v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income taxes Income taxes
Income before income taxes is comprised of the following components:
For Years Ended December 31,
202520242023
U.S.$4,503 $4,438 $6,445 
Non-U.S.1,207 1,015 973 
Total$5,710 $5,453 $7,418 
Provision for income taxes is comprised of the following components:
For Years Ended December 31,
202520242023
CurrentDeferredTotalCurrentDeferredTotalCurrentDeferredTotal
U.S. federal$466 $102 $568 $605 $(139)$466 $943 $(277)$666 
Non-U.S.259 (121)138 244 (71)173 240 (22)218 
U.S. state3 — 3 15 — 15 24 — 24 
Total$728 $(19)$709 $864 $(210)$654 $1,207 $(299)$908 
Applying the updated requirements in ASU 2023-09 on a prospective basis, the principal reconciling items from the U.S. statutory income tax rate to the effective tax rate (provision for income taxes as a percentage of income before income taxes) are as follows:
For Year Ended December 31,
2025
U.S. statutory income tax rate$1,199 21.0 %
Foreign tax effects:
Malaysia:
Tax incentives(127)(2.2)
Other foreign jurisdictions16 0.3 
Effect of cross-border tax laws:
Foreign derived intangible income(231)(4.0)
Other(30)(0.6)
Tax credits:
R&D tax credit(79)(1.4)
Nontaxable or nondeductible items:
Stock compensation(66)(1.1)
Other9 0.1 
Other adjustments18 0.3 
Effective tax rate$709 12.4 %
For the years ended December 31, 2024, and 2023, prior to the adoption of ASU 2023-09, the principal reconciling items from the U.S. statutory income tax rate to the effective tax rate are as follows:
For Years Ended December 31,
20242023
U.S. statutory income tax rate21.0 %21.0 %
Foreign derived intangible income(6.1)(6.8)
Stock compensation(2.1)(1.0)
R&D tax credit(2.0)(1.3)
Changes in uncertain tax positions0.1 — 
Other1.1 0.3 
Effective tax rate12.0 %12.2 %
The earnings represented by non-cash operating assets, such as fixed assets and inventory, will continue to be permanently reinvested outside the United States. Under current law, earnings of non-U.S. subsidiaries repatriated to the U.S. are not taxable. Consequently, no U.S. tax provision has been made for the future remittance of these earnings. However, withholding or distribution taxes in certain non-U.S. jurisdictions will be incurred upon repatriation of available cash to the United States. A provision has been made for deferred taxes on these undistributed earnings to the extent that repatriation of the available cash to the United States is expected to result in a tax liability. As of December 31, 2025, determination of any remaining unrecognized deferred taxes related to undistributed earnings is not practicable.
We have made an allowable policy election to account for the effects of GILTI as a component of income tax expense in the period in which the tax is incurred.
The primary components of deferred tax assets and liabilities are as follows:
December 31,
20252024
Deferred tax assets:
Capitalized R&D$1,019 $1,076 
Accrued expenses315 297 
Deferred loss and tax credit carryforwards230 216 
Stock compensation226 186 
Inventories112 105 
Other31 40 
Total deferred tax assets, before valuation allowance1,933 1,920 
Valuation allowance(230)(212)
Total deferred tax assets, after valuation allowance1,703 1,708 
Deferred tax liabilities:
Property, plant and equipment(443)(441)
CHIPS Act incentives(299)(336)
International earnings(35)(33)
Other(25)(15)
Total deferred tax liabilities(802)(825)
Net deferred tax asset$901 $883 
The deferred tax assets and liabilities based on tax jurisdictions are presented on our Consolidated Balance Sheets as follows:
December 31,
20252024
Deferred tax assets$967 $936 
Deferred tax liabilities(66)(53)
Net deferred tax asset$901 $883 
We make an ongoing assessment regarding the realization of U.S. and non-U.S. deferred tax assets. This assessment is based on our evaluation of relevant criteria, including the existence of deferred tax liabilities that can be used to absorb deferred tax assets, taxable income in prior carryback years and expectations for future taxable income. Valuation allowances increased $18 million, $14 million and $9 million in 2025, 2024 and 2023, respectively. These changes had no impact to net income in 2025, 2024 or 2023.
As of December 31, 2025, tax loss carryforwards were not material.
Applying the updated requirements in ASU 2023-09 on a prospective basis, cash payments made for income taxes, net of refunds, are as follows:
For Year Ended December 31,
2025
U.S. federal taxes$253 
U.S. state taxes6 
Foreign taxes:
Taiwan72 
Germany51 
Other foreign jurisdictions174 
Total cash taxes paid556 
ITC proceeds from CHIPS Act incentives(260)
Total cash taxes paid, net of refunds$296 
Total cash taxes paid, net of refunds$296 
ITC used to reduce income taxes payable335 
ITC proceeds from CHIPS Act incentives260 
Total cash taxes paid without CHIPS Act incentives$891 
Cash payments made for income taxes, net of refunds, were $451 million and $1.35 billion in 2024 and 2023, respectively. In 2024, the total cash benefit related to the CHIPS Act ITC was $588 million, which was used to reduce our income taxes payable.
Uncertain tax positions
We operate in a number of tax jurisdictions, and our income tax returns are subject to examination by tax authorities in those jurisdictions who may challenge any item on these tax returns. Because the matters challenged by authorities are typically complex, their ultimate outcome is uncertain. Before any benefit can be recorded in our financial statements, we must determine that it is “more likely than not” that a tax position will be sustained by the appropriate tax authorities. We recognize accrued interest related to uncertain tax positions and penalties as components of OI&E.
The changes in the total amounts of uncertain tax positions are as follows:
202520242023
Balance, January 1$85 $82 $82 
Additions based on tax positions related to the current year2 3 3 
Additions for tax positions of prior years— — — 
Reductions for tax positions of prior years— — (3)
Balance, December 31$87 $85 $82 
Interest income (expense) recognized in the year ended December 31$9 $(5)$(9)
Interest payable as of December 31$22 $15 $10 
The liability for uncertain tax positions is a component of other long-term liabilities on our Consolidated Balance Sheets.
All of the $87 million and $85 million liabilities for uncertain tax positions as of December 31, 2025 and 2024, respectively, are comprised of positions that, if recognized, would lower the effective tax rate. If these liabilities are ultimately realized, no existing deferred tax assets in 2025 or 2024 would also be realized.
As of December 31, 2025, the statute of limitations remains open for U.S. federal tax returns for 2018 and following years. Certain tax treaty procedures for relief from double taxation remain pending for U.S. federal tax returns for the years 2018 through 2022.
In non-U.S. jurisdictions, the years open to audit represent the years still open under the statute of limitations. With respect to major jurisdictions outside the United States, our subsidiaries are no longer subject to income tax audits for years before 2016.