Income Taxes

3 Months Ended

Mar. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Note 8—Income Taxes

The effective tax rate was 28.8% for the three months ended March 31, 2025, compared to 19.3% in the same period of 2024. The change in these rates were primarily from changes in results of operations in the jurisdictions in which we operate and changes in forecasted results reflected in the tax rates.

The liability for unrecognized tax benefits was $36 million at March 31, 2025 and December 31, 2024. Included in the liability at March 31, 2025 and December 31, 2024 were no tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.

On August 26, 2020, we received a Notice of Proposed Adjustment (NOPA) from the Internal Revenue Service (IRS) regarding our 2015 and 2016 consolidated income tax returns. On June 30, 2021, we received a NOPA from the IRS regarding our 2017 and 2018 consolidated income tax returns. Within the NOPAs, the IRS has asserted that our taxable income for the aforementioned years should be higher based on their assessment of the appropriate amount of taxable income that we should report in the U.S. in connection with our sourcing of products by our foreign subsidiaries for sale in the U.S. by our domestic subsidiaries. The transfer pricing methodology was consistently applied for all years subject to the NOPAs and 2019 into 2022, but is no longer employed.

In late June 2024, the IRS and the relevant foreign taxing authority mutually agreed to proposed adjustments to our 2015 through 2018 consolidated tax returns. As a result, we remeasured the uncertain tax position for the 2015 through 2018 tax years, as well as the affected 2019 through 2022 tax years, to the amount expected to be paid upon a final agreement with the IRS. This matter does not impact our 2023, 2024 or future tax years. As of March 31, 2025, we owed $44 million associated with the NOPA matter, which includes $13 million of interest accrued on the matter through March 31, 2025. The balance sheet classification and amount owed may be subject to change depending on the timing of a final agreement with the IRS.