Income Taxes

12 Months Ended

Dec. 31, 2025

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

We use an asset-and-liability approach to account for income taxes. Our objective is to recognize the amount of taxes payable or refundable for the current year through charges or credits to the current tax provision, and to recognize deferred tax assets and liabilities for future tax consequences of temporary differences between amounts reported in our consolidated financial statements and their respective tax bases. The measurement of tax assets and liabilities is based on enacted tax laws and applicable tax rates. The effects of a tax position on our consolidated financial statements are recognized when we believe it is more likely than not that the position will be sustained. A valuation allowance is established if it is considered more likely than not that all or a portion of the deferred tax assets will not be realized. Deferred tax assets and liabilities recorded in our consolidated statement of condition are netted within the same tax jurisdiction.

The following table presents the components of income tax expense (benefit) for the periods indicated:

	Years Ended December 31,
(In millions)	2025		2024		2023
Current:
Federal	$	375	$	108	$	160
State	96		68		79
Non-U.S.	404		387		317
Total current expense	875		563		556
Deferred:
Federal	(133)		77		(77)
State	(1)		2		(63)
Non-U.S.	45		66		(44)
Total deferred expense (benefit)	(89)		145		(184)
Total income tax expense (benefit)	$	786	$	708	$	372

The Company adopted ASU 2023-09, Improvements to Income Tax Disclosures, prospectively for annual periods beginning after December 31, 2024. The following table presents a reconciliation of the U.S. federal statutory tax rate to our effective income tax rate for the year ended December 31, 2025 (after adoption of ASU 2023-09):

	Years Ended December 31,
(Dollars in millions)	2025
U.S. federal income tax rate	$	783	21.0	%
Changes from statutory rate:
State and local income taxes, net of federal income tax effect(1)	81		2.2
Foreign tax effects	45		1.2
Effects of cross-border tax laws(2)	7		0.2
Tax Credits(3)	(68)		(1.8)
Nontaxable or nondeductible items	(27)		(0.8)
Changes in unrecognized tax benefits	(35)		(0.9)
Effective tax rate	$	786	21.1	%

(1) State taxes in Massachusetts, New York State and New York City made up the majority (greater than 50%) of the tax effect in this category.

(2) Effects of cross-border tax laws includes the period expense for global intangible low-taxed income.

(3) Business tax credits include research, low-income housing, production and investment tax credits.

The following table presents a reconciliation of the U.S. statutory income tax rate to our effective tax rate based on income before income tax expense for the periods indicated:

	Years Ended December 31,
	2024		2023
U.S. federal income tax rate	21.0	%	21.0	%
Changes from statutory rate:
State taxes, net of federal benefit	1.8		2.4
Tax-exempt income	(1.0)		(1.5)
Business tax credits(1)	(2.0)		(3.6)
Foreign tax differential	1.0		(0.6)
Foreign tax credit (benefits)/ limitations(2)	0.6		(2.0)
Change in Valuation Allowance	(0.5)		(0.2)
Other, net	(0.1)		0.6
Effective tax rate	20.8	%	16.1	%

(1) Business tax credits include research, low-income housing, production and investment tax credits.

(2) Foreign tax credit (benefits)/limitations includes the period expense for global intangible low-taxed income.

Certain earnings of our foreign subsidiaries are considered indefinitely reinvested, and no state, local, or foreign withholding tax liabilities have been recorded on these amounts as the related tax effects are not practicable to estimate. Any future distribution of these earnings is expected to be exempt from U.S. federal income tax but could result in state, local, and foreign withholding taxes. Although foreign withholding taxes may be creditable for U.S. federal income tax purposes, limitations on foreign tax credit utilization could result in a net tax cost.

The following table presents significant components of our gross deferred tax assets and gross deferred tax liabilities as of the dates indicated:

	December 31,
(In millions)	2025		2024
Deferred tax assets:
Other amortizable assets	$	176	$	189
Tax credit carryforwards	656		577
Lease obligations	248		214
Deferred compensation	229		111
Restructuring charges and other reserves	166		227
NOL and other carryforwards	154		147
Pension plan	13		21
Foreign currency translation	24		63
Unrealized losses on investment securities, net	52		184
Total deferred tax assets	1,718		1,733
Valuation allowance for deferred tax assets	(198)		(172)
Deferred tax assets, net of valuation allowance	$	1,520	$	1,561
Deferred tax liabilities:
Fixed and intangible assets	$	654	$	634
Investment basis differences	45		47
Right-of-use assets	240		198
Other	33		40
Total deferred tax liabilities	$	972	$	919

The table below summarizes the deferred tax assets, carryforwards and related valuation allowances recognized as of December 31, 2025:

(In millions)	Deferred Tax Asset		Valuation Allowance		Expiration
Other amortizable assets	$	176	$	(69)	None
Tax credits	656		—		2042-2045
NOLs - Non-U.S.	130		(110)		2026-2042, None
NOLs - U.S.	21		(17)		2026-2041, None
Other carryforwards	2		(2)		None

Management considers the valuation allowance adequate to reduce the total deferred tax assets to an aggregate amount that will more likely than not be realized. Management has determined that a valuation allowance is not required for the remaining deferred tax assets because it is more likely than not that there will be sufficient taxable income of the appropriate nature within the carryforward periods to realize these assets.

At December 31, 2025, 2024 and 2023, the gross unrecognized tax benefits, excluding interest,

were $248 million, $237 million and $237 million, respectively. Of this, the amounts that would reduce the effective tax rate, if recognized, are $230 million, $220 million and $197 million, respectively. The reduction in the effective tax rate includes the federal benefit for unrecognized state tax benefits.

The following table presents activity related to unrecognized tax benefits as of the dates indicated:

	December 31,
(In millions)	2025		2024		2023
Beginning balance	$	237	$	237	$	285
Decrease related to agreements with tax authorities	(2)		(22)		(32)
Increase related to tax positions taken during current year	48		36		39
Increase/(Decrease) related to tax positions taken during prior years	23		11		(34)
Decreases related to a lapse of the applicable statute of limitations	(58)		(25)		(21)
Ending balance	$	248	$	237	$	237

Management believes that we have sufficient accrued liabilities as of December 31, 2025 for tax exposures and related interest expense.

Income tax expense included related interest and penalties of approximately $9 million, $8 million and $7 million in 2025, 2024 and 2023, respectively. Total accrued interest and penalties were approximately $29 million as of December 31, 2025, and $21 million as of both December 31, 2024 and 2023.

The table below summarizes income taxes paid for the year ended December 31, 2025 (after adoption of ASU 2023-09):

(In millions)	Year Ended December 31, 2025
U.S. Federal	$	78
U.S. State:
New York State	28
Other	33
Total U.S. State	61
Foreign:
United Kingdom	110
Canada	54
Luxembourg	46
Ireland	36
India	34
Italy	31
Other	144
Total Foreign	455
Total income taxes paid	$	594

Total income taxes paid for the years ended December 31, 2024 and 2023, were $451 million and $423 million, respectively.