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INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
We recognize income tax-related penalties in Provision for/(Benefit from) income taxes on our consolidated income statements. We recognize income tax-related interest income and expense in Other income/(loss), net on our consolidated income statements.

We account for U.S. tax on global intangible low-taxed income in the period incurred, and we account for investment tax credits using the deferral method.

Deferred tax assets and liabilities are recognized based on the future tax consequences attributable to temporary differences that exist between the financial statement carrying value of assets and liabilities and their respective tax bases, and net operating loss carryforwards and tax credit carryforwards on a taxing jurisdiction basis. We measure deferred tax assets and liabilities using enacted tax rates that will apply in the years in which we expect the temporary differences to be recovered or paid.

Our accounting for deferred tax consequences represents our best estimate of the likely future tax consequences of events that have been recognized in our consolidated financial statements or tax returns and their future probability.  In assessing the need for a valuation allowance, we consider both positive and negative evidence related to the likelihood of realization of the deferred tax assets.  If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, we record a valuation allowance.

As disclosed in Note 3, New Accounting Standards, we have prospectively adopted the guidance in ASU 2023-09, Improvements to Income Tax Disclosures.
NOTE 7. INCOME TAXES (Continued)

Components of Income Taxes

The components of income taxes excluding other comprehensive income/(loss) and equity in net results of affiliated companies accounted for after-tax for the years ended December 31 were as follows (in millions):
 202320242025
Income/(Loss) before income taxes   
U.S.$3,395 $3,424 $(11,550)
Non-U.S.572 3,809 (280)
Total$3,967 $7,233 $(11,830)
Provision for/(Benefit from) income taxes 
Current 
Federal$62 $78 $71 
Non-U.S.948 791 701 
State and local229 107 99 
Total current1,239 976 871 
Deferred 
Federal(413)25 (1,405)
Non-U.S.(1,149)303 (2,630)
State and local(39)35 (504)
Total deferred(1,601)363 (4,539)
Total$(362)$1,339 $(3,668)

Reconciliation of Income Tax

The reconciliation of the Company’s effective tax rate for the years ended December 31 were as follows:

Reconciliation of the Company’s effective tax rate20232024
U.S. federal statutory tax21.0 %21.0 %
Non-U.S. tax rate differential(3.4)2.9 
U.S. state and local taxes1.9 1.7 
General business credits(15.9)(5.9)
Dispositions and restructurings (a)(14.7)— 
U.S. tax on non-U.S. earnings7.7 (0.2)
Prior year settlements and claims1.2 0.1 
Tax incentives(3.9)(2.2)
Enacted change in tax laws0.1 0.4 
Valuation allowances(0.7)(1.0)
Other(2.4)1.7 
Effective tax rate(9.1)%18.5 %
__________
(a)2023 includes benefits of $610 million associated with legal entity restructuring within our leasing operations and China.
NOTE 7. INCOME TAXES (Continued)

 2025
Reconciliation of the Company’s provision for/(benefit from) income taxes and effective tax rateAmountPercent
U.S. federal statutory tax$(2,484)21.0 %
Federal
Effect of cross-border tax laws (a)
Flow-through operations1,313 (11.1)
Other(46)0.4 
Tax Credits
Research and development(341)2.9 
Changes in valuation allowances7 (0.1)
Nontaxable or nondeductible items23 (0.2)
Other18 (0.2)
U.S. state and local taxes (b)(321)2.7 
Foreign
Brazil
Change in valuation allowances(2,809)23.7 
Other145 (1.2)
Germany
Effect of changes in tax laws or rates592 (5.0)
Other82 (0.7)
India
Change in valuation allowances(362)3.1 
Other13 (0.1)
Mexico
Non-U.S. tax rate differential(128)1.1 
Other18 (0.2)
Other foreign tax effects80 (0.6)
Changes in unrecognized tax benefits532 (4.5)
Total$(3,668)31.0 %
__________
(a)    Includes the impact of foreign tax credits.
(b)    For the year ended December 31, 2025, the majority of taxes were incurred in California; New Jersey; Louisville, Kentucky; Michigan; Wisconsin; Illinois; and Maryland.

Cash Paid for Income Taxes, Net of Refunds

Cash paid for income taxes, net of refunds, for the years ended December 31, 2023 and 2024 was $1,027 million and $1,218 million, respectively.

Cash paid for income taxes, net of refunds, for the year ended December 31, 2025, were as follows (in millions):
2025
Cash paid for income taxes, net of refunds
U.S. federal$52 
U.S. state and local42 
Foreign
Mexico158 
Other (a)370 
Total$622 
__________
(a)    Includes payments to numerous jurisdictions that are individually insignificant.
NOTE 7. INCOME TAXES (Continued)

Components of Deferred Tax Assets and Liabilities

The components of deferred tax assets and liabilities at December 31 were as follows (in millions):
 20242025
Deferred tax assets  
Net operating loss carryforwards$7,458 $7,196 
Tax credit carryforwards7,993 7,500 
Research expenditures4,873 5,184 
Dealer and dealers’ customer allowances and claims3,498 4,088 
Employee benefit plans2,010 1,906 
Other foreign deferred tax assets2,691 3,418 
All other1,995 3,031 
Total gross deferred tax assets30,518 32,323 
Less: Valuation allowances(3,856)(628)
Total net deferred tax assets26,662 31,695 
Deferred tax liabilities
Leasing transactions3,523 2,718 
Depreciation and amortization (excluding leasing transactions)3,590 1,855 
Flow-through operations891 2,370 
Other foreign deferred tax liabilities1,381 2,066 
All other1,976 2,087 
Total deferred tax liabilities11,361 11,096 
Net deferred tax assets$15,301 $20,599 

Net operating loss carryforwards were $24.6 billion at December 31, 2025. These losses resulted in a deferred tax asset of $7.2 billion, of which $5.8 billion has no expiration date. A substantial portion of the remaining losses will expire beyond 2031. Tax credit carryforwards available to offset future tax liabilities are $7.5 billion. The majority of these credits have a remaining carryforward period of 12 years or more. Tax benefits from net operating loss carryforwards and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and available tax planning strategies. In our evaluation, we anticipate making tax elections that change the order of tax credit carryforward utilization on our U.S. tax returns.

At December 31, 2025, we maintained earnings that are considered indefinitely reinvested in operations outside the United States, for which deferred taxes have not been provided. Quantification of the deferred tax liability, if any, associated with these earnings is not practicable.

Other

A reconciliation of the amount of unrecognized tax benefits for the years ended December 31 were as follows (in millions):
 20242025
Beginning balance$2,913 $2,540 
Increase – tax positions in prior periods512 506 
Increase – tax positions in current period11 8 
Decrease – tax positions in prior periods(775)(350)
Settlements(13)(7)
Lapse of statute of limitations(5)(3)
Foreign currency translation adjustment(103)147 
Ending balance$2,540 $2,841 
NOTE 7. INCOME TAXES (Continued)

The amount of unrecognized tax benefits that would affect the effective tax rate if recognized was $2.5 billion and $2.8 billion as of December 31, 2024 and 2025, respectively.

Examinations by tax authorities have been completed through 2008 in Germany; 2014 in the United States; 2017 in Mexico; 2018 in the United Kingdom; 2019 in Canada; 2020 in China; and 2021 in India.  
Net tax-related interest expense was $16 million, $21 million, and $79 million for the years ended December 31, 2023, 2024, and 2025, respectively. At December 31, 2024 and 2025, we recognized a net tax-related interest receivable of $37 million and a net tax-related interest payable of $49 million, respectively.