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Income Taxes
 9 Months Ended
Sep. 30, 2025
Income Taxes  
Income Taxes

Note 7—Income Taxes

Tax provision and rate—In the nine months ended September 30, 2025 and 2024, our effective tax rate was 3.0 percent and 11.3 percent, respectively, based on loss before income tax benefit.  In the nine months ended September 30, 2025 and 2024, the effect of various discrete period tax items was a net tax benefit of $195 million and $178 million, respectively.  In the nine months ended September 30, 2025, such discrete items included changes to various uncertain tax positions, valuation allowances, rig ownership changes and rig-basis changes related to impairments.  In the nine months ended September 30, 2024, such discrete items included changes to deferred taxes resulting from operational and structural changes related to rig movements and asset impairments, changes to valuation allowances and settlements of various uncertain tax positions.  In the nine months ended September 30, 2025 and 2024, our effective tax rate, excluding discrete items, was 86.6 percent and 364.0 percent, respectively, based on income or loss before income tax expense.

In the nine months ended September 30, 2025, we recognized a net tax benefit of $195 million, primarily resulting from a release of an uncertain tax position.  In the nine months ended September 30, 2024, as a result of operational and structural changes related to rig movements, we remeasured our deferred tax assets and liabilities related to Luxembourg, resulting in an increase of our net deferred tax asset from $8 million to $280 million, and such increase was substantially offset by an increase to our valuation allowance.

Tax positions and returns—We conduct operations through our various subsidiaries in countries throughout the world.  Each country has its own tax regimes with varying nominal rates, deductions and tax attributes that are subject to changes resulting from new legislation, interpretation or guidance.  From time to time, as a result of these changes, we may revise previously evaluated tax positions, which could cause us to adjust our recorded tax assets and liabilities.  Tax authorities in certain jurisdictions are examining our tax returns and, in some cases, have issued assessments.  We intend to defend our tax positions vigorously.  Although we can provide no assurance as to the outcome of the aforementioned changes, examinations or assessments, we do not expect the ultimate liability to have a material adverse effect on our condensed consolidated statement of financial position or results of operations; however, it could have a material adverse effect on our condensed consolidated statement of cash flows.

Brazil tax investigations—In December 2005, the Brazilian tax authorities began issuing tax assessments with respect to our tax returns for the years 2000 through 2004.  In May 2014, the Brazilian tax authorities issued an additional tax assessment for the years 2009 and 2010.  We filed protests with the Brazilian tax authorities for the assessments and are engaged in the appeals process, and a portion of two cases were favorably closed.  As of September 30, 2025, the remaining aggregate tax assessment, including interest and penalties, was for corporate income tax of BRL 517 million, equivalent to $97 million, and indirect tax of BRL 94 million, equivalent to $18 million.  We believe our returns are materially correct as filed, and we are vigorously contesting these assessments.  An unfavorable outcome on these proposed assessments could have a material adverse effect on our condensed consolidated statement of financial position, results of operations or cash flows.