Income Taxes |
6 Months Ended |
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Jun. 30, 2025 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes Our quarterly provision for income taxes is measured using an estimated annual effective tax rate, adjusted for discrete items within the periods presented. The comparison of our effective tax rate between periods is significantly impacted by the level and mix of earnings and losses by tax jurisdiction and discrete items. The income tax provision for the three months ended June 30, 2025 was $75 million resulting in an effective tax rate of 25.0%, compared to a $53 million expense resulting in an effective tax rate of 21.4% for the same period in 2024. The income tax provision for the six months ended June 30, 2025 was $125 million resulting in an effective tax rate of 24.2%, compared to a $96 million expense resulting in an effective tax rate of 21.6% for the same period in 2024. The effective tax rate for the three and six month periods ended June 30, 2025 was higher than the U.S. federal statutory rate primarily due to mix of earnings across different jurisdictions. On July 4, 2025, the One Big Beautiful Bill Act (“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 favorable tax treatment for certain business provisions. We are currently assessing its impact on our consolidated financial statements. Unrecognized Tax Benefits During 2019, Xylem’s Swedish subsidiary received a tax assessment from the Swedish Tax Agency (the "STA") for the 2013 tax year related to the tax treatment of an intercompany transfer of certain intellectual property that was made in connection with a reorganization of our European businesses. Xylem filed an appeal with the Administrative Court of Växjö, which rendered a decision adverse to Xylem in June 2022 for SEK837 million (approximately $88 million), consisting of the full tax assessment amount plus penalties and interest. Xylem appealed this decision with the intermediate appellate court, the Administrative Court of Appeal, and on May 15, 2024, that court rendered a decision in favor of Xylem and also remanded an issue to the trial court for resolution. In June 2024, the STA filed a notice of appeal of this decision to the Supreme Administrative Court, which declined to hear the case and remanded one issue back to the County Administrative Court for further consideration. Management, in consultation with external legal advisors, continues to believe it is more likely than not that Xylem will prevail on the proposed assessment and will continue to vigorously defend our position through this litigation. There can be no assurance that the final determination by the authorities will not be materially different than our position. As of June 30, 2025, we do not have any unrecognized tax benefits related to this tax position.
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