v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Components of income tax expense were as follows for the years ended December 31:
Millions202520242023
Current tax expense:
Federal1,460 1,649 1,417 
State321 359 314 
Foreign6 11 6 
Total current tax expense1,787 2,019 1,737 
Deferred and other tax expense/(benefit):
Federal351 47 219 
State [a](114)(24)(104)
Foreign4 5 2 
Total deferred and other tax expense241 28 117 
Total income tax expense$2,028 $2,047 $1,854 
[a]In 2025, Kansas enacted corporate income tax legislation that resulted in a $115 million reduction of our deferred tax expense. In 2024, Louisiana and Arkansas enacted corporate income tax legislation that resulted in a $34 million reduction of our deferred tax expense. In 2023, Nebraska, Iowa, Kansas, and Arkansas enacted corporate income tax legislation that resulted in a $114 million reduction of our deferred tax expense.
For the years ended December 31, reconciliations between statutory and effective tax rates are as follows:
Millions, except percentages202520242023
Federal Taxes$1,925 21.0%$1,847 21.0%$1,729 21.0%
State and local income tax, net of federal benefit163 1.8264 3.0166 2.0
Foreign tax effects10 0.1 16 0.2 8 0.1 
Effect of cross-border tax laws(2)- 1 - (2)- 
Tax credits(50)(0.6)(45)(0.5)(21)(0.3)
Nontaxable or nondeductible items(16)(0.2)(36)(0.4)(37)(0.4)
Changes in unrecognized tax benefits(2)- - - (1)- 
Other adjustments- -- -12 0.1
Effective tax rate$2,028 22.1 %$2,047 23.3 %$1,854 22.5 %
The state statutory rate, net of federal benefits, was 3.1%, 3.2%, and 3.4% for years ended December 31, 2025, 2024, and 2023, respectively.
UPRR operates in the western two-thirds of the country. The majority of our state taxes are paid in the states where we actively operate. The following states represent over 50% of our state income tax liability, listed in order of magnitude:
202520242023
CaliforniaCaliforniaCalifornia
IllinoisNebraskaNebraska
NebraskaIllinoisIllinois
KansasKansasKansas
IowaIowa
Deferred income tax assets/(liabilities) were comprised of the following at December 31:
Millions20252024
Deferred income tax liabilities:
Property$(13,260)$(13,020)
Operating lease assets(248)(314)
Other(639)(581)
Total deferred income tax liabilities(14,147)(13,915)
Deferred income tax assets:
Operating lease liabilities241 308 
Accrued casualty costs184 172 
Accrued wages52 51 
Stock compensation34 28 
Other215 205 
Total deferred income tax assets726 764 
Net deferred income tax liability$(13,421)$(13,151)
In 2025 and 2024, there were no valuation allowances against deferred tax assets.
A reconciliation of changes in unrecognized tax benefits liabilities/(assets) from the beginning to the end of the reporting period is as follows:
Millions202520242023
Unrecognized tax benefits at January 1$32 $30 $34 
Refunds from/(payments to) and settlements with taxing authorities- 7 - 
Decreases for positions taken in prior years(1)(6)(1)
Increases/(decreases) for interest and penalties1 1 - 
Lapse of statutes of limitations(5)- (4)
Increases for positions taken in current year- - 1 
Unrecognized tax benefits at December 31$27 $32 $30 
We recognize interest and penalties as part of income tax expense. Total accrued liabilities for interest and penalties were $4 million at both December 31, 2025 and 2024, respectively. Total interest and penalties recognized as part of income tax expense/(benefit) were $1 million for both 2025 and 2024 and ($1) million for 2023.
Several state tax authorities are examining our state income tax returns for years 2020 through 2024. With few exceptions, we are no longer subject to state income tax examinations by tax authorities for years before 2020. Additionally, we are no longer subject to U.S. federal income tax examinations by tax authorities for years before 2022.
The portion of our unrecognized tax benefits that relates to permanent changes in tax and interest would reduce our effective tax rate, if recognized. The remaining unrecognized tax benefits relate to tax positions for which only the timing of the benefit is uncertain. The unrecognized tax benefits that would reduce our effective tax rate are $27 million for 2025, $32 million for 2024, and $30 million for 2023.