v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
Note 9. Income Taxes
Income (loss) from continuing operations before income taxes consisted of the following:
(Millions)202520242023
United States$1,870 $2,300 $(13,272)
International2,343 2,519 2,001 
Total$4,213 $4,819 $(11,271)
Provision (benefit) for income taxes consisted of the following:
(Millions)202520242023
Current
Federal$(11)$(75)$302 
State(1)(6)38 
International597 583 494 
Deferred
Federal307 328 (3,084)
State21 1 (495)
International90 (27)(122)
Total$1,003 $804 $(2,867)
Cash income tax payments, net of refunds, consisted of the following:
(Millions)202520242023
Federal$211 
State28
International561
China134
India
44
Korea44
Other international339
Total $800 $852 $1,384 
The 2017 Tax Cuts and Jobs Act (TCJA) involved a transition tax that is payable over eight years beginning in 2018. As of December 31, 2024, 3M reflected $211 million payable within one year associated with the transition tax. The Company made the final payment in 2025.
A reconciliation of the U.S. federal statutory income tax rate to 3M's worldwide effective income tax rate is provided below:
2025
(Millions)AmountPercent
U.S. federal statutory tax rate$885 21.0 %
State and local income taxes, net of federal income tax effect(a)
26 0.6 
Foreign tax effects212 5.0 
Effect of cross-border tax laws
Global intangible low-taxed income (net of foreign tax credits)100 2.4 
Other(71)(1.7)
Tax credits(44)(1.0)
Changes in valuation allowances(87)(2.1)
Nontaxable or nondeductible items32 0.8 
Changes in unrecognized tax benefits(50)(1.2)
Effective worldwide tax rate$1,003 23.8 %
(a)     State taxes in California, Florida, Iowa, Massachusetts, New York, Virginia and Wisconsin made up the majority (greater than 50 percent) of this category.
2024
2023(b)
Statutory U.S. tax rate21.0 %21.0 %
State income taxes - net of federal benefit0.6 3.2 
International income taxes - net (c)
2.1 0.6 
Global intangible low taxed income (GILTI)0.6 (0.3)
Foreign derived intangible income (FDII)(0.3)0.6 
U.S. research and development credit(0.7)0.4 
Reserves for tax contingencies0.6 (0.4)
Employee share-based payments0.4 — 
Change in valuation allowance on Solventum ownership(7.7)— 
All other - net0.1 0.3 
Effective worldwide tax rate16.7 %25.4 %
(b)     A positive rate reconciliation percent for the year ended 2023 is a tax benefit on a pretax loss.
(c)     International income taxes include tax expense associated with international earnings no longer considered permanently reinvested.
The primary factors that impacted the 2025 effective tax rate when compared to 2024 were the tax impact of 3M's retained ownership interest in Solventum and net costs of significant litigation. The primary factors that impacted the 2024 rate when compared to 2023 were the effective tax rate benefit on the change in value of 3M's retained ownership interest in Solventum offset by the effective tax rate on the PWS Settlement and the CAE Settlement (as discussed in Note 17), including 3M’s related decision in the fourth quarter of 2024 to defer certain deductions and accelerate income for tax purposes.
As described in Note 2, the Company completed the spin-off of its Health Care business through a pro rata distribution of 80.1% of the outstanding shares of Solventum Corporation to 3M stockholders. The Company determined that the spin-off, and certain related internal separation transactions qualified as tax-free transactions under U.S. federal tax law, supported by an Internal Revenue Service (IRS) private letter ruling, third party tax opinions, and other external tax advice. These determinations involve judgment and may be subject to IRS review. If the transactions were ultimately determined not to qualify as tax-free, the Company could incur significant tax liabilities and related impacts.
The Company recognizes the amount of tax benefit that has a greater than 50 percent likelihood of being ultimately realized upon settlement. The total amount of net unrecognized tax benefits (UTB), if recognized, would affect the effective tax rate by $652 million as of December 31, 2025. The ending net UTB results from adjusting the gross balance for deferred items, interest and penalties, and deductible taxes. The net UTB is included as components of Other Assets and Other Liabilities within the Consolidated Balance Sheet. A reconciliation of the beginning and ending amount of gross UTB is as follows:
(Millions)202520242023
Gross UTB balance at beginning of period$574 $590 $632 
Additions based on tax positions related to the current year46 13 11 
Additions for tax positions of prior years64 57 63 
Reductions for tax positions of prior years(87)(16)(42)
Settlements(45)(17)(33)
Reductions due to lapse of applicable statute of limitations(49)(36)(42)
Foreign currency translation13 (17)1 
Gross UTB balance at end of period
$516 $574 $590 
Gross interest and penalties (benefits) recognized in the consolidated statement of income (loss) (d)
$6 $25 $83 
Gross accrued interest and penalties in the consolidated balance sheet at end of period
$195 $207 $183 
(d)     The Company recognizes interest and penalties accrued related to UTB in tax expense. The amount of interest and penalties recognized may be an expense or benefit due to new or remeasured UTB accruals.
As a result of certain employment commitments and capital investments made by 3M, income from certain foreign operations in the following countries is subject to reduced tax rates or, in some cases, is exempt from tax for years through the following: Singapore (2025), Switzerland (2026), China (2028) and Brazil (2034). The continuing income tax benefits attributable to the tax status of these subsidiaries are as follows:
(Millions, except per share)202520242023
Income tax benefits attributable to reduced tax rates or exemptions in foreign locations
$58 $87 $100 
Per diluted share impact of reduced tax rates or exemptions in foreign locations$0.11 $0.16 $0.18 
Components of deferred tax assets and (liabilities) are comprised of the following:
(Millions)December 31, 2025December 31, 2024
Deferred tax assets:
Employee benefit costs$250 $241 
Product and other claims2,541 3,154 
Investments175 333 
Miscellaneous accruals220 143 
Stock-based compensation222 267 
Net operating/capital loss/tax credit carryforwards275 130 
Foreign tax credits210 143 
Research and experimentation capitalization 820 720 
Lease liabilities137 150 
Intangible amortization176 104 
Other229 70 
Gross deferred tax assets5,255 5,455 
Valuation allowance(e)
(1,052)(1,061)
Total deferred tax assets$4,203 $4,394 
Deferred tax liabilities:
Depreciation$(403)$(263)
Right-of-use asset(136)(151)
Other(256)(188)
Total deferred tax liabilities$(795)$(602)
Net deferred tax assets(f)
$3,408 $3,792 
(e)    The company has provided a valuation allowance against certain of these deferred tax assets, including the difference in basis of the retained ownership interest in Solventum, based on management’s determination that it is more-likely-than-not that the tax benefits related to these assets will not be realized.
(f)     As of December 31, 2025 and December 31, 2024, these amounts include $3,826 million and $4,146 million, respectively, of deferred tax assets reported in Other Assets on 3M’s consolidated balance sheet, and $418 million and $354 million, respectively, of deferred tax liabilities reported in Other Liabilities on 3M’s consolidated balance sheet.
As of December 31, 2025, the Company's tax effected operating losses, capital losses, and tax credit carryovers before limitation impacts and valuation allowances were approximately:
Jurisdiction(in millions)Carryover period
Federal$290 
4 years to 20 years
State120 
5 years to indefinite
International75 
7 years to indefinite
The IRS completed its field examination of the Company’s U.S. federal income tax returns through 2020, but the years 2005 through 2020 have not closed as the Company is in the process of resolving issues identified during those examinations. Currently, the Company is under examination by the IRS for its U.S. federal income tax returns for the years ended 2021 through 2023. In addition to the U.S. federal examination, there is also audit activity in several U.S. state and foreign jurisdictions where the Company is subject to ongoing tax examinations and governmental assessments, which could be impacted by evolving political environments in those jurisdictions. As of December 31, 2025, no taxing authority proposed significant adjustments to the Company’s tax positions for which the Company is not adequately reserved.
In connection with the completion of the separation of Solventum in April 2024, 3M re-evaluated its global cash needs and certain unrepatriated earnings were no longer considered permanently reinvested, which resulted in a charge of approximately $100 million in the second quarter of 2024. Thereafter, 3M provides for income taxes associated with foreign earnings in certain subsidiaries that are not considered permanently reinvested. As of December 31, 2025, the Company has not provided deferred taxes on undistributed earnings from non-U.S. subsidiaries which are indefinitely reinvested in operations. Because of the multiple avenues by which to repatriate the earnings to minimize tax cost, and because a large portion of these earnings are not liquid, it is not practical to determine the income tax liability that would be payable if such earnings were not reinvested indefinitely.