XML 30 R20.htm IDEA: XBRL DOCUMENT v3.25.2
INCOME TAXES
 6 Months Ended
Jun. 30, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company accounts for income tax expense in accordance with ASC 740, Income Taxes ("ASC 740"), which requires an estimate of the annual effective income tax rate for the full year to be applied to the respective interim period, taking into account year-to-date amounts and projected results for the full year. The effective tax rate for the three months ended June 30, 2025 was 20.0% compared with 21.2% for the three months ended June 30, 2024. The effective tax rate for the three months ended June 30, 2025 was lower than the effective tax rate for the three months ended June 30, 2024 primarily due to a state tax benefit of $6 million related to the utilization of a capital loss, a tax benefit of $6 million from the conclusion of the UTC 2020 U.S. Internal Revenue Service ("IRS") tax audit, a reduction in non-deductible interest expense and lower income tax costs associated with U.S. tax on international operations.

The effective tax rate for the six months ended June 30, 2025 was 20.1% compared with 20.6% for the six months ended June 30, 2024. The year-over-year decrease was primarily driven by a $12 million tax benefit generated by the purchase of investment tax credits from a third-party, a state tax benefit of $6 million related to the utilization of a capital loss, a tax benefit of $6 million from the conclusion of the UTC 2020 IRS tax audit, a reduction in non-deductible interest expense and lower income tax costs associated with U.S. tax on international operations. These amounts were partially offset by the absence of a $21 million tax benefit associated with the TMA and UTC's conclusion of certain income tax matters from their 2017 and 2018 tax audit with the IRS recognized during the six months ended June 30, 2024.

The Company assesses the realizability of its deferred tax assets on a quarterly basis through an analysis of potential sources of future taxable income, including prior year taxable income that may be available to absorb a carryback of tax losses, reversals of existing taxable temporary differences, tax planning strategies and forecasts of taxable income. The Company considers all negative and positive evidence, including the weight of the evidence, to determine whether valuation allowances against deferred tax assets are required. The Company maintains valuation allowances against certain deferred tax assets.

The Company conducts business globally and files income tax returns in U.S. federal, state and foreign jurisdictions. In certain jurisdictions, the Company's operations were included in UTC's combined tax returns for the periods through the Distribution. In the three months ended June 30, 2025, the IRS finalized the examination of UTC's tax year 2020, resulting in the recognition of a tax benefit of $6 million. Carrier's tax year 2022 is under examination by the IRS, but is in an early stage. The Australia tax office is auditing the Company's 2021 tax return, including the review of the disentanglement of the Chubb Australia business, with the audit expected to close in 2026. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including Australia, Canada, China, France, Germany, Hong Kong, India, Italy, Mexico, the Netherlands, Poland, Singapore, the United Kingdom and the United States. The Company is no longer subject to U.S. federal income tax examination for years prior to 2022 and, with few exceptions, is no longer subject to state, local and foreign income tax examinations for tax years prior to 2014.

In the ordinary course of business, there is inherent uncertainty in quantifying the Company's income tax positions. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances and information available at the reporting date. The Company believes that it is reasonably possible that a net decrease in unrecognized tax benefits of $15 million to $45 million may occur within 12 months as a result of additional uncertain tax positions, the revaluation of uncertain tax positions arising from examinations, appeals, court decisions and/or the expiration of tax statutes.