v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
Note 14. Income Taxes
Income before income taxes by domestic and foreign subsidiaries (in millions):

Year Ended December 31,
202520242023
Liberia$3,411 $2,417 $1,432 
Foreign subsidiaries962524279
Income before income taxes$4,373 $2,941 $1,711 

For the year ended December 31, 2025, we adopted ASU No. 2023-09, Income Taxes (Topic 740), on a prospective basis.

Provision for Income Taxes: Current and Deferred:

For the year ended December 31, 2025, current tax expense was $64 million and deferred tax expense (benefit) was $18 million. Our income tax expense relates entirely to the operations of foreign subsidiaries

For the years ending December 31, 2024 and 2023, our income tax expense was approximately $46 million and $6 million, respectively. These amounts mainly resulted from taxes on our non-US operations, certain items not qualifying under Section 883, tonnage taxes, and other subsidiary income taxes, none of which were considered significant.

For the year ended December 31, 2025, there were no individual jurisdictions with material cash taxes paid.

Reconciliation of income tax expense, computed by applying the Liberia statutory rate (in millions):

Year Ended December 31,
2025
Income before income taxes$4,373 
Less: Equity investment income414 
Income before income taxes, excluding equity investment income3,959 
Tax at Liberia statutory rate of 25%990 25 %
Nontaxable or nondeductible items
Liberia international shipping income exemption(850)(21)%
Foreign tax effects
 United States
US source shipping income not exempt under Section 883 of the Internal Revenue Code 1
37 1 %
United Kingdom
Profits exempt under tonnage tax(94)(2)%
Other(1)— %
Total$82 2 %

(1) The tax benefit associated with US source shipping income exempt under Section 883 of the Internal Revenue Code was approximately $200 million.

We are subject to corporate income taxes in countries where we have operations or subsidiaries. For the years ended December 31, 2025, 2024 and 2023, we and the majority of our ship-operating and vessel-owning subsidiaries were exempt from U.S. corporate income tax on U.S. source income from the international operation of ships pursuant to Section 883 of the Internal Revenue Code. Regulations under Section 883 have limited the activities that are considered to be the international
operation of a ship or incidental thereto. Accordingly, our provision for U.S. federal and state income taxes includes taxes on certain activities not considered incidental to the international operation of our ships.

Additionally, for the years ended December 31, 2025, 2024 and 2023, one of our ship-operating subsidiaries was subject to tax under the tonnage tax regime of the United Kingdom. Under this regime, income from qualifying activities is subject to corporate income tax, but the tax is computed by reference to the net tonnage of the ship or ships registered under the relevant provisions of the tax regimes (the "relevant shipping profits"), which replaces the regular taxable income base. Income from activities not considered qualifying activities, which we do not consider significant, remains subject to United Kingdom corporate income tax..

Deferred Tax Assets and Liabilities:

As of December 31, 2025, our deferred tax liabilities total $153 million and primarily relate to $137 million of timing differences on property and equipment which arose on the acquisition of the Port of Costa Maya and adjacent land in Mahahual, Mexico. As of December 31, 2024, our deferred tax liabilities were $13 million and primarily related to investments in foreign subsidiaries.
As of December 31, 2025, our gross deferred tax assets total $53 million and primarily relate to U.S. and foreign net operating losses (“NOLs”) of approximately $25 million and deferred tax assets for U.S. and foreign tax credits of approximately $15 million.
As of December 31, 2024, our gross deferred tax assets total $63 million and primarily relate to U.S. and foreign NOLs of approximately $32 million and deferred tax assets for U.S. and foreign tax credits of approximately $19 million.
We regularly review deferred tax assets for recoverability based on our history of earnings, expectations of future earnings, and tax planning strategies. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income to support the amount of deferred taxes. A valuation allowance is recorded in those circumstances in which we conclude it is not more-likely-than-not we will recover the deferred tax assets prior to their expiration.
As of December 31, 2025, we have provided a valuation allowance for approximately $25 million, of which $20 million relates to deferred tax assets for NOLs and tax credits. As of December 31, 2024, we provided a valuation allowance for approximately $21 million, of which $15 million relates to deferred tax assets for NOLs and tax credits.
As of December 31, 2025, $9 million of the NOLs deferred tax assets relate to NOLs which are subject to expire between 2026 and 2042 and $14 million of the tax credits deferred tax assets relate to credits which are subject to expire between 2037 and 2039.
For a majority of our subsidiaries, we do not expect to incur income taxes on future distributions of undistributed earnings. Accordingly, no deferred income taxes have been provided for the distribution of these earnings. Where we do expect to incur income taxes on future distributions of undistributed earnings, we have provided for deferred taxes, which we do not consider significant to our operations.

Unrecognized tax benefits:
As of and for the years ended December 31, 2025, 2024 and 2023, the company had no material unrecognized tax benefits and no material changes in unrecognized tax benefits. Any interest expense and penalties related to income tax liabilities are recorded as income tax expense.