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

Income Taxes

v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
10. INCOME TAXES
The income tax provision consists of the following:
Year Ended December 31,
2025 2024 2023
Current
Federal $ 73  $ 43  $ 72 
State 17  12  14 
Foreign 37  20  40 
127  75  126 
Deferred
Federal (43) 4  (6)
State (12) 2  (4)
Foreign (2) (2) (7)
(57) 4  (17)
Provision for income taxes $ 70  $ 79  $ 109 
Pretax income for domestic and foreign operations consisted of the following:
Year Ended December 31,
2025 2024 2023
Domestic $ 172  $ 264  $ 332 
Foreign 91  104  66 
Pretax income $ 263  $ 368  $ 398 
Deferred Taxes
Deferred income tax assets and liabilities are comprised of the following:
As of December 31,
2025 2024
Deferred income tax assets:
Accrued liabilities and deferred revenues $ 91  $ 85 
Tax credits (a)
9  8 
Other comprehensive income and other 23  16 
Provision for doubtful accounts 30  9 
Net operating loss carryforward (b)
25  20 
Valuation allowance (c)
(21) (19)
Deferred income tax assets 157  119 
Deferred income tax liabilities:
Depreciation and amortization 386  404 
Other comprehensive income and other 27  34 
Deferred income tax liabilities 413  438 
Net deferred income tax liabilities $ 256  $ 319 
Reported in:
Other non-current assets $ 15  $ 13 
Deferred income taxes 271  332 
Net deferred income tax liabilities $ 256  $ 319 
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(a)    The Company had $8 million and $7 million of foreign tax credits as of December 31, 2025 and 2024, respectively. The foreign tax credits expire no later than 2035.
(b)    As of December 31, 2025, the Company’s net operating loss carryforwards primarily relate to state and foreign net operating losses, which are due to expire at various dates, but no later than 2045.
(c)    The valuation allowance of $21 million as of December 31, 2025 relates to net operating loss carryforwards, certain deferred tax assets and foreign tax credits of $10 million, $3 million and $8 million, respectively. The valuation allowance of $19 million as of December 31, 2024 relates to net operating loss carryforwards, certain deferred tax assets and foreign tax credits of $9 million, $3 million and $7 million, respectively. The valuation allowance will be reduced when and if the Company determines it is more likely than not that the related deferred income tax assets will be realized.
Although the one-time mandatory deemed repatriation tax during 2017 and the territorial tax system created as a result of U.S. tax reform generally eliminate U.S. federal income taxes on dividends from foreign subsidiaries, the Company continues to assert that all of the undistributed foreign earnings will be reinvested indefinitely as of December 31, 2025. In the event the Company determines not to continue to assert that all or part of its undistributed foreign earnings are permanently reinvested, such a determination in the future could result in the accrual and payment of additional foreign withholding taxes and U.S. taxes on currency transaction gains and losses, the determination of which is not practicable due to the complexities associated with the hypothetical calculation.
The table below provides the updated requirements of ASU 2023-09 for 2025. See Note 2 - Summary of Significant Accounting Policies—Recently Adopted Accounting Pronouncements for additional details on the adoption of ASU 2023-09.
The effective income tax rate for the year ended December 31, 2025 differs from the statutory federal income tax rate as follows:
Category 2025 2025 Percent
U.S. federal statutory tax rate $ 55  21.0  %
State and local income taxes, net of federal income tax effect (a)
3  1.1  %
Foreign tax effects
Singapore - foreign tax credits (4) (1.5) %
Singapore - other (3) (1.1) %
China - withholding tax 3  1.1  %
Other foreign jurisdictions 18  6.8  %
Effect of changes in tax laws or rates enacted in the current period —  —  %
Effect of cross-border tax laws
Foreign-derived intangible income (5) (1.9) %
Global intangible income 7  2.7  %
Other 2  0.8  %
Tax credits
Foreign tax credits (14) (5.3) %
Other (1) (0.4) %
Changes in valuation allowances 1  0.4  %
Nontaxable or nondeductible items
Executive compensation 5  1.9  %
Other (1) (0.4) %
Changes in unrecognized tax benefits 3  1.1  %
Other adjustments 1  0.3  %
Effective tax rate $ 70  26.6  %
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(a)    State taxes in California, Illinois, New Jersey and New York make up greater than 50% of the tax effects of this category.
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
2024 2023
Federal statutory rate 21.0  % 21.0  %
State and local income taxes, net of federal tax benefits 3.0  2.5 
Taxes on foreign operations at rates different than U.S. federal statutory rates 0.8  2.6 
Taxes on foreign income, net of tax credits 0.2  0.3 
Nondeductible executive compensation 1.7  1.2 
Foreign-derived intangible income (1.1) (0.8)
Valuation allowances —  0.1 
Puerto Rico tax credits (3.7) — 
Other (0.4) 0.5 
21.5  % 27.4  %
The effective income tax rate for 2025, 2024 and 2023 differs from the U.S. Federal income tax rate of 21% primarily due to state taxes and U.S. and foreign taxes, including withholding taxes on the Company’s international operations. During 2024, the effective income tax rate was lower primarily due to tax credits received in Puerto Rico.
The following table summarizes the activity related to the Company’s unrecognized tax benefits as of December 31:
2025 2024 2023
Beginning balance $ 11  $ 11  $ 8 
Increases related to tax positions taken during a prior period 1  —  7 
Increases related to tax positions taken during the current period 2  2  2 
Decreases related to settlements with taxing authorities (6) —  (2)
Decreases as a result of a lapse of the applicable statute of limitations —  (2) (4)
Ending balance $ 8  $ 11  $ 11 
The gross amount of the unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate was $8 million as of December 31, 2025 and $11 million as of December 31, 2024 and 2023. The Company recorded both accrued interest and penalties related to unrecognized tax benefits as a component of provision for income taxes on the Consolidated Statements of Income. The amount of potential penalties and interest related to these unrecognized tax benefits recorded in the provision for income taxes was $1 million during 2025 and immaterial during both 2024 and 2023. The Company had a liability for potential penalties of $1 million as of December 31, 2025, 2024 and 2023, and potential interest of $4 million as of December 31, 2025 and $3 million as of December 31, 2024 and 2023, respectively. Such liabilities are reported as a component of accrued expenses and other current liabilities and other non-current liabilities on the Consolidated Balance Sheets.
The Company files income tax returns in the U.S. federal and state jurisdictions, as well as in foreign jurisdictions. With certain exceptions, the Company is no longer subject to federal income tax examinations for years prior to 2022. The 2019 through 2024 tax years generally remain subject to examination by many state tax authorities. In significant foreign jurisdictions, the 2018 through the 2024 tax years generally remain subject to examination by their respective tax authorities.
The Company made cash income tax payments, net of refunds, of $73 million during 2025 as follows:
2025
U.S. federal $ 32 
U.S. state and local 14 
Foreign
Singapore 13 
United Kingdom 6 
Other 8 
Total foreign 27 
Total income taxes paid, net $ 73 
The Company made cash income tax payments, net of refunds, of $95 million during both 2024 and 2023.
Various jurisdictions in which the Company operates have enacted the Pillar II directive which establishes a global minimum corporate tax rate of 15% initiated by the Organization for Economic Co-operation and Development with an effective date of January 1, 2024. Pillar II did not have a material impact on its financial results, including its annual effective tax rate or liquidity for 2025.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the U.S. The Company has evaluated the effects of the OBBBA and concluded that it does not have a material impact on its financial results, including its annual effective rate or liquidity for 2025.