v3.25.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
INCOME BEFORE TAXES
 Years Ended December 31,
202520242023
U.S.$373 $1,442 $1,652 
Non-U.S.5,103 4,802 4,539 
Total Income before taxes$5,476 $6,244 $6,191 
TAX EXPENSE
Tax expense consists of:
 Years Ended December 31,
202520242023
Current   
U.S. Federal$49 $478 $13 
U.S. State27 57 22 
Non-U.S.914 943 1,038 
Total current tax expense990 1,478 1,073 
Deferred
U.S. Federal10 (209)58 
U.S. State(54)(23)17 
Non-U.S.62 3 114 
Total deferred tax expense (benefit)
18 (229)189 
Total Tax expense
$1,008 $1,249 $1,262 
The U.S. federal statutory income tax rate is reconciled to the effective income tax rate as follows:
December 31, 2025
AmountPercent
U.S. federal statutory income tax rate1,150 21.0 
State and local income taxes, net of federal income tax effect1
(45)(0.8)
Foreign tax effects
Puerto Rico
Statutory tax rate difference between Puerto Rico and United States124 2.3 
Preferential tax rate(252)(4.6)
Other54 1.0 
Switzerland
Statutory tax rate difference between Switzerland and United States(278)(5.1)
Subnational tax effects144 2.6 
Other(23)(0.4)
Other foreign jurisdictions265 4.9 
Effect of cross-border tax laws
Global intangible low-taxed income153 2.8 
Other(82)(1.5)
Tax credits
Research and development tax credits(214)(3.9)
Other(3)(0.1)
Changes in valuation allowance129 2.4 
Nontaxable or nondeductible items
Impairment losses164 3.0 
Indemnification termination gain(168)(3.1)
Other4 0.1 
Changes in unrecognized tax benefits(24)(0.4)
Other adjustments
Outside basis differences(71)(1.3)
Other(19)(0.5)
Effective income tax rate$1,008 18.4 %
1
State taxes in Arizona and Illinois made up the majority (greater than 50 percent) of the tax effect in this category.
The U.S. federal statutory income tax rate is reconciled to the effective income tax rate as follows:
 Years Ended December 31,
20242023
U.S. federal statutory income tax rate21.0 %21.0 %
Taxes on non-U.S. earnings1,2,3
(0.7)(2.4)
U.S. state income taxes1
0.6 0.2 
Reserves for tax contingencies1.6 3.9 
Employee stock compensation(0.7)(0.3)
Restructuring4
(0.3)— 
U.S. federal tax credits
(2.2)(1.7)
U.S. valuation allowance4
1.0 (0.1)
All other items—net(0.3)(0.2)
Effective income tax rate20.0 %20.4 %
1
Net of changes in valuation allowance.
2
Includes U.S. taxes on non-U.S. earnings, net of foreign tax credits.
3
2023 includes (4.2)% deferred tax benefit resulting from a non-U.S. legislative change, offset by 4.2% deferred tax expense resulting from a full valuation allowance.
4
2024 includes (1.0)% deferred tax benefit resulting from an outside basis difference in assets held for sale, offset by 1.0% deferred tax expense resulting from a full valuation allowance.
The effective tax rate decreased by 1.6 percentage points in 2025 compared to 2024, largely driven by an increase in benefit for U.S. federal tax credits. The Company’s 2025 non-U.S. effective tax rate was 19.1%, a decrease of 0.6 percentage points compared to 2024. The decrease in the non-U.S. effective tax rate was primarily attributable to changes in accruals on foreign tax matters partially offset by other foreign discrete adjustments.
The effective tax rate decreased by 0.4 percentage points in 2024 compared to 2023. The decrease was primarily attributable to a reduced benefit from taxes on non-U.S. earnings, offset by a decrease in accruals on various foreign tax matters. The Company’s 2024 non-U.S. effective tax rate was 19.7%, a decrease of 5.6 percentage points compared to 2023. The decrease in the non-U.S. effective tax rate was primarily attributable to changes in accruals on foreign tax matters and other foreign discrete adjustments, partially offset by increased expense on global minimum taxes.
DEFERRED TAX ASSETS (LIABILITIES)
The tax effects of temporary differences and tax carryforwards which give rise to future income tax benefits and payables are as follows:
Deferred tax assetsDecember 31,
20252024
Postretirement benefits other than pensions$45 $50 
Asbestos and environmental189 373 
Capitalized research and development917 946 
Employee compensation and benefits104 130 
Lease liabilities212 228 
Other accruals and reserves389 375 
Net operating losses650 618 
Capital loss carryover and outside basis differences544 467 
Tax credit carryforwards and other attributes648 269 
Gross deferred tax assets3,698 3,456 
Valuation allowance(1,374)(1,253)
Total deferred tax assets2,324 2,203 
Deferred tax liabilities
Deferred revenue(175)(244)
Pension(1,339)(1,481)
Property, plant and equipment
(351)(212)
Right-of-use asset(198)(198)
Intangibles(886)(654)
Unremitted earnings of foreign subsidiaries(482)(488)
Other asset basis differences(271)(272)
Total deferred tax liabilities(3,702)(3,549)
Net deferred tax liability1
$(1,378)$(1,346)
1
As of December 31, 2025, Net deferred tax liability excludes $136 million of deferred tax assets that are included in Assets held for sale in the Consolidated Balance Sheet. As of December 31, 2024, Net deferred tax liability excludes $124 million of deferred tax liabilities that are included in Liabilities held for sale in the Consolidated Balance Sheet. Refer to Note 2 Acquisitions, Divestitures, and Discontinued Operations.
The Company's gross deferred tax assets include $1,258 million related to non-U.S. operations comprised primarily of net operating losses and other tax attribute carryforwards in Germany, Luxembourg, Switzerland, and the United Kingdom. The Company maintains a valuation allowance of $1,058 million against a portion of the non-U.S. gross deferred tax assets and a valuation allowance of $316 million against the U.S. gross deferred tax asset, primarily related to capital loss and other credit carryforwards. The change in the valuation allowance resulted in an increase of $88 million, a decrease of $13 million, and an increase of $458 million to income tax expense in 2025, 2024, and 2023, respectively. If the Company determines that the likelihood of realization of existing deferred tax assets changes, a corresponding increase or decrease to valuation allowances will be recognized as an increase or reduction to income tax expense in the period that determination is made.
As of December 31, 2025, the Company's net operating loss, capital loss, tax credit carryforwards, and other attributes were as follows:
JurisdictionNet Operating
and Capital Loss
Carryforwards
Tax Credit
Carryforwards and Other Attributes
U.S. Federal$697 $72 
U.S. State267 21 
Non-U.S.3,611 223 
Total
$4,575 $316 
Many jurisdictions impose limitations on the timing and utilization of net operating loss and tax credit carryforwards. Approximately $3,228 million of the non-U.S. net operating loss has no expiration period. The U.S. federal capital loss carryforward of $510 million expires in 2026. The remaining net operating loss, capital loss and credit carryforwards, and other tax attributes have expiration periods through 2045.
The table below summarizes the Company's change in unrecognized tax benefits for the years ended December 31, 2025, 2024, and 2023:
Years Ended December 31,
202520242023
Change in unrecognized tax benefits   
Balance at beginning of year$1,201 $1,215 $1,077 
Gross increases related to current period tax positions30 64 89 
Gross increases related to prior periods tax positions99 12 181 
Gross decreases related to prior periods tax positions(2)(17)— 
Decrease related to resolutions of audits with tax authorities(91)(31)(132)
Expiration of the statute of limitations for the assessment of taxes(44)(9)(3)
Foreign currency translation45 (33)3 
Balance at end of year$1,238 $1,201 $1,215 
As of December 31, 2025, 2024, and 2023, there were $1,238 million, $1,201 million, and $1,215 million, respectively, of unrecognized tax benefits that if recognized would be recorded as a component of tax expense.
The following table summarizes tax years that remain subject to examination by major tax jurisdictions as of December 31, 2025:
JurisdictionOpen Tax Years
Examination in progressExamination not yet initiated
U.S. Federal2017-20212022-2025
U.S. State2013-20242025
Canada2018-20212022-2025
China2013-20242025
Germany
2017-20202021-2025
India2006-20202021-2025
Malaysia2019-20232024-2025
Puerto RicoN/A2020-2025
SwitzerlandN/A2020-2025
United Kingdom2013-20232024-2025
Based on the outcome of these examinations, or as a result of the expiration of statute of limitations for specific jurisdictions, it is reasonably possible that certain unrecognized tax benefits for tax positions taken on previously filed tax returns will materially change from those recorded as liabilities in the Company's financial statements. In addition, the outcome of these examinations may impact the valuation of certain deferred tax assets (such as net operating losses) in future periods.
Unrecognized tax benefits for examinations in progress were $874 million, $787 million, and $803 million as of December 31, 2025, 2024, and 2023, respectively. Estimated interest and penalties related to the underpayment of income taxes are classified as a component of Tax expense in the Consolidated Statement of Operations and totaled $55 million, $94 million, and $74 million for the years ended December 31, 2025, 2024, and 2023, respectively. Accrued interest and penalties were $751 million, $707 million, and $612 million as of December 31, 2025, 2024, and 2023, respectively.
The amounts of cash taxes paid by the Company for continuing and discontinued operations are as follows:
December 31, 2025
Federal$658 
State42
Foreign
Canada105
China156
Switzerland224
All other foreign613 
Income taxes paid, net of refunds$1,798