Income Taxes

6 Months Ended

Jun. 30, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The effective income tax rate was 22.8% and 22.2% for the three and six months ended June 30, 2025, respectively, and 21.3% and 20.1% for the three and six months ended June 30, 2024, respectively. The higher 2025 rates are due to both a change in mix of income by jurisdiction and benefits from discrete adjustments in 2024.

At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary quarterly earnings. The tax expense or benefit related to significant unusual or infrequently occurring items that will be separately reported or reported net of their related tax effect, and are individually computed, is recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates or tax status is recognized in the interim period in which the change occurs.

The Company is subject to tax examinations in various jurisdictions. As of June 30, 2025 and December 31, 2024, the total amount of federal, state and local, and foreign unrecognized tax benefits was $348 million and $325 million, respectively, exclusive of interest and penalties. We recognize accrued interest and penalties related to unrecognized tax benefits in interest expense and operating-related expense, respectively. As of June 30, 2025 and December 31, 2024, we had $85 million and $65 million, respectively, of accrued interest and penalties associated with unrecognized tax benefits. Based on the current status of income tax audits, we believe that the total amount of unrecognized tax benefits may decrease by approximately $12 million in the next twelve months as a result of the resolution of local tax examinations.

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (“OBBBA”). The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act, as well as modifying certain international tax provisions. Accounting Standards Codification (“ASC”) 740, Income Taxes, requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted. Consequently, as of the date of enactment, and during the three months ended September 30, 2025, the Company will evaluate all deferred tax balances under the newly enacted tax law and identify any other changes required to its financial statements as a result.

The Organization for Economic Co-operation and Development (“OECD”) introduced an international tax framework under Pillar Two which includes a global minimum tax of 15%. This framework has been implemented by several jurisdictions, including jurisdictions in which we operate, with effect from January 1, 2024, and many other jurisdictions, including jurisdictions in which we operate, are in the process of implementing it. The effect of enacted Pillar Two taxes has been included in the results disclosed and did not have a significant impact on our consolidated financial statements.

In June 2025, G7 reached an agreement with the U.S. regarding the application of the OECD global minimum tax rules to U.S. companies, which would exempt U.S. companies from OECD’s global minimum tax rules, and in return the U.S. withdrew proposed section 899 from OBBBA, which would have imposed retaliatory taxes on non-U.S. businesses. We are continuing to monitor implementation dates of this agreement and will be evaluating the impact on our financial statements once more details are available.