XML 39 R21.htm IDEA: XBRL DOCUMENT v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following table sets forth the geographic split of earnings before income taxes (in millions).
Year Ended December 31
 202520242023
United States$(192)$656 $1,844 
Foreign1,447 1,599 2,450 
Total Earnings Before Income Taxes
$1,255 $2,255 $4,294 



Significant components of income tax expense are as follows (in millions):
Year Ended December 31
 202520242023
Current expense (benefit)
 
Federal$(102)$108 $291 
State19 8 47 
Foreign310 490 513 
$227 $606 $851 
Deferred (benefit) expense
 
Federal(46)(99)(52)
State(27)6 (10)
Foreign28 (37)39 
$(45)$(130)$(23)
Income tax expense
$182 $476 $828 
Significant components of deferred tax liabilities and assets are as follows (in millions):
December 31, 2025December 31, 2024
Deferred tax liabilities 
Property, plant, and equipment$758 $808 
Intangibles330 343 
Right of use assets313 317 
Equity in earnings of affiliates195 236 
Debt exchange47 49 
Reserves and other accruals28 133 
Other36 30 
 $1,707 $1,916 
Deferred tax assets 
Pension and postretirement benefits$85 $95 
Inventories12 12 
Lease liabilities320 323 
Stock compensation22 36 
Foreign tax loss carryforwards503 386 
Foreign capital loss carryforwards
45 41 
State tax attributes32 23 
US carryforwards
113 196 
Other81 111 
Gross deferred tax assets1,213 1,223 
Valuation allowances(292)(223)
Net deferred tax assets$921 $1,000 
Net deferred tax liabilities$786 $916 
The net deferred tax liabilities are classified as follows: 
Non-current assets
$349 $352 
Non-current liabilities
(1,135)(1,268)
 $(786)$(916)

Net Operating Losses and Valuation Allowances

The Company had $503 million and $386 million of tax assets related to net operating loss carryforwards of certain international subsidiaries at December 31, 2025 and 2024, respectively. As of December 31, 2025, approximately $436 million of these assets have no expiration date, and the remaining $67 million expire at various times through fiscal 2034. The annual usage of certain of these assets is limited to a percentage of taxable income of the respective foreign subsidiary for the year. The Company has recorded a valuation allowance of $233 million and $166 million against these tax assets at December 31, 2025 and 2024, respectively, due to the uncertainty of their realization.

The Company had $45 million and $41 million of tax assets related to foreign capital loss carryforwards as of December 31, 2025 and 2024, respectively. The Company recorded a valuation allowance of $45 million and $41 million against these tax assets as of December 31, 2025 and 2024, respectively, due to the uncertainty of their realization.
The Company had $113 million of tax assets related to U.S. income tax attributes at December 31, 2025, of which $72 million will expire between 2029 and 2034, and the remaining $41 million will expire in 2044.

The Company had $32 million and $23 million of tax assets related to state income tax attributes (incentive credits and net operating loss carryforwards), net of federal tax benefit, at December 31, 2025 and 2024, respectively, a majority of which will expire between 2026 and 2030. Due to the uncertainty of realization, the Company recorded a valuation allowance of $14 million and $16 million related to state income tax assets net of federal tax benefit as of December 31, 2025 and 2024, respectively.

In assessing the need for a valuation allowance, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. During 2025, the Company increased valuation allowances primarily related to net operating loss carryforwards.
The activity related to the income tax valuation allowance for the years ended December 31, 2025, 2024, and 2023 was as follows (in millions):
Year Ended December 31
202520242023
Opening balance, January 1
$223 $216 $209 
Additions
92 40 58 
Deductions
(23)(33)(51)
Ending balance, December 31
$292 $223 $216 

Income Tax Rate Reconciliations

The table below provides additional details per the requirements of ASU 2023-09 for the year ended December 31, 2025. See Note 1. Summary of Significant Accounting Policies for additional details on the adoption of ASU 2023-09.
Year Ended December 31, 2025
$%
Provision for income taxes at U.S. federal statutory rate$264 21.0 %
State and local income tax, net of federal (national) income tax effect(6)(0.5)
Foreign Tax Effects:Singapore - Non-taxable Equity Earning(65)(5.2)
Singapore - Other(21)(1.7)
Japan - Non-deductible Impairment40 3.2 
Japan - Other(15)(1.2)
Brazil - Valuation Allowance53 4.2 
Brazil - Other(2)(0.1)
Switzerland - Foreign Rate Differential(35)(2.8)
Switzerland - Other22 1.8 
Other Foreign Tax Effects68 5.4 
Tax Credits:Tax benefit on U.S. railroad credits(63)(5.0)
Other tax credits(27)(2.1)
Effects of cross-border tax lawsAmended 2017 tax return - transition tax(24)(2.0)
Other13 1.1 
Change in unrecognized tax benefits(17)(1.4)
Other adjustments(3)(0.2)
Total tax expense and effective tax rate$182 14.5 %

The Company’s effective tax rate for 2025 was 14.5% compared to 21.1% for 2024. The change in the effective rate was driven primarily by tax treatment of non-recurring items and the Company's geographic mix of earnings.

The state and local income tax category reflects income taxes imposed at the state or local level in the jurisdiction of domicile. For the year ended December 31, 2025, state taxes in California, Pennsylvania and Indiana comprised the majority (greater than 50%) of the tax effect in this category.

As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
Year Ended December 31
 20242023
U.S. Federal Statutory rate21.0 %21.0 %
State income taxes, net of federal tax benefit0.2 0.9 
Foreign earnings taxed at rates other than the U.S. statutory rate2.2 (0.3)
Foreign currency effects/remeasurement(4.8)0.5 
Withholding Tax1.8 0.1 
Impairment of Investments4.3 0.5 
Change in Uncertain Tax Position3.2 0.1 
Tax benefit on U.S. biodiesel credits(2.9)(1.7)
Second-generation biofuel credit(1.2)— 
U.S. railroad credits(2.5)(1.5)
U.S. tax on foreign earnings0.6 1.2 
Other(0.8)(1.5)
Effective income tax rate21.1 %19.3 %

The following table presents supplemental cash flow information related to income taxes paid (net of refunds received):


Year Ended December 31
 2025
U.S. Federal $48 
US State and Local15 
Foreign:
Argentina30 
Canada44 
Germany21 
Mexico58 
Philippines26 
Switzerland25 
Other122 
Total cash taxes paid, net of refunds received$389 


OBBBA

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions, including the energy tax credit policy. The legislation has multiple effective dates between 2025 and 2027. The OBBBA provisions that were effective for 2025 did not have a significant impact on the Consolidated Financial Statements for the year ended December 31, 2025. The Company is evaluating the impact of the adoption of OBBBA on future tax years as additional guidance is issued.
Other Matters

The Company is indefinitely reinvested with respect to its historical undistributed earnings of certain foreign subsidiaries and undistributed earnings for other foreign subs and corporate joint ventures at December 31, 2025. It is not practicable to determine the amount of unrecognized deferred tax liability related to any remaining undistributed earnings of foreign subsidiaries and corporate joint ventures.

The Company incurred U.S. taxable income of $210 million, $674 million, and $425 million related to Global Intangible Low-Taxed Income (GILTI) and deducted $0 million, $16 million, and $77 million related to Foreign Derived Intangible Income Deduction in fiscal years 2025, 2024, and 2023, respectively. The Company made an accounting policy election to treat GILTI as a period cost. The Company has recorded and will continue to record the impact of tax reform items as U.S. tax authorities issue Treasury Regulations and other guidance addressing tax reform-related changes. The additional guidance, along with the potential for additional global tax legislation changes, may affect significant deductions and income inclusions and could have a material adverse effect on the Company’s net income or cash flow.

Unrecognized Tax Benefits

The following table sets forth a rollforward of activity of unrecognized tax benefits for the year ended December 31, 2025 and 2024 (in millions).
 December 31,
 20252024
Opening balance, January 1 $185 $168 
Net additions related to current year’s tax positions9 12 
Net additions related to prior years’ tax positions— 57 
Additions (adjustments) related to acquisitions— 2 
Reductions related to prior years’ tax positions(13)— 
Reductions related to lapse of statute of limitations(8)(6)
Settlements with tax authorities(35)(48)
Ending balance, December 31 $138 $185 

The additions and reductions in unrecognized tax benefits shown in the table included effects related to net income and shareholders’ equity. The changes in unrecognized tax benefits did not have a material effect on the Company’s net income or cash flow. At December 31, 2025 and 2024, the Company had accrued interest and penalties on unrecognized tax benefits of $61 million and $59 million, respectively.

The Company is subject to income taxation and routine examinations in many jurisdictions around the world and frequently faces challenges regarding the amount of taxes due. These challenges include positions taken by the Company related to the timing, nature, and amount of deductions and the allocation of income among various jurisdictions. In its routine evaluations of the exposure associated with various tax filing positions, the Company recognizes a liability, when necessary, for estimated potential tax owed by the Company in accordance with applicable accounting standards. Given the long periods of time involved in resolving tax positions, the Company does not expect that the recognition of unrecognized tax benefits will have a material impact on the Company’s effective income tax rate in any given period. If the total amount of unrecognized tax benefits were recognized by the Company at one time, there would be a reduction of $138 million on the tax expense for that period.
The Company remains subject to federal examination in the U.S. for the calendar tax years 2017, and 2022 through 2025.