v3.25.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of our earnings before income taxes for the last three fiscal years consisted of:
(in millions)202520242023
U.S.$2,021 $1,717 $2,113 
Non-U.S.1,373 1,434 1,265 
$3,394 $3,151 $3,378 
Our (provision) benefit for income taxes for the last three fiscal years consisted of:
(in millions)
202520242023
Current-U.S. Federal$(409)$(447)$(431)
-U.S. State(70)(124)(158)
-Non-U.S.(252)(282)(249)
(731)(853)(838)
Deferred-U.S. Federal8 125 94 
-U.S. State4 19 16 
-Non-U.S.(74)(67)433 
(62)77 543 
$(793)$(776)$(295)
Unrecognized Tax Benefits
The following table reconciles our unrecognized tax benefit balance for each year from the beginning of 2023 to the end of 2025:
(in millions)Amount
Unrecognized tax benefit at beginning of 2023
$255 
Change attributable to tax positions taken in prior years(90)
Change attributable to tax positions taken during the current period16 
Decrease attributable to settlements with taxing authorities(9)
Unrecognized tax benefit at year-end 2023
172 
Change attributable to tax positions taken in prior years(4)
Change attributable to tax positions taken during the current period17 
Decrease attributable to settlements with taxing authorities(2)
Unrecognized tax benefit at year-end 2024
183 
Change attributable to tax positions taken in prior years1 
Change attributable to tax positions taken during the current period16 
Decrease attributable to lapse of statute of limitations(106)
Unrecognized tax benefit at year-end 2025
$94 
Our unrecognized tax benefit balance included $90 million at year-end 2025, $171 million at year-end 2024, and $161 million at year-end 2023 of tax positions that, if recognized, would impact our effective tax rate. We recognize accrued interest and penalties for our unrecognized tax benefits as a component of tax expenses. Related interest (benefit) expense totaled $(41) million in 2025, $14 million in 2024, and $6 million in 2023. We accrued interest and penalties related to our unrecognized tax benefits of approximately $22 million at year-end 2025 and $63 million at year-end 2024.
We file income tax returns, including returns for our subsidiaries, in various jurisdictions around the world. The U.S. Internal Revenue Service has examined our federal income tax returns, and as of year-end 2025, we have settled all issues for tax years through 2022. Our 2023 and 2024 tax year audits are currently ongoing. Various foreign, state, and local income tax returns are also under examination by the applicable taxing authorities.
Deferred Income Taxes
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases, as well as from net operating loss and tax credit carry-forwards. We state those balances at the enacted tax rates we expect will be in effect when we pay or recover the taxes. Deferred income tax assets represent amounts available to reduce income taxes we will pay on taxable income in future years. We evaluate our ability to realize these future tax deductions and credits by assessing whether we expect to have sufficient future taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings, and available tax planning strategies to utilize these future deductions and credits. We establish a valuation allowance when we no longer consider it more likely than not that a deferred tax asset will be realized.
The following table presents the tax effect of each type of temporary difference and carry-forward that gave rise to significant portions of our deferred tax assets and liabilities as of year-end 2025 and year-end 2024:
(in millions)At Year-End 2025At Year-End 2024
Deferred Tax Assets
Employee benefits$289 $302 
Net operating loss carry-forwards982 1,046 
Accrued expenses and other reserves134 153 
Tax credits64 62 
Loyalty Program343 313 
Deferred income114 114 
Lease liabilities255 239 
Interest limitation106 123 
Property and equipment29 15 
Other47 36 
Deferred tax assets2,363 2,403 
Valuation allowance(1,011)(1,070)
Deferred tax assets after valuation allowance1,352 1,333 
Deferred Tax Liabilities
Intangibles(584)(477)
Right-of-use assets(245)(223)
Other(32)(64)
Deferred tax liabilities(861)(764)
Net deferred taxes$491 $569 
Our valuation allowance is primarily attributable to non-U.S. net operating loss carry-forwards.
At year-end 2025, we had approximately $52 million of tax credits that will expire through 2035 and $12 million of tax credits that do not expire. We recorded $5 million of net operating loss benefits in 2025 and $22 million in 2024. At year-end 2025, we had approximately $4,436 million of primarily state and foreign net operating losses, of which $2,867 million will expire between 2042 and 2045.
We made no provision for U.S. income taxes or additional non-U.S. taxes on certain undistributed earnings of non-U.S. subsidiaries. These earnings could become subject to additional taxes if the non-U.S. subsidiaries dividend or loan those earnings to an affiliate or if we sell our interests in the non-U.S. subsidiaries. We cannot practically estimate the amount of additional taxes that might be payable on the undistributed earnings.
Reconciliation of U.S. Federal Statutory Income Tax Rate to Actual Income Tax Rate
The following table reconciles the U.S. statutory tax rate to our effective income tax rate for the year ended December 31, 2025, as required by ASU 2023-09 (see “New Accounting Standards Adopted” caption in Note 2 for more information):
2025
($ in millions)
AmountPercent
U.S. statutory tax rate$713 21.0 %
Federal
Effect of cross-border tax laws
Foreign Tax Credits(41)(1.2)
Other17 0.5 
Other(24)(0.7)
State and local income tax, net of federal tax benefit (1)
95 2.8 
Non-U.S. tax effects
Canada
Effect of cross-border tax laws
37 1.1 
Luxembourg
Changes in valuation allowance
(56)(1.6)
Nontaxable or nondeductible items
76 2.2 
Other Non-U.S. jurisdictions
105 3.1 
Changes in unrecognized tax benefits(129)(3.8)
Effective rate$793 23.4 %
(1) State and local taxes in California, Maryland, and New York make up the majority (greater than 50%) of the tax in this category.
The following table reconciles the U.S. statutory tax rate to our effective income tax rate for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09:
20242023
U.S. statutory tax rate21.0 %21.0 %
U.S. state income taxes, net of U.S. federal tax benefit2.4 2.8 
Non-U.S. income 1.6 0.3 
Change in valuation allowance(0.9)(5.8)
Change in uncertain tax positions0.4 (2.3)
Excess tax benefits related to equity awards(1.0)(0.8)
U.S. tax on foreign earnings1.0 1.1 
Intellectual property restructuring
0.0 (7.9)
Other, net0.1 0.3 
Effective rate24.6 %8.7 %
Other Information
The following table presents income taxes paid (net of refunds received) for the year ended December 31, 2025, as required by ASU 2023-09:
(in millions)
2025
U.S. Federal
$496 
U.S. State
156 
Non-U.S.
Switzerland
126 
Other jurisdictions
292 
Total cash paid$1,070 
We paid cash for income taxes, net of refunds, of $947 million in 2024 and $907 million in 2023.