Income taxes

6 Months Ended

Jun. 30, 2025

Income Tax Disclosure [Abstract]

Income taxes

Income taxes

The effective income tax rate including discrete items for the three and six months ended June 30, 2025 was 22.45% and 23.26%, respectively, compared to 24.40% and 24.72%, respectively for the same periods in 2024.

For the three months ended June 30, 2025, the effective income tax rate was 24.50%, excluding the discrete items of a gain on sale of an equity investment of $333 million, amortization of the fair value adjustments associated with purchase accounting of $96 million related to the Kansas City Southern ("KCS") acquisition, and acquisition-related costs of $19 million related to the KCS acquisition.

For the three months ended June 30, 2024, the effective income tax rate was 25.00%, excluding the discrete items of amortization of the fair value adjustments associated with purchase accounting of $88 million related to the KCS acquisition, acquisition-related costs of $28 million related to the KCS acquisition, and a deferred tax recovery of $3 million on the Arkansas state corporate income tax rate change.

For the six months ended June 30, 2025, the effective tax rate was 24.50%, excluding the discrete items of a gain on sale of an equity investment of $333 million, amortization of the fair value adjustments associated with purchase accounting of $190 million related to the KCS acquisition, and acquisition-related costs of $39 million related to the KCS acquisition.

For the six months ended June 30, 2024, the effective tax rate was 25.00%, excluding the discrete items of amortization of the fair value adjustments associated with purchase accounting of $174 million related to the KCS acquisition, acquisition-related costs of $54 million related to the KCS acquisition, adjustments to provisions and settlements of Mexican taxes of $10 million recognized in "Compensation and benefits", and a deferred tax recovery of $3 million on the Arkansas state corporate income tax rate change.

Mexican Tax Settlements

During the six months ended June 30, 2025, the Company received final audit letters for Kansas City Southern de México, S.A. de C.V. (also known as Canadian Pacific Kansas City Mexico) ("CPKCM") for 2021 and a payment of $11 million was made in respect of that year.

2014 Tax Assessment

CPKCM's 2014 Tax Assessment is currently in litigation (see Note 14).