Income Taxes

9 Months Ended

Sep. 30, 2025

Income Taxes

Income Taxes

4.    Income Taxes

Our effective income tax rate was 22.2% and 21.0% for the three and nine months ended September 30, 2025, respectively, compared to 23.6% and 22.2% for the three and nine months ended September 30, 2024, respectively. The decrease in our effective income tax rate when comparing the three and nine months ended September 30, 2025 and 2024 was primarily driven by an increase in federal tax credits partially offset by unfavorable adjustments to accruals and related deferred taxes.

We evaluate our effective income tax rate at each interim period and adjust it as facts and circumstances warrant.

Investments Qualifying for Federal Tax Credits 

Renewable Natural Gas — Through our subsidiaries, including our WM Renewable Energy segment, we have invested in building landfill gas-to-energy facilities in the U.S. and Canada that produce renewable electricity and RNG. We expect our new RNG facilities to qualify for federal tax credits and to realize those credits through 2026 under Section 48 of the Internal Revenue Code.

During the three and nine months ended September 30, 2025, we recognized a reduction in our income tax expense of $49 million and $138 million, respectively, due to federal tax credits expected to be realized from our RNG investments compared to $37 million and $111 million, respectively, for the comparable prior year periods.

Low-Income Housing — We have significant financial interests in entities established to invest in and manage low-income housing properties. We support the operations of these entities in exchange for a pro-rata share of the tax credits they generate. The low-income housing investments qualify for federal tax credits that we expect to realize through 2036 under Section 42 and Section 45D of the Internal Revenue Code.

Under the proportional amortization method, the equity investment is amortized in proportion to the income tax credits and other income tax benefits received. The amortization expense and the income tax credits are required to be presented on a net basis in income tax expense on the Condensed Consolidated Statements of Operations.

During the three and nine months ended September 30, 2025, we recognized income tax expense of $26 million and $71 million, respectively, related to amortization under the proportional amortization method and a reduction in our income tax expense of $37 million and $99 million, respectively, primarily due to federal tax credits realized from these investments. In addition, during the three and nine months ended September 30, 2025, we recognized interest expense of $8 million and $25 million, respectively, associated with our investments in low-income housing properties.

During the three and nine months ended September 30, 2024, we recognized income tax expense of $19 million and $56 million related to amortization under the proportional amortization method and a reduction in our income tax expense of $26 million and $76 million, respectively, primarily due to federal tax credits realized from these investments. In addition, during the three and nine months ended September 30, 2024, we recognized interest expense of $5 million and

$16 million, respectively, associated with our investments in low-income housing properties. See Note 14 for additional information related to these unconsolidated variable interest entities.

Adjustments to Accruals and Related Deferred Taxes — During the three and nine months ended September 30, 2025, we recognized income tax expense of $22 million due to certain adjustments to accruals and related deferred taxes primarily related to a change from our initial expectations of the federal tax credits expected to be realized from our RNG investments. During the three and nine months ended September 30, 2024, there were immaterial adjustments to accruals and related deferred taxes.

Tax Legislation — On July 4, 2025, President Trump signed the One Big Beautiful Bill Act into law. We are currently evaluating several business tax provisions in the legislation, none of which are expected to have a material impact on our effective tax rate. However, we expect a beneficial impact to cash taxes related to bonus depreciation.