v3.25.4

Income Taxes | 12 Months Ended
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Dec. 31, 2025
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The components of Income (Loss) before Income Taxes follow:
(In millions) | 2025 |  | 2024 |  | 2023
U.S. | $ | (1,047) |  |  | $ | (286) |  |  | $ | (325) |
Foreign | 914 |  |  | 416 |  |  | (396) |
| $ | (133) |  |  | $ | 130 |  |  | $ | (721) |
In accordance with the adoption of ASU 2023-09, a reconciliation of income taxes at the U.S. statutory rate to United States and Foreign Tax Expense for the year ended December 31, 2025 is as follows:
(In millions) | 2025 |  | %
U.S. federal income tax expense (benefit) at the statutory rate of 21% | $ | (28) |  |  | 21.0 | %
State income taxes, net of U.S. federal benefit(1) | 183 |  |  | (137.4) | %
Foreign tax effects |  |  |
Luxembourg |  |  |
Changes in valuation allowances | (53) |  |  | 39.6 | %
Rate differential | 11 |  |  | (8.0) | %
Other | (1) |  |  | 1.1 | %
Other foreign jurisdictions | 57 |  |  | (42.7) | %
Effect of cross-border tax laws | (13) |  |  | 9.8 | %
Tax credits |  |  |
Research and development credits | (6) |  |  | 4.5 | %
Changes in valuation allowances | 1,267 |  |  | (949.1) | %
Nontaxable or nondeductible items |  |  |
Goodwill impairment | 140 |  |  | (104.8) | %
Changes in unrecognized tax benefits | 9 |  |  | (6.7) | %
Other Adjustments | 1 |  |  | (1.0) | %
United States and Foreign Tax Expense | $ | 1,567 |  |  | (1,173.7) | %
(1) State taxes in Pennsylvania, Illinois, Michigan, Kansas, California, Louisiana and Georgia made up the majority (greater than 50 percent) of the tax effect in this category.
For the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, a reconciliation of income taxes at the U.S. statutory rate to United States and Foreign Tax Expense for the years then ended is as follows:
(In millions) | 2024 |  | 2023
U.S. federal income tax expense (benefit) at the statutory rate of 21% | $ | 27 |  |  | $ | (151) |
Net foreign losses with no tax due to valuation allowances | 48 |  |  | 122 |
Adjustment for foreign income taxed at different rates and nontaxable foreign items | 44 |  |  | 14 |
U.S. charges (benefits) related to foreign tax credits, R&D and foreign derived intangible deduction | (30) |  |  | 4 |
Net establishment (release) of uncertain tax positions | 6 |  |  | (3) |
Net establishment of foreign valuation allowances and write-off of deferred taxes | 4 |  |  | — |
State income taxes, net of U.S. federal benefit | (8) |  |  | (12) |
Net establishment of U.S. valuation allowances | 4 |  |  | — |
Goodwill impairment | — |  |  | 34 |
Other | — |  |  | 2 |
United States and Foreign Tax Expense | $ | 95 |  |  | $ | 10 |
The components of United States and Foreign Tax Expense by taxing jurisdiction, follow:
(In millions) | 2025 |  | 2024 |  | 2023
Current: |  |  |  |  |
Federal | $ | (8) |  |  | $ | (29) |  |  | $ | 37 |
Foreign | 212 |  |  | 189 |  |  | 177 |
State | 6 |  |  | — |  |  | 26 |
| 210 |  |  | 160 |  |  | 240 |
Deferred: |  |  |  |  |
Federal | 1,126 |  |  | (78) |  |  | (123) |
Foreign | 5 |  |  | 31 |  |  | (62) |
State | 226 |  |  | (18) |  |  | (45) |
| 1,357 |  |  | (65) |  |  | (230) |
United States and Foreign Tax Expense | $ | 1,567 |  |  | $ | 95 |  |  | $ | 10 |
Income tax expense in 2025 was $1,567 million on a loss before income taxes of $133 million. In 2025, income tax expense includes net discrete tax expense totaling $1,453 million. Discrete tax expense was primarily related to the establishment of a full valuation allowance on our net deferred tax assets in the U.S. In 2024, income tax expense was $95 million on income before income taxes of $130 million and includes net discrete tax benefits totaling $2 million. In 2023, income tax expense was $10 million on a loss before income taxes of $721 million and includes net discrete tax benefits totaling $9 million, primarily related to additional prior year withholding tax creditable in the U.S. as a result of a tax law change. We consider both positive and negative evidence when measuring the need for a valuation allowance. The weight given to the evidence is commensurate with the extent to which it may be objectively verified. Current and cumulative financial reporting results are a source of objectively verifiable information. We give operating results during the most recent three-year period a significant weight in our analysis. We perform scheduling exercises to determine if sufficient taxable income of the appropriate character exists in the periods required in order to realize our deferred tax assets with limited lives (such as tax loss carryforwards and tax credits) prior to their expiration. We also consider prudent tax planning strategies (including an assessment of their feasibility) to accelerate taxable income if required to utilize expiring deferred tax assets. A valuation allowance is not required to the extent that, in our judgment, positive evidence exists with a magnitude and duration sufficient to result in a conclusion that it is more likely than not that our deferred tax assets will be realized. In the U.S., we had a cumulative loss for the three-year period ending December 31, 2025 primarily driven by non-recurring items such as goodwill and intangible asset impairments, rationalization charges, pension curtailments and settlements, and one-time costs associated with the Goodyear Forward plan. During 2025, industry disruption and various macroeconomic factors such as the impact of tariff, transportation, labor and energy costs have negatively impacted our U.S. operating results and future forecasted U.S. earnings. In addition, the One Big Beautiful Bill Act ("OBBBA") amended the business interest expense limitation. The reduction in current and expected future earnings, as a result of industry disruption, represented significant negative evidence in the assessment of the realizability of our deferred tax assets. We concluded that it is more likely than not that our U.S. net deferred tax assets will not be fully realized and recorded a non-cash charge of $1.4 billion to establish a full valuation allowance in the U.S. during the third quarter of 2025. We intend to maintain a valuation allowance until sufficient positive evidence exists to support realization of these deferred tax assets. At December 31, 2025 and December 31, 2024, we had approximately $1.4 billion and $1.3 billion of U.S. federal, state and local net deferred tax assets, respectively, and related valuation allowances totaling $1.4 billion and $26 million, respectively. At December 31, 2025 and December 31, 2024, we also had approximately $1.5 billion of foreign net deferred tax assets and related valuation allowances of approximately $1.3 billion. Our losses in various foreign taxing jurisdictions in recent periods represented sufficient negative evidence to require us to maintain a full valuation allowance against certain of these net foreign deferred tax assets. Most notably, in Luxembourg, we maintain a valuation allowance of approximately $1.1 billion on all of our net deferred tax assets. Each reporting period, we assess available positive and negative evidence and estimate if sufficient future taxable income will be generated to utilize these existing deferred tax assets. We do not believe that sufficient positive evidence required to release valuation allowances on our foreign deferred tax assets having a significant impact on our financial position or results of operations will exist within the next twelve months. On July 4, 2025, OBBBA was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework, and the restoration of tax treatment for certain business provisions. We did not have a material impact from OBBBA on our 2025 operating tax rates. We will continue to assess the impact on us as regulations develop in the future. The Organisation for Economic Co-operation and Development ("OECD") have published the Pillar Two model rules which adopt a global corporate minimum tax of 15% for multinational enterprises with average revenue in excess of €750 million. Certain jurisdictions in which we operate enacted legislation consistent with one or more of the OECD Pillar Two model rules effective in 2025. The model rules include minimum domestic top-up taxes, income inclusion rules and undertaxed profit rules, all aimed to ensure that multinational corporations pay a minimum effective corporate tax rate of 15% in each jurisdiction in which they operate. The Pillar Two model rules did not materially impact our annual effective tax rate in 2025. However, we are continuing to evaluate the Pillar Two model rules and related developments, including the side-by-side safe harbor package for U.S.-based multinationals, and their potential impact on future periods. Temporary differences and carryforwards giving rise to deferred tax assets and liabilities at December 31 follow:
(In millions) | 2025 |  | 2024
Tax loss carryforwards and credits | $ | 1,321 |  |  | $ | 1,233 |
Capitalized research and development expenditures | 466 |  |  | 486 |
Accrued expenses deductible as paid | 353 |  |  | 316 |
Prepaid royalty income | 337 |  |  | 344 |
Partnership basis differences | 279 |  |  | 299 |
Property basis differences | 79 |  |  | 29 |
Other prepayments income | 119 |  |  | 32 |
Lease liabilities | 76 |  |  | 83 |
Postretirement benefits and pensions | 57 |  |  | 67 |
Rationalizations and other provisions | 27 |  |  | 25 |
Vacation and sick pay | 22 |  |  | 24 |
Other | 73 |  |  | 139 |
| 3,209 |  |  | 3,077 |
Valuation allowance | (2,734) |  |  | (1,252) |
Total deferred tax assets | 475 |  |  | 1,825 |
Intangible property basis differences related to Cooper Tire acquisition | (160) |  |  | (167) |
Right-of-use assets | (72) |  |  | (80) |
Total net deferred tax assets | $ | 243 |  |  | $ | 1,578 |
At December 31, 2025, we had a valuation allowance of $1,428 million for all U.S. federal and state deferred tax assets as recovery is uncertain. Approximately $228 million o f our U.S. federal and state tax assets had limited lives, primarily for net operating loss and tax credit carryforwards that are subject to expiration from 2026 to 2046. At December 31, 2025, we h ad $1,083 million of tax assets for net operating loss, capital loss and tax credit carryforwards related to certain foreign subsidiaries. These carryforwards are primarily from countries with unlimited carryforward periods, but include $84 million of tax credit carryforwards in various European countries that are subject to expiration from 2026 to 2035. A valuation allowance totaling $1,306 million h as been recorded against these and other deferred tax assets where recovery of the asset or carryforward is uncertain. At December 31, 2025, we had unrecognized tax benefi ts of $107 million that, if recognized, would have a favorable impact on our tax expense of $78 million. We had accrued interest of $1 million as of December 31, 2025. If not favorably settled, $22 million of the unrecognized tax benefits and all the accrued int erest would require the use of our cash. A summary of our unrecognized tax benefits and changes during the year follows:
(In millions) | 2025 |  | 2024 |  | 2023
Balance at January 1 | $ | 98 |  |  | $ | 92 |  |  | $ | 87 |
Increases related to prior year tax positions | 10 |  |  | 20 |  |  | 5 |
Decreases related to prior year tax positions | (2) |  |  | — |  |  | — |
Settlements | (5) |  |  | — |  |  | (1) |
Foreign currency impact | 9 |  |  | (14) |  |  | 4 |
Increases related to current year tax positions | — |  |  | — |  |  | — |
Lapse of statute of limitations | (3) |  |  | — |  |  | (3) |
Balance at December 31 | $ | 107 |  |  | $ | 98 |  |  | $ | 92 |
We are open to examination in the U.S. from 2021 onward a nd in Germany from 2018 onward. Generally, for our remaining tax jurisdictions, years from 2020 onward are still open to examination. Following an audit by the Internal Revenue Service ("IRS"), we received a Notice of Proposed Adjustment ("NOPA") during the second quarter of 2025 related to an intercompany sale of certain intellectual property in 2021. The IRS proposes to disallow income recognition totaling $1.5 billion associated with this transaction. The federal tax charge related to that income recognition was fully offset by the utilization of $315 million of then-existing deferred tax assets, including tax loss carryforwards and foreign tax credits. We disagree with the IRS’s position as stated in the NOPA. We are currently challenging the proposed adjustment through established IRS administrative procedures and are engaging in settlement discussions with the IRS. If the income recognition associated with the transaction is disallowed in full or in part, we will not be able to use a portion of the deferred tax assets that we utilized to offset the related federal taxes and we will need to write-off those deferred tax assets. However, since our U.S. deferred tax assets are in a full valuation allowance as of December 31, 2025, any such write-off of deferred tax assets would not have a material impact on our results of operations. We have concluded that no provision for tax in the U.S. is required on undistributed earnings and profits of our foreign subsidiaries because substantially all has been or will be reinvested in property, plant and equipment and working capital outside of the U.S. A foreign withholding tax charge would be required if these earnings and profits were distributed to the U.S. We estimate the foreign withholding tax charge to be approximately $100 million (net of foreign tax credits) using various assumptions. Future events, including changes in our business operations and tax law changes, could impact our current estimate. In accordance with the adoption of ASU 2023-09, below is a summary of income taxes paid, net of refunds received, by jurisdiction for the year ended December 31, 2025:
(In millions) | 2025
U.S. Federal | $ | 9 |
U.S. state and local | 8 |
Total U.S. | $ | 17 |
Foreign |
Brazil | 32 |
China | 28 |
Germany | 15 |
Canada | 14 |
Other | 54 |
Total Foreign | $ | 143 |
Total | $ | 160 |
For the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, net cash payments for income taxes were $170 million and $200 million, respectively.

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