v3.25.4

Income Taxes (Tables) | 12 Months Ended
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Jan. 03, 2026
Income Tax Disclosure [Abstract] |
Income Before Income Taxes | Income from continuing operations before income taxes is as follows:
(In millions) | 2025 | 2024 | 2023
U.S. | $ | 903 |  | $ | 739 |  | $ | 905 |
Non-U.S. | 234 |  | 204 |  | 182 |
Income from continuing operations before income taxes | $ | 1,137 |  | $ | 943 |  | $ | 1,087 |
Income Tax Expense (Benefit) | Income tax expense is summarized as follows:
(In millions) | 2025 | 2024 | 2023
Current: |  |  |
Federal | $ | (7) |  | $ | 84 |  | $ | 267 |
State | 8 |  | 21 |  | 18 |
Non-U.S. | 58 |  | 61 |  | 72 |
Total current | 59 |  | 166 |  | 357 |
Deferred: |  |  |
Federal | 165 |  | (34) |  | (181) |
State | (6) |  | (24) |  | 1 |
Non-U.S. | (4) |  | 10 |  | (12) |
Total deferred | 155 |  | (48) |  | (192) |
Total income tax expense (benefit): |  |  |
Federal | 158 |  | 50 |  | 86 |
State | 2 |  | (3) |  | 19 |
Non-U.S. | 54 |  | 71 |  | 60 |
Total income tax expense | $ | 214 |  | $ | 118 |  | $ | 165 |
Effective Income Tax Rate Reconciliation | This standard has been adopted on a prospective basis and the new presentation of the U.S. Federal statutory income tax rate to our effective tax rate for 2025 is provided below.
| 2025 |  |
(Dollars in millions) | Amount | Percentage |  |
U.S. Federal statutory income tax rate | $ | 239 |  | 21.0 | % |  |
State and local income taxes, net of Federal income tax effects* | 2 |  | 0.2 | % |  |
Foreign tax effects | 6 |  | 0.5 | % |  |
Effect of cross-border tax laws | (2) |  | (0.2) | % |  |
Tax credits - research and development | (36) |  | (3.2) | % |  |
Non-taxable or nondeductible items: |  |  |  |
Share-based compensation | 29 |  | 2.6 | % |  |
Other | 6 |  | 0.5 | % |  |
Changes in unrecognized tax benefits: |  |  |  |
Audit settlement | (17) |  | (1.5) | % |  |
Other | 3 |  | 0.3 | % |  |
Other adjustments | (16) |  | (1.4) | % |  |
Effective income tax rate | $ | 214 |  | 18.8 | % |  |
* State income taxes for Kansas and Texas comprise the majority (greater than 50%) of this category. In 2025, an $18 million benefit was recognized related to the enactment of a single sales factor apportionment in Kansas. A reconciliation of the U.S. Federal statutory income tax rate to our effective income tax rate for prior years is provided below.
|  | 2024 | 2023
U.S. Federal statutory income tax rate |  | 21.0% | 21.0%
Increase (decrease) resulting from: |  |  |
State income taxes, net of Federal tax benefit |  | (0.2)% | 1.4%
Non-U.S. tax rate differential and foreign tax credits |  | 2.1% | 1.5%
Research and development tax credits |  | (5.4)% | (4.7)%
Uncertain tax positions release for 2012 to 2017 IRS audit |  | (2.9)% | —%
Foreign-derived intangible income deduction |  | (1.7)% | (3.2)%
Other, net |  | (0.4)% | (0.8)%
Effective income tax rate |  | 12.5% | 15.2%
Reconciliation of Unrecognized Tax Benefits | A reconciliation of these unrecognized tax benefits is as follows:
(In millions) | 2025 | 2024 | 2023
Balance at beginning of year | $ | 215 |  | $ | 222 |  | $ | 231 |
Additions for tax positions related to current year | 19 |  | 17 |  | 16 |
Additions for tax positions of prior years | — |  | 4 |  | 3 |
Reductions for tax positions of prior years | (1) |  | — |  | (28) |
Reductions for settlements | (17) |  | (28) |  | — |
Balance at end of year | $ | 216 |  | $ | 215 |  | $ | 222 |
Deferred Taxes | The significant components of our net deferred tax assets/(liabilities) are provided below:
(In millions) | January 3, 2026 | December 28, 2024
Capitalized research and development expenditures | $ | 459 |  | $ | 631 |
U.S. operating loss and tax credit carryforwards (a) | 232 |  | 212 |
Accrued liabilities (b) | 201 |  | 224 |
Obligation for pension and postretirement benefits | 130 |  | 109 |
Operating lease liabilities | 102 |  | 93 |
Non-U.S. operating loss and tax credit carryforwards (c) | 82 |  | 88 |
Deferred compensation | 70 |  | 94 |
Prepaid pension benefits | (721) |  | (562) |
Property, plant and equipment, principally depreciation | (186) |  | (198) |
Amortization of goodwill and other intangibles | (157) |  | (184) |
Operating lease right-of-use assets | (99) |  | (90) |
Valuation allowance on deferred tax assets | (76) |  | (82) |
Other, net | (25) |  | (74) |
Deferred taxes, net | $ | 12 |  | $ | 261 |
(a)At January 3, 2026, U.S. operating loss and tax credit carryforward benefits of $184 million expire through 2045 if not utilized and $48 million may be carried forward indefinitely. (b)Accrued liabilities include warranty reserves, self-insured liabilities and interest. (c)At January 3, 2026, non-U.S. operating loss and tax credit carryforward benefits of $73 million may be carried forward indefinitely. The following table presents the breakdown of our deferred taxes:
(In millions) | January 3, 2026 | December 28, 2024
Manufacturing group: |  |
Deferred tax assets, net of valuation allowance | $ | 145 |  | $ | 394 |
Deferred tax liabilities | (123) |  | (96) |
Finance group – Deferred tax liabilities | (10) |  | (37) |
Net deferred tax asset | $ | 12 |  | $ | 261 |

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