XML 46 R29.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 reconciles the statutory federal tax rate with the effective tax rate for the periods presented below.
TABLE 87: INCOME TAXES
FOR THE YEAR ENDED DECEMBER 31,
($ In Millions)202520252024202420232023
Statutory Federal Tax Rate$491.3 21.0 %$558.5 21.0 %$307.6 21.0 %
Tax Credits(7.2)(0.3)(8.9)(0.3)(4.4)(0.3)
Tax Credit Investments, Net (1)
(15.5)(0.7)(17.9)(0.7)(37.5)(2.6)
Nontaxable or Nondeductible Tax Benefits1.0 — (7.0)(0.3)(3.0)(0.2)
Effects of Cross-Border Tax Laws13.6 0.6 10.1 0.4 10.9 0.7 
Valuation Allowance59.8 2.6 36.7 1.4 25.8 1.8 
Other, net0.8 — (11.5)(0.4)(4.5)(0.3)
Domestic State and Local Income Taxes, net (2)
38.8 1.7 65.1 2.4 34.9 2.4 
Foreign Tax Effects21.1 0.9 5.5 0.2 7.7 0.5 
Worldwide Changes in Unrecognized Tax Benefits(1.1)— (2.2)(0.1)20.0 1.4 
Effective Tax Rate$602.6 25.8 %$628.4 23.6 %$357.5 24.4 %
(1) Tax Credit Investments, Net includes Low Income Housing Tax Credits and New Market Tax Credits net of proportional amortization starting in 2024. Refer to Note 28, “Variable Interest Entities” for further information.
(2) State and local income taxes in Illinois, New York, and California comprise the majority of the Domestic State and Local Taxes, net category.
Income tax expense for the year ended December 31, 2025, 2024, and 2023 was $602.6 million, $628.4 million, and $357.5 million, representing an effective tax rate of 25.8%, 23.6%, and 24.4% respectively.
For the year ended December 31, 2025, the increase in the effective tax rate was primarily driven by a higher net tax impact from international operations.
The Corporation is no longer subject to income tax examinations by U.S. federal tax authorities before 2015, U.S. state or local tax authorities for years before 2011, or non-U.S. tax authorities for years before 2015.
Included in Other Liabilities on the consolidated balance sheets at December 31, 2025 and 2024 were $57.4 million and $58.5 million of unrecognized tax benefits, respectively. If recognized, the amounts would reduce 2025 and 2024 income tax expense by $49.4 million and $51.9 million, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows.
TABLE 88: UNRECOGNIZED TAX BENEFITS
(In Millions)202520242023
Balance at January 1$58.5 $60.7 $40.7 
Additions for Tax Positions Taken in the Current Year2.5 2.0 2.1 
Additions for Tax Positions Taken in Prior Years7.1 10.8 24.0 
Reductions for Tax Positions Taken in Prior Years(6.0)(10.9)(5.1)
Reductions Resulting from Settlements with Taxing Authorities(4.7)(2.5)— 
Reductions Resulting from Expiration of Statutes— (1.6)(1.0)
Balance at December 31$57.4 $58.5 $60.7 
A benefit for interest and penalties of $1.7 million, net of tax, was included in the Provision for Income Taxes for the year ended December 31, 2025. This compares to a provision for interest and penalties of $4.7 million, net of tax, and a provision of $0.2 million, net of tax, for the year ended December 31, 2024 and 2023, respectively. As of December 31, 2025 and 2024, the liability for the potential payment of interest and penalties totaled $14.3 million and $16.0 million, net of tax, respectively.
The components of the consolidated Provision for Income Taxes for each of the three years ended December 31 are as follows.
TABLE 89: PROVISION FOR INCOME TAXES (1)
FOR THE YEAR ENDED DECEMBER 31,
(In Millions)202520242023
Current Tax Provision:
Federal$184.6 $400.2 $250.5 
State23.7 66.7 63.2 
Non-U.S.199.8 140.8 92.0 
Total$408.1 $607.7 $405.7 
Deferred Tax Provision:
Federal$159.9 $(1.1)$(54.0)
State34.0 17.5 (1.4)
Non-U.S.0.6 4.3 7.2 
Total$194.5 $20.7 $(48.2)
Provision for Income Taxes
Federal$344.5 $399.1 $196.5 
State57.7 84.2 61.8 
Non-U.S.200.4 145.1 99.2 
Grand Total$602.6 $628.4 $357.5 
(1) Refer to Note 31, “Reporting Segments and Related Information” for Income Before Income Taxes disaggregation.
In addition to the amounts shown above, tax charges (benefits) have been recorded directly to Stockholders’ Equity for the following. For further detail, refer to Note 14, “Accumulated Other Comprehensive Income (Loss).”
TABLE 90: TAX CHARGES (BENEFITS) RECORDED DIRECTLY TO STOCKHOLDERS’ EQUITY
FOR THE YEAR ENDED DECEMBER 31,
(In Millions)202520242023
Tax Effect of Other Comprehensive Income$5.0 $156.5 $120.2 
The components of Income Taxes Paid for each of the three years ended December 31 are as follows.
TABLE 91: INCOME TAXES PAID(1)
FOR THE YEAR ENDED DECEMBER 31,
(In Millions)202520242023
US Federal $169.3 $97.9 $173.2 
US State and Local
   Illinois*21.7 42.0 
   New Jersey*(17.6)*
   Other 38.7 35.1 41.8 
Total US State and Local $38.7 $39.2 $83.8 
Foreign
   United Kingdom122.6 43.4 43.2 
   Australia25.2 **
   Luxembourg *32.3 *
   India *18.3 *
   Other 71.0 37.5 62.3 
Total Foreign $218.8 $131.5 $105.5 
Total Income Taxes Paid$426.8 $268.6 $362.5 
(1) Income Taxes Paid (net of refunds received) are based on earnings and current tax liabilities which vary year-over-year by jurisdiction and in total. Payments (net of refunds) in a given year and by jurisdiction may also be impacted by the timing of final settlements with tax authorities and non-recurring items, such as refund claims, that may relate to prior years limiting comparability between years.
* The amount of income taxes paid during the year does not meet the 5% disaggregation threshold.
Deferred taxes result from temporary differences between the amounts reported on the consolidated financial statements and the tax bases of assets and liabilities. Deferred tax assets and liabilities have been computed as follows.
TABLE 92: DEFERRED TAX ASSETS AND LIABILITIES
DECEMBER 31,
(In Millions)20252024
Deferred Tax Liabilities:
Software Development$423.6 $419.9 
Compensation and Benefits61.0 9.5 
State Taxes, net74.1 46.7 
Other Liabilities108.9 85.2 
Gross Deferred Tax Liabilities$667.6 $561.3 
Deferred Tax Assets:
Depreciation and Amortization39.7 38.4 
Allowance for Credit Losses41.5 43.2 
Unrealized Losses on Securities, net73.7 143.3 
Tax Credit and Loss Carryforwards217.7 157.9 
Other Assets94.0 117.2 
Gross Deferred Tax Assets$466.6 $500.0 
Valuation Reserve(217.7)(157.9)
Deferred Tax Assets, net of Valuation Reserve248.9 342.1 
Net Deferred Tax Assets (Liabilities)$(418.7)$(219.2)
The Corporation generated a foreign tax credit carryforward during the years ended December 31, 2025 and 2024, expiring in 2035 and 2034, respectively. A cumulative valuation allowance related to the credit carryforward of $217.3 million and $157.5 million was recorded at December 31, 2025 and 2024, respectively, as management believes the foreign tax credit carryforwards will not be fully realized.
Northern Trust had various state net operating loss carryforwards as of December 31, 2025 and 2024. The income tax benefits associated with these loss carryforwards were approximately $0.4 million as of both December 31, 2025 and 2024. A valuation allowance related to the loss carryforwards of $0.4 million was recorded at both December 31, 2025 and 2024, as management believes the net operating losses will not be fully realized.