Annual report [Section 13 and 15(d), not S-K Item 405]

INCOME TAXES (Tables)

v3.25.4
INCOME TAXES (Tables)
 12 Months Ended
Dec. 31, 2025
Dec. 31, 2024
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest [Abstract]    
Schedule of Income before Income Tax, Domestic and Foreign
The following table summarizes income before income taxes:
  Years ended December 31,
In millions 2025 2024 2023
U.S. income (loss) $ 1,781  $ 2,857  $ (541)
Foreign income 2,182  2,046  2,167 
Income before income taxes $ 3,963  $ 4,903  $ 1,626 
 
Schedule of Components of Income Tax Expense (Benefit)
Income tax expense (benefit) consisted of the following:
  Year ended December 31,
In millions 2025
Current  
U.S. federal $ 130 
U.S. state and local 18 
Foreign 772 
Total current income tax expense 920 
Deferred  
U.S. federal 86 
U.S. state and local 8 
Foreign (8)
Total deferred income tax expense 86 
Income tax expense $ 1,006 
Income tax expense (benefit) under the previous standard was as follows:
  Years ended December 31,
In millions 2024 2023
Current    
U.S. federal and state $ 433  $ 611 
Foreign 611  632 
Total current income tax expense 1,044  1,243 
Deferred
U.S. federal and state $ (241) $ (468)
Foreign 32  11 
Total deferred income tax benefit (209) (457)
Income tax expense $ 835  $ 786 
Schedule of Effective Income Tax Rate Reconciliation
Reconciliations of the statutory U.S. federal income tax expense and tax rate to the net expense and effective tax rate were as follows:
In millions Year ended December 31, 2025
U.S. federal statutory tax expense/rate $ 832  21.0  %
Domestic federal
Effect of cross-border tax laws
Foreign derived intangible income (42) (1.1)
Other 15  0.4 
Tax credits
Research tax credits (69) (1.7)
Other (36) (0.9)
Nontaxable or nondeductible items 1  — 
Effect of changes in tax laws or rates enacted in the current period 14  0.3 
Other 26  0.7 
Domestic state and local taxes, net of federal income tax effect (1)
20  0.5 
Foreign tax effects
Canada
Valuation allowance 63  1.6 
Other 54  1.4 
China
Withholding tax 55  1.4 
Equity income or loss (49) (1.2)
Other (7) (0.2)
India 50  1.3 
Netherlands
Nontaxable or nondeductible items 44  1.1 
Other (8) (0.2)
United Kingdom
Tax incentives (44) (1.1)
Other 16  0.4 
Other foreign jurisdictions 105  2.6 
Worldwide changes in unrecognized tax benefits (34) (0.9)
Total tax expense/rate $ 1,006  25.4  %
(1) State and local taxes in California, Illinois, Pennsylvania, Georgia, Tennessee, Michigan, North Carolina, Wisconsin and Iowa comprise the majority of this category.
A reconciliation of the statutory U.S. federal income tax rate to the effective tax rate was as follows:
  Years ended December 31,
  2024 2023
Statutory U.S. federal income tax rate 21.0  % 21.0  %
State income tax, net of federal effect 1.2  (0.4)
Differences in rates and taxability of foreign subsidiaries and joint ventures (1)
4.2  11.9 
Research tax credits (1.5) (4.7)
Foreign derived intangible income (1.3) (4.2)
Settlement Agreements, federal impact (2)
—  22.4 
Settlement Agreements, state impact (2)
—  2.1 
Non-taxable Atmus gain (3)
(6.1) — 
Other, net (0.5) 0.2 
Effective tax rate 17.0  % 48.3  %
(1) Included the jurisdictional mix of pre-tax income and impact of actual and planned repatriation of earnings back to the U.S.
(2) See NOTE 14, "COMMITMENTS AND CONTINGENCIES," for additional information.
(3) See NOTE 21, "ATMUS DIVESTITURE," for additional information.
Schedule of Cash Flow, Supplemental Disclosures
Cash payments for income taxes and interest were as follows:
  Years ended December 31,
In millions 2025 2024 2023
Cash payments for income taxes, net of refunds $ 1,074  $ 1,175  $ 1,181 
Cash payments for interest, net of capitalized interest 308  334  374 
 
Schedule of Deferred Tax Assets and Liabilities
Carryforward tax benefits and the tax effect of temporary differences between financial and tax reporting that give rise to net deferred tax assets (liabilities) were as follows:
  December 31,
In millions 2025 2024
Deferred tax assets    
U.S. and state carryforward benefits $ 258  $ 254 
Foreign carryforward benefits 784  653 
Employee benefit plans 170  308 
Warranty expenses 599  545 
Lease liabilities 142  109 
Capitalized research and development expenditures 676  805 
Accrued expenses 230  207 
Other 209  139 
Gross deferred tax assets 3,068  3,020 
Valuation allowance (954) (872)
Total deferred tax assets 2,114  2,148 
Deferred tax liabilities    
Property, plant and equipment (439) (371)
Unremitted income of foreign subsidiaries and joint ventures (175) (162)
Employee benefit plans (242) (289)
Lease assets (135) (109)
Intangible assets (342) (315)
Other (106) (172)
Total deferred tax liabilities (1,439) (1,418)
Net deferred tax assets $ 675  $ 730 
 
Tax Related Line Items on the Consolidated Balance Sheets
Our Consolidated Balance Sheets contain the following tax related items:
December 31,
In millions 2025 2024
Prepaid expenses and other current assets    
Refundable income taxes $ 264  $ 121 
Other assets
Deferred income tax assets 1,063  1,119 
Long-term refundable income taxes 20  47 
Other accrued expenses
Income tax payable 156  244 
Other liabilities
Long-term income taxes 8  5 
Deferred income tax liabilities 388  389 
 
Schedule of Unrecognized Tax Benefits Roll Forward
A reconciliation of unrecognized tax benefits for the years ended December 31, 2025, 2024 and 2023 was as follows:
December 31,
In millions 2025 2024 2023
Balance at beginning of year $ 304  $ 330  $ 283 
Additions to tax positions due to acquisitions —  —  8 
Additions to current year tax positions 18  21  21 
Additions to prior years' tax positions 12  9  19 
Reductions to prior years' tax positions (62) (18) (1)
Reductions for tax positions due to settlements with taxing authorities —  (38) — 
Balance at end of year $ 272  $ 304  $ 330 
 
Accounting Standards Update 2023-09    
Income (Loss) from Continuing Operations before Income Taxes, Noncontrolling Interest [Abstract]    
Schedule of Cash Flow, Supplemental Disclosures
Income taxes paid, net of refunds received, consisted of the following:
  Year ended December 31,
In millions 2025
U.S. federal $ 328 
U.S. state and local 32 
Foreign
India 182 
China 184 
Other 348 
Total income taxes paid $ 1,074