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Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The geographical sources of income before income taxes were as follows (in millions)
Year Ended December 31,
 202520242023
Domestic$360 $486 $167 
Foreign200 149 167 
Total$560 $635 $334 
Income tax expense (benefit) consisted of the following (in millions):
Year Ended December 31,
 202520242023
Federal (national)$81 $46 $(3)
State16 17 1 
Foreign44 44 40 
Total$141 $107 $38 

The Company’s effective tax rates were 25.2%, 16.9% and 11.4% for the years ended December 31, 2025, 2024 and 2023, respectively.
A reconciliation of the U.S. federal statutory income tax rate to our actual income tax rate is provided below (in millions):
Year Ended December 31,
202520242023
AmountPercentAmountPercentAmountPercent
U.S. Federal Statutory Tax Rate$118 21.0 %$133 21.0 %$70 21.0 %
State and Local Income Taxes, net of federal income tax effect(1)
12 2.2 16 2.5 1 0.2 
Foreign Tax Effects
Singapore
Statutory tax rate difference between Singapore and United States(1)(0.3)(1)(0.2)(4)(1.1)
Other— — 1 0.1 — — 
Canada
Changes in valuation allowance(21)(3.8)(5)(0.8)5 1.4 
Other— — 3 0.4 (7)(2.1)
Luxembourg
Effect of Changes in Tax Laws or Rates Enacted in the Current Period— — 15 2.3 — — 
Changes in valuation allowance— — (13)(2.1)— 0.1 
Other— — (1)(0.2)— — 
Other Foreign Jurisdictions9 1.6 — 0.1 — — 
Effect of Cross-border Tax Laws1 0.1 (37)(5.8)(18)(5.4)
U.S. Federal Tax Credits
Research and development tax credits(10)(1.8)(14)(2.2)(19)(5.7)
Nontaxable or nondeductible U.S. Federal Items
Officers' Comp §162(m) & Share-based Comp19 3.4 8 1.3 8 2.4 
Other7 1.2 1 0.2 1 0.3 
Changes in Unrecognized Tax Benefits8 1.5 3 0.5 1 0.3 
Other Adjustments
Other(1)0.1 (2)(0.2)— — 
Effective Tax Rate$141 25.2 %$107 16.9 %$38 11.4 %

(1)State taxes in Kentucky and Illinois made up the majority (greater than 50%) of the tax effect in this category (2023-2025)

For the year ended December 31, 2025, the Company’s effective tax rate was higher than the federal statutory rate of 21% due primarily to expense related to foreign earnings subject to U.S. taxation as a result of 2025 U.S tax legislation, taxes related to impacts of U.S. share-based compensation, increased reserves for uncertain tax positions, and U.S. state income taxes, partly offset by the generation of U.S. tax credits and the release of certain Canadian valuation allowance reserves. For the year ended December 31, 2024, the Company’s effective tax rate was lower than the federal statutory rate of 21% primarily due to the tax benefit related to foreign earnings subject to U.S. taxation, and the generation of tax credits. For the year ended December 31, 2023, the Company’s effective tax rate was lower than the federal statutory rate of 21% primarily due to the tax benefit related to foreign earnings subject to U.S. taxation, remeasurements of deferred taxes, and the generation of tax credits.

The Organization for Economic Co-Operation and Development (OECD) has implemented a global minimum tax framework of 15% for companies with annual revenues greater than €750 million, referred to as Pillar 2. Aspects of Pillar 2 are effective beginning January 1, 2024 and 2025, in various jurisdictions in which the Company operates. There is uncertainty about whether the U.S. will enact legislation to adopt Pillar 2. As a result of the Company’s operational footprint, Management has assessed the jurisdictions where legislation is enacted and applicable Transitional Safe Harbor provisions, and has accrued an immaterial impact on the Company’s financial results.

The Company earns a significant amount of its operating income outside of the U.S. that is taxed at rates different than the U.S. federal statutory rate. The Company’s principal foreign jurisdictions that provide sources of operating income are the U.K. and Singapore. In Singapore, the Company previously benefited from an incentivized corporate income tax rate from the Singapore Economic Development Board of 10.5% and a full exemption from withholding taxes. Without these benefits, the corporate tax rate in Singapore is 17% and the withholding tax rate is 10%. The Company decided to forgo a renewal of this benefit beyond 2023; therefore the 2024 and 2025 tax rate is computed using the standard corporate rate of 17%. Under current U.S. Foreign
Tax Credit rules, any withholding taxes paid are creditable for U.S. tax purposes, negating any impact of the increased withholding rate.

Income taxes paid, net of refunds received, were as follows (in millions):
Year Ended December 31,
202520242023
U.S. Federal Taxes$65 $76 $130 
State and Local Taxes
Illinois1 9 5 
Kentucky8 11 3 
Other States7 10 8 
Foreign Taxes
United Kingdom8 — 74 
Singapore17 3 16 
Other Foreign28 15 16 
Total$134 $124 $252 

Tax effects of temporary differences that resulted in deferred tax assets and liabilities are as follows (in millions):
 December 31,
 20252024
Deferred tax assets:
Capitalized research expenditures$219 $292 
Deferred revenue103 102 
Tax credits43 45 
Net operating loss carryforwards380 400 
Other accruals59 34 
Inventory items21 24 
Sales return/rebate reserve89 53 
Share-based compensation expense26 16 
Legal accrual1 1 
Lease liabilities23 24 
Valuation allowance(383)(404)
Total deferred tax assets$581 $587 
Deferred tax liabilities:
Depreciation and amortization162 83 
Unrealized gains and losses on securities and investments7 22 
Undistributed earnings4 3 
Right of use lease assets19 19 
Other7 5 
Total deferred tax liabilities$199 $132 
Net deferred tax assets$382 $455 

For tax years beginning in 2025, the One Big Beautiful Bill Act of 2025 allows taxpayers to immediately deduct domestic research and experimental expenditures paid or incurred in all tax years beginning after December 31, 2024. Furthermore, taxpayers are permitted to elect to accelerate the remaining deductions of the previously capitalized domestic expenditures over a one- or two-year period in lieu of the amortization otherwise to be recognized. The Company is taking the position to accelerate the previously capitalized expenditures in 2025 and to also make the election of I.R.C. 59(e) to capitalize the current year’s domestic expenditures and amortize over 10 years.
The Company’s valuation allowance consists of certain net operating loss (“NOL”) and credit carryforwards for which the Company believes it is more likely than not that a tax benefit will not be realized. With respect to all other deferred tax assets, the Company believes it is more likely than not that the results of future operations will generate sufficient taxable income to realize a tax benefit. The Company’s valuation allowance decreased by $21 million from 2024, primarily due to the release of certain Canadian valuation allowance reserves.

As of December 31, 2025, the Company had approximately $380 million (tax effected) of “NOLs” and $43 million of credit carryforwards. Approximately $161 million of NOLs will expire beginning in 2025 through 2044, and $29 million of credits will expire beginning in 2025 through 2045, with the remaining amounts of NOLs and credit carryforwards having no expiration dates.

The Company is subject to the GILTI, BEAT and FDII provisions for which we recorded an income tax expense of $1 million for the year ended December 31, 2025, and an income tax benefit of $38 million and $16 million for the years ended December 31, 2024 and 2023, respectively. These impacts are included in the calculation of the Company’s effective tax rate.

The Company is not permanently reinvested with respect to its U.S. directly-owned foreign subsidiaries. The Company is subject to U.S. income tax on substantially all foreign earnings under GILTI, while any remaining foreign earnings are eligible for a dividends received deduction. As a result, future repatriation of earnings will not be subject to additional U.S. federal income tax but may be subject to currency translation gains or losses. Where required, the Company has recorded a deferred tax liability for foreign withholding taxes on current earnings. Additionally, gains and losses on any future taxable dispositions of U.S.-owned foreign affiliates continue to be subject to U.S. income tax.

The Company has not recognized deferred tax liabilities in the U.S. with respect to its outside basis differences in its directly-owned foreign affiliates. It is not practicable to determine the amount of unrecognized deferred tax liabilities on these indefinitely reinvested earnings.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in millions):
Year ended December 31,
20252024
Balance at beginning of year$30 $17 
Additions for tax positions related to the current year14 14 
Lapse of statutes(1)(1)
Balance at end of year$43 $30 

As of December 31, 2025 and December 31, 2024, there were $21 million and $13 million, respectively, of unrecognized tax benefits that, if recognized, would affect the annual effective tax rate. Additionally, fiscal years 2009 through 2024 remain open to examination by multiple foreign and U.S. state taxing jurisdictions.

As of December 31, 2025, no significant uncertain tax positions are expected to be settled within the next twelve months. Due to uncertainties in any tax audit or litigation outcome, the Company’s estimates of the ultimate settlements of uncertain tax positions may change and the actual tax benefits may differ significantly from estimates.
The Company did not recognize expense or benefit associated with interest and penalties related to income tax matters during the years ended December 31, 2025 and 2024. The Company has included $4 million of estimated interest and penalty obligations within Other long-term liabilities on the Consolidated Balance Sheets each as of December 31, 2025 and 2024.