v3.25.4
Income Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Income before income taxes is attributable to the following geographic locations for the years ended December 31 (in millions):
202520242023
Domestic $380 $147 $278 
Foreign 1,128 828 846 
Income before income taxes
$1,508 $975 $1,124 
The tax expenses for income taxes consisted of the following components for the years ended December 31 (in millions):
202520242023
Current:
Federal $(6)$1 $— 
State and local (2)(3)— 
Foreign (208)(189)(150)
Subtotal
(216)(191)(150)
Deferred:
State and local (1)2 — 
Foreign 57 28 (5)
Subtotal
56 30 (5)
Income tax expense
$(160)$(161)$(155)
State and foreign taxes not based on income are included in general and administrative expenses and the aggregate amounts were not significant for the years ended December 31, 2025, 2024 and 2023.
We applied ASU 2023-09 on a prospective basis as discussed in Note 1. Accordingly, the disaggregation of rate reconciliation categories in the table below provide the disclosures required by ASU 2023-09 for the year ended December 31, 2025.
Income tax benefit (expense) for the year ended December 31, 2025 differed from the amounts computed by applying the U.S. federal income tax rate of 21% to pre-tax income as a result of the following ($ in millions, except percentages):
2025
$%
Federal tax at statutory rate$(317)21.0 %
State and local taxes (1)
(3)0.2 %
Non-deductible or non-taxable items:
REIT status/dividends paid deduction (2)
194 (12.9)%
Other(2)0.1 %
Change in valuation allowance(4)0.3 %
Foreign tax effects:
Canada20 (1.3)%
Singapore
Tax rate differential17 (1.1)%
Other(8)0.5 %
Other foreign jurisdictions(53)3.5 %
Change in unrecognized tax benefits(3)0.2 %
Other adjustments(1)0.1 %
Total income tax expense$(160)10.6 %
(1)State taxes in Virginia contributed to the majority of the tax effect in this category.
(2)The REIT status/dividends paid deduction reconciling item reflects that the Company is generally entitled to a deduction for dividends paid and therefore generally is not subject to U.S. federal corporate income tax on taxable income that is distributed; accordingly, certain permanent differences (e.g., nondeductible executive compensation) do not result in incremental federal income tax expense when fully offset through the dividends paid deduction mechanism.
Income tax benefit (expense) for the years ended December 31, 2024 and 2023 differed from the amounts computed by applying the U.S. federal income rate of 21% to pre-tax income as a result of the following (in millions):
20242023
Federal tax at statutory rate $(205)$(236)
State and local tax expense(1)— 
Foreign income tax rate differential (12)(14)
Non-deductible expenses (10)(6)
Stock-based compensation expense (8)(9)
Change in valuation allowance(72)(32)
Foreign financing activities(2)(4)
Uncertain tax positions reserve 11 21 
Tax adjustments related to REIT130 132 
Change in deferred tax adjustments1 (3)
Effect of tax rate change on deferred tax assets— (2)
Other, net 7 (2)
Total income tax expense
$(161)$(155)
Our accounting policy is to treat any tax on net controlled foreign corporation ("CFC") tested income, or "NCTI" (before January 1, 2026, Global Intangible Low-Taxed Income or GILTI) inclusions as a current period cost included in the tax expense in the year incurred. We estimate the NCTI inclusion provision will result in no material financial statement impact provided we satisfy our REIT distribution requirement with respect to the NCTI inclusions.
As a result of our conversion to a REIT effective January 1, 2015, it is no longer our intent to indefinitely reinvest undistributed foreign earnings. However, no deferred tax liability has been recognized to account for this change because the expected recovery of the basis difference will not result in material U.S. taxes in the post-REIT conversion periods due to the fact that the majority of our foreign subsidiaries are either QRSs or owned directly by our REIT and QRSs, and the foreign withholding tax effect would be immaterial. We continue to assess the foreign withholding tax impact of our current policy and do not believe the distribution of our foreign earnings would trigger any significant foreign withholding taxes, as the majority of the foreign jurisdictions where we operate do not impose withholding taxes on dividend distributions to a corporate U.S. parent.
The types of temporary differences that give rise to significant portions of our deferred tax assets and liabilities are set out below as of December 31 (in millions):
20252024
Deferred tax assets:
Stock-based compensation expense $11 $10 
Net unrealized losses26 12 
Operating lease liabilities233 217 
Finance lease liabilities36 — 
Deferred revenue15 11 
Loss carryforwards and tax credits304 253 
Others, net62 25 
Gross deferred tax assets
687 528 
Valuation allowance (285)(277)
Total deferred tax assets, net 402 251 
Deferred tax liabilities:
Finance lease liabilities— (13)
Property, plant and equipment(305)(200)
Right-of-use assets(235)(220)
Deferred income(6)(5)
Goodwill(40)(17)
Intangible assets (83)(87)
Total deferred tax liabilities
(669)(542)
Net deferred tax liabilities$(267)$(291)
The tax basis of REIT assets, excluding investments in TRSs, is greater than the amounts reported for such assets in the accompanying consolidated balance sheets by approximately $3.1 billion as of December 31, 2025.
Our accounting for deferred taxes involves weighing positive and negative evidence concerning the realizability of our deferred tax assets in each taxing jurisdiction. After considering evidence such as the nature, frequency and severity of current and cumulative financial reporting losses, the sources of future taxable income, taxable income in carryback years permitted by the tax laws and tax planning strategies, we concluded that valuation allowances were required in certain jurisdictions. The operations in most of the jurisdictions for which a valuation allowance has been established have a history of significant losses as of December 31, 2025. As such, we do not believe these operations have established a sustained history of profitability and that a valuation allowance is, therefore, necessary. We also provided a valuation allowance against certain gross deferred tax assets in certain taxing jurisdictions as these deferred tax assets are not expected to be realizable in the foreseeable future.
Changes in the valuation allowance for deferred tax assets for the years ended December 31 are as follows (in millions):
202520242023
Beginning balance $277 $221 $167 
Amounts from acquisitions
— — 10 
Amounts recognized into income
(26)6 (2)
Current increase26 57 44 
Impact of foreign currency exchange
8 (7)2 
Ending balance $285 $277 $221 
Our net operating loss carryforwards for federal, state and foreign tax purposes which expire, if not utilized, at various intervals from 2026, are outlined below (in millions):
Expiration DateFederalStateForeign
Total (1) (2)
2026$1 $— $12 $13 
2027 to 20291 — 73 74 
2030 to 2032— 1 38 39 
2033 to 20351 — 69 70 
2036 to 20382 — 16 18 
2039 to 2041— 21 74 95 
Thereafter194 92 727 1,013 
$199 $114 $1,009 $1,322 
(1)In certain jurisdictions, the net operating loss carryforwards can only be used to offset a percentage of taxable income in a given year.
(2)If certain substantial changes in the entity's ownership occur, there may be a limitation on the amount of the carryforwards that can be utilized.
As of December 31, 2025, we had tax credit carryforwards of $7 million, which expire if not utilized, from 2026 to 2031. We also had capital losses of $9 million, which can be carried forward indefinitely.
The beginning and ending balances of our unrecognized tax benefits are reconciled below for the years ended December 31 (in millions):
202520242023
Beginning balance$57 $70 $89 
Gross increases related to prior year tax positions
7 — 3 
Gross decreases related to prior year tax positions
— (12)(17)
Gross increases related to current year tax positions
5 7 5 
Decreases resulting from expiration of statute of limitation
(7)(7)(10)
Decreases resulting from settlements
— (1)— 
Ending balance$62 $57 $70 
We recognize interest and penalties related to unrecognized tax benefits within income tax expense in the consolidated statements of operations. We accrued $7 million, $5 million, and $7 million for interest and penalties as of December 31, 2025, 2024 and 2023, respectively.
The unrecognized tax benefits of $62 million as of December 31, 2025, if subsequently recognized, will affect our effective tax rate favorably at the time when such a benefit is recognized.
In general, our income tax returns for the years from 2021 through the current year remain open to examination by federal and state taxing authorities. In addition, our tax years of 2018 through the current year remain open and subject to examination by local tax authorities in certain foreign jurisdictions in which we have major operations.
We applied ASU 2023-09 on a prospective basis as discussed in Note 1. Accordingly, the income taxes paid by jurisdiction (net of refunds received) in the table below provide the disclosures required by ASU 2023-09 for the year ended December 31, 2025 (in millions):
2025
US federal$(1)
US states2
Foreign
Brazil26
Singapore68
Japan23
Australia23
Netherlands31
Other35
Total foreign206 
Total income taxes paid (net of refunds received) (1)
$207 
(1)Includes withholding tax expense.