v3.25.4

INCOME TAXES | 12 Months Ended
--- | ---
Dec. 31, 2025
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of income (loss) from continuing operations before income taxes are as follows (in millions):
|  | Year Ended December 31,
|  | 2025 |  | 2024 |  | 2023
U.S. |  | $ | 30 |  |  | $ | 72 |  |  | $ | 89 |
Foreign |  | 262 |  |  | 336 |  |  | 491 |
Income (loss) from continuing operations before income taxes |  | $ | 292 |  |  | $ | 408 |  |  | $ | 580 |
The Company recorded Income (loss) from discontinued operations and Gain (loss) on disposition of discontinued operations before income taxes of $3 million for the year ended December 31, 2023. The major components of the Company’s provision for (benefit from) income taxes on continuing operations before income taxes are summarized below (in millions):
|  | Year Ended December 31,
|  | 2025 |  | 2024 |  | 2023
Current: |  |  |  |  |  |
Federal |  | $ | 16 |  |  | $ | 31 |  |  | $ | 31 |
State |  | 6 |  |  | 5 |  |  | 4 |
Foreign |  | 52 |  |  | 47 |  |  | 66 |
Current income tax provision (benefit) |  | 74 |  |  | 83 |  |  | 101 |
Deferred: |  |  |  |  |  |
Federal |  | (1) |  |  | (4) |  |  | (4) |
State |  | (1) |  |  | — |  |  | (3) |
Foreign |  | (1) |  |  | (6) |  |  | (31) |
Deferred income tax (benefit) provision |  | (3) |  |  | (10) |  |  | (38) |
Provision for (benefit from) income taxes |  | $ | 71 |  |  | $ | 73 |  |  | $ | 63 |
The elimination of tax from intercompany transactions is included in current tax expense. The Company recorded Provision for (benefit from) income taxes of $1 million from discontinued operations and on disposition of discontinued operations for the year ended December 31, 2023. The tax effects of the basis differences between tax and financial reporting purposes for assets, liabilities and loss carry forwards as of December 31, 2025 and 2024 for continuing operations are summarized below for major balance sheet captions (in millions):
|  | 2025 |  | 2024
Property, plant and equipment |  | $ | (34) |  |  | $ | (34) |
Intangibles |  | 3 |  |  | (5) |
Inventories |  | 12 |  |  | 9 |
Accrued warranties and product liability |  | 11 |  |  | 9 |
Loss carry forwards |  | 162 |  |  | 171 |
Retirement plans |  | 8 |  |  | 9 |
Accrued compensation and benefits |  | 23 |  |  | 18 |
Research and development |  | 15 |  |  | 18 |
Derivatives |  | 13 |  |  | (3) |
Operating lease right-of-use asset |  | (33) |  |  | (32) |
Operating lease liability |  | 36 |  |  | 35 |
Other |  | 23 |  |  | 16 |
Deferred tax assets valuation allowance |  | (40) |  |  | (44) |
Net deferred tax assets (liabilities) |  | $ | 199 |  |  | $ | 167 |
Deferred tax assets were $247 million before valuation allowances of $40 million, resulting in $207 million of net deferred tax assets which are partially offset by deferred tax liabilities of $8 million at December 31, 2025. Deferred tax assets were $221 million before valuation allowances of $44 million, resulting in $177 million of net deferred tax assets which are partially offset by deferred tax liabilities of $10 million at December 31, 2024. The net change in the total valuation allowance for the years ended December 31, 2025 and 2024 was a decrease of $4 million and $9 million, respectively. The Company’s Provision for (benefit from) income taxes is different from the amount that would be provided by applying the statutory federal income tax rate to the Company’s Income (loss) from continuing operations before income taxes. The following table is a reconciliation of the statutory federal income tax rate to the Company’s Provision for (benefit from) income taxes for the year ended December 31, 2025 (in millions):
|  |  |  | Year Ended December 31, 2025 |
|  |  |  | Amount |  | Percent |
U.S. federal statutory tax rate |  |  |  | $ | 61 |  |  | 21.0 | % |
State and local income taxes, net of federal income tax effect(1) |  |  |  | 4 |  |  | 1.5 | % |
Foreign tax effects |  |  |  |  |  |  |
Germany |  |  |  |  |  |  |
Tax rate change on beginning deferred balances |  |  |  | 9 |  |  | 3.1 | % |
India |  |  |  |  |  |  |
Withholding tax |  |  |  | 3 |  |  | 1.1 | % |
Other |  |  |  | 1 |  |  | 0.3 | % |
Italy |  |  |  |  |  |  |
Participation exemption |  |  |  | (11) |  |  | (3.8) | % |
Other |  |  |  | 4 |  |  | 1.5 | % |
Switzerland |  |  |  |  |  |  |
Statutory tax rate difference |  |  |  | (21) |  |  | (7.2) | % |
State and local income taxes, net of federal (national) income tax effect |  |  |  | 17 |  |  | 5.7 | % |
Other |  |  |  | (2) |  |  | (0.7) | % |
United Kingdom |  |  |  |  |  |  |
Patent box |  |  |  | (7) |  |  | (2.5) | % |
Other |  |  |  | 2 |  |  | 0.6 | % |
Other foreign jurisdictions |  |  |  | 1 |  |  | 0.3 | % |
Effect of cross-border tax laws |  |  |  |  |  |  |
Global intangible low-taxed income |  |  |  | 5 |  |  | 1.8 | % |
Subpart F income |  |  |  | 3 |  |  | 1.2 | % |
Foreign-derived intangible income |  |  |  | (3) |  |  | (1.2) | % |
Tax credits |  |  |  |  |  |  |
Other |  |  |  | (4) |  |  | (1.5) | % |
Changes in valuation allowances |  |  |  | (1) |  |  | (0.2) | % |
Nontaxable or nondeductible items |  |  |  |  |  |  |
Other |  |  |  | 4 |  |  | 1.2 | % |
Changes in unrecognized tax benefits |  |  |  | 3 |  |  | 1.1 | % |
Other adjustments |  |  |  |  |  |  |
Other |  |  |  | 3 |  |  | 1.0 | % |
Effective tax rate |  |  |  | $ | 71 |  |  | 24.3 | % |
(1) State and local taxes in Texas, California, Oklahoma, New York, New Hampshire, New York City, and Illinois made up the majority (greater than 50 percent) of the tax effect in this category. The following table is a reconciliation of the statutory federal income tax rate to the Company’s Provision for (benefit from) income taxes for the years ended December 31, 2024 and 2023 (in millions):
|  |  |  | Year Ended December 31, |
|  |  |  | 2024 |  | 2023 |
Tax at statutory U.S. federal income tax rate |  |  |  | $ | 86 |  |  | $ | 122 |  |
State taxes |  |  |  | 4 |  |  | 1 |  |
Change in valuation allowance |  |  |  | (7) |  |  | (3) |  |
Foreign tax differential on income/losses of foreign subsidiaries |  |  |  | (18) |  |  | (25) |  |
U.S. tax on multi-national operations |  |  |  | 8 |  |  | 13 |  |
Swiss cantonal tax attribute |  |  |  | — |  |  | (42) |  |
Research and development |  |  |  | (2) |  |  | (2) |  |
Provision to return adjustments |  |  |  | (5) |  |  | (3) |  |
Compensation |  |  |  | — |  |  | 3 |  |
Other |  |  |  | 7 |  |  | (1) |  |
Provision for (benefit from) income taxes |  |  |  | $ | 73 |  |  | $ | 63 |  |
The Company’s effective tax rate was 24.3%, 17.8% and 10.9% for the years ended December 31, 2025, 2024 and 2023, respectively. On December 15, 2022, the European Union (“EU”) Member States formally adopted the EU’s Pillar Two Directive, which generally provides for a minimum effective tax rate of 15% for large corporations, as established by the Organization for Economic Co-operation and Development (“OECD”) Pillar Two Framework. A number of countries in which we operate have adopted legislation subject to the OECD transitional safe harbor rules, while other countries are still in the process of introducing legislation. In addition, the OECD continues to issue guidance on this matter including the technical documents released on January 5, 2026. Among this release, the OECD issued Administrative Guidance which includes a “Side by Side” System designed to align the U.S. tax regime with Pillar Two for U.S.-parented multinational groups, effective for tax years beginning on or after January 1, 2026. While the Company has determined the impact of enacted Pillar Two legislation on its financial statements is not material, the Company will continue to evaluate the financial statement impacts as additional Pillar Two rules are enacted and OECD guidance is issued. On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) (H.R.1) was signed in to law by the President of the United States. The OBBBA contains significant provisions impacting corporate taxation in the U.S. with multiple effective dates. Among the changes effective in 2025 are modifications to capitalization of domestic research and development costs, accelerated depreciation of fixed assets and other qualifying property, as well as limitations on deductions for interest expense. Changes effective in 2026 include, among others, modifications to certain international tax provisions. The impacts of OBBBA are reflected in our results for the year ended December 31, 2025. There was no material effect on our income tax expense or effective tax rate. In November 2023, the Company concluded discussions with the Swiss cantonal taxing authorities with respect to the availability of future tax deductions resulting in the Company meeting the recognition criteria to record a deferred tax asset of $42 million. The Company considers foreign earnings that have been taxed in the U.S. and certain earnings that have qualified for the high tax exception not to be indefinitely reinvested and thus, has accrued foreign income and withholding, U.S. federal and state tax expense with respect to such earnings. The Company plans to indefinitely reinvest all undistributed foreign earnings in excess of those previously taxed in the U.S. which is approximately $134 million for the year ended December 31, 2025. At this time, determination of the unrecognized deferred tax liabilities for temporary differences related to the Company’s investment in non-U.S. subsidiaries is not practicable. At December 31, 2025, the Company has state net operating loss carry forward deferred tax assets of $36 million available to reduce future taxable income and income taxes in various states, substantially all of which is offset by valuation allowances and the majority will expire at various dates through 2045. The Company has approximately $558 million of foreign operating loss carry forwards. The following operating loss carry forwards are not offset by valuation allowances and do not expire: $299 million in Germany, $159 million in Italy and $29 million in Spain. The majority of the remaining operating loss carry forwards of $71 million are not offset by valuation allowances and do not expire. Also, the Company has an Indian capital loss carry forward of $3 million expiring in 2026 and an Australian capital loss carry forward of $9 million which does not expire; both are offset by valuation allowances. The Company does not have any material tax credit carry forwards. The following table is a summary of net income tax payments by jurisdiction for the year ended December 31, 2025 (in millions):
|  | Year Ended December 31, |
|  | 2025 |  |
Federal |  | $ | 5 |  |  |
State |  | 5 |  |  |
Foreign |  |  |  |
Australia |  | 7 |  |  |
China |  | 2 |  |  |
India |  | 5 |  |  |
Italy |  | 5 |  |  |
Mexico |  | 6 |  |  |
Switzerland |  | 9 |  |  |
United Kingdom |  | (6) |  |  |
Other |  | 5 |  |  |
Total net income tax payments |  | $ | 43 |  |  |
The Company made total net income tax payments of $79 million and $86 million in 2024 and 2023, respectively. At December 31, 2025 and 2024, Other current assets included net income tax receivable amounts of $18 million and $27 million, respectively. The following table summarizes the activity related to the Company’s unrecognized tax benefits (in millions).
Balance as of January 1, 2023 | $ | 3 |
Additions for current year tax positions | — |
Additions for prior year tax positions | 5 |
Reductions for prior year tax positions | (2) |
Reductions for current year tax positions | — |
Reductions for expiration of statute of limitations | — |
Settlements | — |
Balance as of December 31, 2023 | 6 |
Additions for current year tax positions | — |
Additions for prior year tax positions | 7 |
Reductions for prior year tax positions | — |
Reductions for current year tax positions | — |
Reductions for expiration of statute of limitations | — |
Settlements | — |
Acquired balances | 5 |
Balance as of December 31, 2024 | 18 |
Additions for current year tax positions | — |
Additions for prior year tax positions | 3 |
Reductions for prior year tax positions | — |
Reductions for current year tax positions | — |
Reductions for expiration of statute of limitations | (1) |
Settlements | — |
Balance as of December 31, 2025 | $ | 20 |
The Company files income tax returns, including returns for its subsidiaries, with federal, state, local and foreign taxing jurisdictions. The following tax years as described below remain subject to examination by the respective major tax jurisdictions.
Major Tax Jurisdiction | Open Tax Years
Australia | 2017 - present
China | 2014 - present
Germany | 2017 - present
India | 2005-2010, 2012, 2016, 2019 - present
Italy | 2004-2005, 2009-2011, 2014, 2020 - present
Switzerland | 2021 - present
United Kingdom | 2019 - present
United States - federal | 2017 - present
United States - states | 2017 - present
As of December 31, 2025 and 2024, the Company had $20 million and $18 million, respectively, of unrecognized tax benefits. Of the $20 million at December 31, 2025, $6 million, if recognized, would affect the effective tax rate. Potential interest and penalties were a liability of $5 million and $3 million as of December 31, 2025 and 2024, respectively. During the year ended December 31, 2025, the Company recognized total tax expense of $2 million for interest and penalties. During the year ended December 31, 2024, the total tax expense recognized was immaterial as the $1 million liability for interest and penalties was recorded to goodwill as a result of purchase accounting.

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