v3.25.4

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2025
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES Earnings before income taxes and the provision for income taxes are presented in the following table.
| Year Ended December 31,
(in millions) | 2025 |  | 2024 |  | 2023
Earnings (loss) before income taxes: |  |  |  |  |
U.S. 1 | $ | (177) |  |  | $ | (303) |  |  | $ | (316) |
Non-U.S. | 701 |  |  | 842 |  |  | 1,307 |
Total | $ | 524 |  |  | $ | 539 |  |  | $ | 991 |
Provision for income taxes: |  |  |  |  |
Current: |  |  |  |  |
Federal 2 | $ | (1) |  |  | $ | (18) |  |  | $ | (1) |
State | (3) |  |  | 1 |  |  | 8 |
Foreign 2 | 326 |  |  | 284 |  |  | 342 |
Total current expense | 322 |  |  | 267 |  |  | 349 |
Deferred: |  |  |  |  |
Federal | (76) |  |  | (198) |  |  | (85) |
State | (7) |  |  | (5) |  |  | — |
Foreign | (50) |  |  | 47 |  |  | 25 |
Total deferred benefit | (133) |  |  | (156) |  |  | (60) |
Total provision for income taxes | $ | 189 |  |  | $ | 111 |  |  | $ | 289 |
__________________________ 1 In 2023, the U.S. loss before income taxes included the realized and unrealized loss on debt and equity securities of $174 million that was primarily related to the Company’s investment in Wolfspeed convertible debt securities that was sold during the year. 2 In accordance with ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”, which requires withholding tax expense to be reflected in the jurisdiction in which the tax is imposed, the Company reclassified $45 million and $43 million of withholding tax expense for 2024 and 2023, respectively, from U.S. current tax expense to foreign current tax expense. The reconciliation of the tax provision at the U.S. federal statutory rate to income tax expense is presented in the following table.
| Year Ended December 31, |
(in millions) | 2025 |  | 2024 |  | 2023 |
U.S. federal statutory tax rate | $ | 110 |  |  | 21.0 | % |  | $ | 114 |  |  | 21.0 | % |  | $ | 209 |  |  | 21.0 | % |
State and local income taxes 1 | (10) |  |  | (1.9) |  |  | — |  |  | — |  |  | 6 |  |  | 0.6 |  |
Enactment of new tax laws | — |  |  | — |  |  | (9) |  |  | (1.7) |  |  | — |  |  | — |  |
Effect of cross-border tax laws |  |  |  |  |  |  |  |  |  |  |  |
Foreign-derived intangible income | — |  |  | — |  |  | (11) |  |  | (2.0) |  |  | (23) |  |  | (2.3) |  |
Global intangible low-taxed income | 36 |  |  | 6.9 |  |  | 24 |  |  | 4.5 |  |  | 19 |  |  | 1.9 |  |
Net tax on remittance of foreign earnings | 1 |  |  | 0.2 |  |  | (17) |  |  | (3.2) |  |  | (10) |  |  | (1.0) |  |
Other | 14 |  |  | 2.7 |  |  | 1 |  |  | 0.2 |  |  | 11 |  |  | 1.1 |  |
Tax credits |  |  |  |  |  |  |  |  |  |  |  |
Foreign tax credits | (48) |  |  | (9.2) |  |  | (47) |  |  | (8.7) |  |  | (40) |  |  | (4.0) |  |
Research and development credit | (10) |  |  | (1.9) |  |  | (26) |  |  | (4.8) |  |  | (34) |  |  | (3.4) |  |
Changes in valuation allowances | (6) |  |  | (1.1) |  |  | 32 |  |  | 5.9 |  |  | 39 |  |  | 3.9 |  |
Nontaxable or nondeductible items |  |  |  |  |  |  |  |  |  |  |  |
Intercompany transaction gain | (6) |  |  | (1.1) |  |  | (15) |  |  | (2.8) |  |  | (61) |  |  | (6.1) |  |
Other | 14 |  |  | 2.7 |  |  | 9 |  |  | 1.7 |  |  | 5 |  |  | 0.5 |  |
Other adjustments |  |  |  |  |  |  |  |  |  |  |  |
Realization of basis differences | (40) |  |  | (7.6) |  |  | (13) |  |  | (2.4) |  |  | 1 |  |  | 0.1 |  |
Other | 2 |  |  | 0.4 |  |  | 13 |  |  | 2.4 |  |  | (6) |  |  | (0.6) |  |
Foreign tax effects |  |  |  |  |  |  |  |  |  |  |  |
China |  |  |  |  |  |  |  |  |  |  |  |
Effect of rates different than statutory | 21 |  |  | 4.0 |  |  | 4 |  |  | 0.7 |  |  | 18 |  |  | 1.8 |  |
Withholding tax | 37 |  |  | 7.1 |  |  | 33 |  |  | 6.1 |  |  | 52 |  |  | 5.2 |  |
Net tax on remittance of foreign earnings | (6) |  |  | (1.1) |  |  | (6) |  |  | (1.1) |  |  | (21) |  |  | (2.1) |  |
Impairment of goodwill | — |  |  | — |  |  | 94 |  |  | 17.5 |  |  | (1) |  |  | (0.1) |  |
Tax holiday | (39) |  |  | (7.4) |  |  | (45) |  |  | (8.4) |  |  | (35) |  |  | (3.5) |  |
Enhanced research and development deduction | (24) |  |  | (4.6) |  |  | (29) |  |  | (5.4) |  |  | (35) |  |  | (3.5) |  |
Changes in valuation allowances | 18 |  |  | 3.4 |  |  | — |  |  | — |  |  | — |  |  | — |  |
Other | (7) |  |  | (1.3) |  |  | 8 |  |  | 1.5 |  |  | (6) |  |  | (0.6) |  |
Germany |  |  |  |  |  |  |  |  |  |  |  |
Effect of rates different than statutory | 28 |  |  | 5.3 |  |  | (7) |  |  | (1.3) |  |  | 1 |  |  | 0.1 |  |
Impairment of goodwill | 61 |  |  | 11.4 |  |  | 32 |  |  | 6.1 |  |  | — |  |  | — |  |
State and local income taxes | (5) |  |  | (1.0) |  |  | 14 |  |  | 2.6 |  |  | 2 |  |  | 0.2 |  |
Other | 27 |  |  | 5.2 |  |  | (16) |  |  | (3.0) |  |  | 20 |  |  | 2.0 |  |
Italy |  |  |  |  |  |  |  |  |  |  |  |
Changes in valuation allowances | (2) |  |  | (0.4) |  |  | 14 |  |  | 2.6 |  |  | — |  |  | — |  |
Other | 7 |  |  | 1.3 |  |  | 6 |  |  | 1.1 |  |  | 7 |  |  | 0.7 |  |
Korea |  |  |  |  |  |  |  |  |  |  |  |
Withholding tax | 13 |  |  | 2.5 |  |  | 14 |  |  | 2.6 |  |  | 13 |  |  | 1.3 |  |
Impairment of goodwill | — |  |  | — |  |  | 18 |  |  | 3.3 |  |  | — |  |  | — |  |
Other | 8 |  |  | 1.5 |  |  | (6) |  |  | (1.1) |  |  | 6 |  |  | 0.6 |  |
Mexico |  |  |  |  |  |  |  |  |  |  |  |
Intercompany transaction gain | — |  |  | — |  |  | — |  |  | — |  |  | (16) |  |  | (1.6) |  |
Other | 15 |  |  | 2.9 |  |  | (5) |  |  | (0.9) |  |  | 19 |  |  | 1.9 |  |
France |  |  |  |  |  |  |  |  |  |  |  |
Changes in valuation allowances | 1 |  |  | 0.2 |  |  | (2) |  |  | (0.4) |  |  | 96 |  |  | 9.7 |  |
Other | 1 |  |  | 0.2 |  |  | — |  |  | — |  |  | (6) |  |  | (0.6) |  |
Luxembourg |  |  |  |  |  |  |  |  |  |  |  |
Changes in valuation allowances | — |  |  | — |  |  | — |  |  | — |  |  | 37 |  |  | 3.7 |  |
Other | (3) |  |  | (0.6) |  |  | 3 |  |  | 0.6 |  |  | (3) |  |  | (0.3) |  |
Other foreign jurisdictions | 1 |  |  | 0.2 |  |  | 31 |  |  | 5.8 |  |  | 31 |  |  | 3.1 |  |
Changes in unrecognized tax benefits | (20) |  |  | (3.8) |  |  | (99) |  |  | (18.4) |  |  | (6) |  |  | (0.6) |  |
Income tax expense | $ | 189 |  |  | 36.1 | % |  | $ | 111 |  |  | 20.6 | % |  | $ | 289 |  |  | 29.1 | % |
__________________________ 1 State taxes in Mississippi (2025), Illinois and Kentucky (2024 & 2023) comprise the majority (greater than 50%) of the tax effect in that category. The Company’s tax rate is affected by the tax laws and rates of the U.S. and other jurisdictions in which the Company operates, the relative amount of income earned by jurisdiction and the relative amount of losses or income for which no tax benefit or expense was recognized due to a valuation allowance. In 2025, the Company reflected a $126 million tax impact of non-deductible impairment of goodwill. In addition, the Company recorded a tax benefit of $29 million related to reductions in certain unrecognized tax benefits and accrued interest for positions remeasured after various audit closures, a tax benefit of $16 million related to the exit of the charging business and a tax benefit of $7 million related to tax law changes. In 2024, the Company reflected a $151 million tax impact of non-deductible impairment of goodwill. In addition, the Company recorded a tax benefit of $107 million related to reductions in certain unrecognized tax benefits and accrued interest for matters where the statute of limitations lapsed and a tax benefit of $36 million related to post Spin-Off restructuring. In 2023, the Company recognized a tax benefit of $19 million related to the resolution of tax audits and reductions in certain unrecognized tax benefits and accrued interest related to matters for which the statute of limitation had lapsed. In addition, the Company recognized a tax benefit of $50 million in relation to the Spin-Off, a tax benefit of $30 million in relation to various changes in filling positions for prior years, and a tax expense of $79 million in relation to changes in judgment related to the recovery of deferred tax assets, primarily due to the impact of the Spin-Off on the allocation of the Company’s profits across jurisdictions for tax purposes as well as various tax structuring actions and strategies. A roll forward of the Company’s total gross unrecognized tax benefits is presented below:
(in millions) | 2025 |  | 2024 |  | 2023
Balance, January 1 | $ | 95 |  |  | $ | 161 |  |  | $ | 172 |
Additions based on tax positions related to current year | 7 |  |  | 9 |  |  | 15 |
Reductions for closure of tax audits and settlements | (1) |  |  | — |  |  | (5) |
Reductions for tax positions of prior years | (37) |  |  | (1) |  |  | (11) |
Reductions for lapse in statute of limitations | — |  |  | (67) |  |  | (10) |
Translation adjustment | 9 |  |  | (7) |  |  | — |
Balance, December 31 | $ | 73 |  |  | $ | 95 |  |  | $ | 161 |
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense and accrued approximately $28 million and $22 million for the payment of interest and penalties at December 31, 2025 and 2024, respectively. For the years ended December 31, 2025, 2024 and 2023, the Company recognized expense related to interest and penalties of $4 million, $5 million and $10 million, respectively. During the year ended December 31, 2024, the Company also recorded a reduction in tax expense of $46 million for previously recorded interest related to matters for which the statute of limitations lapsed. As of December 31, 2025, approximately $80 million represents the amount that, if recognized, would affect the Company's effective income tax rate in future periods. This amount includes a decrease in U.S. federal income taxes that would occur upon recognition of the state tax benefits and U.S. foreign tax credits included therein. The Company and/or one of its subsidiaries files income tax returns with the U.S. federal and various state and foreign jurisdictions. In certain tax jurisdictions, the Company may have more than one taxpayer. The Company is no longer subject to income tax examinations by tax authorities in its major tax jurisdictions as follows:
Tax jurisdiction |  | Years no longer subject to audit |  | Tax jurisdiction |  | Years no longer subject to audit
U.S. Federal |  | 2021 and prior |  | Luxembourg |  | 2020 and prior
China |  | 2019 and prior |  | Mexico |  | 2019 and prior
France |  | 2021 and prior |  | Poland |  | 2019 and prior
Germany |  | 2018 and prior |  | South Korea |  | 2019 and prior
Hungary |  | 2019 and prior |  | United Kingdom |  | 2021 and prior
Japan |  | 2023 and prior |  |  |  |
The components of deferred tax assets and liabilities consist of the following:
| December 31,
(in millions) | 2025 |  | 2024
Deferred tax assets: |  |  |
Net operating loss and capital loss carryforwards | $ | 320 |  |  | $ | 305 |
Research and development capitalization | 332 |  |  | 291 |
Employee compensation | 77 |  |  | 45 |
Other comprehensive loss | 28 |  |  | — |
Warranty | 33 |  |  | 30 |
Tax credits | 106 |  |  | 67 |
Other | 86 |  |  | 116 |
Total deferred tax assets | $ | 982 |  |  | $ | 854 |
Valuation allowance | (360) |  |  | (325) |
Net deferred tax asset | $ | 622 |  |  | $ | 529 |
Deferred tax liabilities: |  |  |
Goodwill and intangible assets | (88) |  |  | (100) |
Unremitted foreign earnings | (88) |  |  | (95) |
Fixed assets | (55) |  |  | (107) |
Other comprehensive gain | — |  |  | (35) |
Total deferred tax liabilities | $ | (231) |  |  | $ | (337) |
Net deferred taxes | $ | 391 |  |  | $ | 192 |
As of December 31, 2025, the Company had non-U.S. net operating loss (“NOL”) deferred tax assets of $235 million, $26 million of which expire at various dates from 2026 through 2045 and $209 million of which have an indefinite life. As of December 31, 2025, the Company had a valuation allowance of $201 million with regards to these deferred tax assets. As of December 31, 2025, certain non-U.S. subsidiaries have tax credit carryforwards of $21 million of which expire at various dates from 2026 to 2035. As of December 31, 2025, the Company had a valuation allowance of $2 million with regards to these deferred tax assets. As of December 31, 2025, U.S. subsidiaries had net operating loss (“NOL”) deferred tax assets of approximately $39 million, of which $15 million expire at various dates from 2026 through 2044 and $24 million of which have an indefinite life. As of December 31, 2025, the Company had a valuation allowance of $36 million with regard to these deferred tax assets. As of December 31, 2025, certain U.S. subsidiaries have tax credit carryforwards of $85 million of which expire at various dates from 2026 to 2045. As of December 31, 2025, the Company had a valuation allowance of $47 million with regard to these deferred tax assets. On a quarterly basis, the Company reviews the likelihood that the benefit of its deferred tax assets will be realized and, therefore, the need for valuation allowances. The Company assesses existing deferred tax assets, net operating loss carryforwards and tax credit carryforwards by jurisdiction and expectations of its ability to utilize these tax attributes through a review of past, current, and estimated future taxable income and tax planning strategies. If, based upon the weight of available evidence, it is more-likely-than-not the deferred tax assets will not be realized, a valuation allowance is recorded. Due to recent restructurings, the Company concluded that the weight of the negative evidence outweighs the positive evidence in certain foreign jurisdictions. As a result, the Company believes it is more-likely-than-not that the net deferred tax assets in certain jurisdictions that include entities in France, Spain, U.S., Italy, Turkey, Germany, and China will not be realized in the future. As of December 31, 2025, the Company recorded deferred tax liabilities of $88 million with respect to foreign unremitted earnings. The Company did not provide deferred tax liabilities with respect to certain book versus tax basis differences not represented by undistributed earnings. The Company’s best estimate of the unrecognized deferred tax liability on these basis differences is approximately $4 million as of December 31, 2025. Cash paid for income taxes, net of refunds is presented in the following table:
| Year Ended December 31,
(in millions) | 2025 |  | 2024 |  | 2023
U.S. state | $ | 1 |  |  | $ | 10 |  |  | $ | 7 |
U.S. federal | — |  |  | 50 |  |  | 47 |
Total foreign | 371 |  |  | 346 |  |  | 308 |
China | 105 |  |  | 96 |  |  | 91 |
Korea | 42 |  |  | 47 |  |  | 41 |
Poland | 35 |  |  | 20 |  |  | 30 |
Spain | 33 |  |  | 32 |  |  | 30 |
Mexico | 31 |  |  | 46 |  |  | 20 |
Germany | 23 |  |  | 6 |  |  | 23 |
India | 23 |  |  | 18 |  |  | 15 |
Other foreign | 79 |  |  | 81 |  |  | 58 |
Total | $ | 372 |  |  | $ | 406 |  |  | $ | 362 |

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