deductibility and 100 percent bonus depreciation with effective dates in 2025. Revisions to the international tax framework are effective in 2026. In the third quarter of 2025, we recorded impacts of the OBBBA, which were not material. In the fourth quarter of 2025, we elected to accelerate into 2025 the deduction of domestic research and development expenditures capitalized and unamortized as of December 31, 2024.