v3.25.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
One Big Beautiful Bill Act
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law. OBBBA permanently reinstated 100% tax bonus depreciation, restored earnings before interest, taxes, depreciation and amortization as the basis for calculating the business interest expense limitation, restored immediate expensing for domestic research and experimental expenditures, and modified the Global Intangible Low-Taxed Income regime, among other items. OBBBA has multiple effective dates, with certain provisions effective in 2025, and others implemented through 2027. These changes reduced our annual U.S. federal cash tax liability by approximately $200 million in 2025 and had no material impact on our effective income tax rate.
The components of "Earnings from continuing operations before income taxes" and the "Provision for income taxes" from continuing operations in the Consolidated Statements of Earnings were as follows:
(In millions)202520242023
Earnings from continuing operations before income taxes
United States$576 $555 $479 
Foreign109 106 139 
Total$685 $661 $618 
Provision for income taxes
Current tax expense from continuing operations:
Federal$6 $112 $35 
State22 15 45 
Foreign26 24 17 
54 151 97 
Deferred tax expense (income) from continuing operations:
Federal114 (13)88 
State14 28 (8)
Foreign2 6 35 
130 21 115 
Total$184 $172 $212 

Federal, state, and foreign net operating losses were utilized to offset current income taxes payable resulting in tax benefits of $3 million, $10 million, and $56 million in 2025, 2024 and 2023, respectively.

A reconciliation of the federal statutory tax rate with the effective tax rate from continuing operations follows:

 December 31, 2025December 31, 2024December 31, 2023
(Percentage of pre-tax earnings)AmountPercentAmountPercentAmountPercent
U.S. federal statutory tax rate$144 21.0 %$139 21.0 %$130 21.0 %
State income taxes, net of federal income tax effect (1)
32 4.7 %37 5.6 %31 5.0 %
Foreign tax effects
U.K. loss carryforward write-off— — %— — %10 1.6 %
U.K. other4 0.5 %— — %1 0.2 %
Canadian provincial taxes9 1.4 %9 1.4 %10 1.7 %
Other foreign jurisdictions(6)(0.9)%(1)(0.2)%2 0.3 %
Effect of cross-border tax laws
Global intangible low-taxed income— — %— — %8 1.2 %
Tax credits
Foreign tax credit— — %(6)(0.8)%(10)(1.5)%
Other(3)(0.4)%(3)(0.5)%— — %
Nontaxable or nondeductible items
Currency translation adjustment— — %— — %34 5.5 %
Other4 0.5 %1 0.2 %(1)(0.2)%
Changes in unrecognized tax benefits1 0.1 %(6)(0.8)%(2)(0.3)%
Other(1)(0.1)%2 0.1 %(1)(0.2)%
Effective tax rate$184 26.8 %$172 26.0 %$212 34.3 %
_______________
(1)States that make up the majority (greater than 50 percent) of the tax effect in this category are: in 2025, TX, CA, IL, FL, PA, MI, NJ, and GA; in 2024, TX, CA, IL, FL, PA, GA, NJ, MI and IN; in 2023, TX, CA, IL, FL, PA and GA.
A reconciliation of the income taxes paid, net of refunds by jurisdiction was as follows:

(In millions)202520242023
U.S. federal$10 $157 $24 
U.S. state & local
Texas5 4 5 
California— 3 7 
Illinois— 2 7 
New Jersey3 1 2 
Other5 22 26 
Total U.S. state & local13 32 47 
Foreign
Mexico17 10 13 
Canada12 8 9 
Other— — 3 
Total foreign29 18 25 
Total income taxes paid, net of refunds$52 $207 $96 
Deferred Income Taxes
The components of the net deferred income tax liability were as follows:
 December 31,
(In millions)
20252024
Deferred income tax assets:
Self-insurance accruals$135 $131 
Operating lease liabilities (1)
262 282 
Net operating loss carryforwards53 33 
Accrued compensation and benefits117 102 
Pension benefits23 35 
Deferred revenue23 23 
Interest expense limitation
8 75 
Other
56 47 
677 728 
Valuation allowance(14)(12)
663 716 
Deferred income tax liabilities:
Property and equipment basis differences(2,058)(1,993)
Operating right-of-use lease assets (1)
(253)(268)
Intangible assets bases difference
(89)(92)
Other(55)(20)
(2,455)(2,373)
Net deferred income tax liability (2)
$(1,792)$(1,657)
_______________
(1)Prior period amounts have been revised.
(2)Deferred tax assets of $16 million and $14 million have been included in "Sales-type leases and other assets" as of December 31, 2025 and 2024.
Changes to the valuation allowance on deferred tax assets consisted of the following:
(In millions)202520242023
Balance at January 1$12 $87 $88 
Additions
2 — — 
Deductions
— (75)(1)
Balance as of December 31
$14 $12 $87 
As of December 31, 2025, we have a cumulative valuation allowance of $14 million against our deferred tax assets, a net increase of $2 million from the prior year. The $75 million decrease in 2024 is primarily due to the cessation of all business activities by a foreign subsidiary on December 27, 2024, which resulted in the write-off of the subsidiary's net operating loss deferred tax asset and the associated valuation allowance. The valuation allowance is subject to change in future years based on the availability of future sources of taxable income.
In 2025, we repatriated $40 million of current year earnings from our Canada subsidiaries with minimal tax cost. In 2024, we repatriated $14 million of current year earnings from our Mexico subsidiary with minimal tax cost. As of December 31, 2025, we continue to consider our U.K. earnings to no longer be indefinitely reinvested and determined that there was no impact to deferred taxes. We consider the undistributed earnings of our Mexico subsidiary generated through 2023 to be indefinitely reinvested. As of 2024, we no longer assert that the current year earnings of our Mexico subsidiary are indefinitely reinvested. We consider the undistributed earnings of our Canada subsidiary generated through 2024 to be indefinitely reinvested. During 2025, we no longer assert that current year earnings of our Canada subsidiary are indefinitely reinvested. The estimated taxes associated with the repatriation of these earnings are not material. Our remaining foreign jurisdictions are indefinitely reinvested.
Any future repatriations of unremitted earnings could be subject to additional federal, state and foreign income taxes, withholding taxes, and/or the tax impact of foreign currency exchange gains or losses. The amount of the unrecognized deferred tax liability associated with these undistributed foreign earnings is not practicable to determine due to the complexities associated with the hypothetical calculations used in evaluating whether we will maintain the indefinite reinvestment assertion on the remaining foreign subsidiaries.
Our carryforwards for net operating losses and tax benefits with the related valuation allowances were as follows:
December 31, 2025December 31, 2024
(Dollars in millions)
Carryforwards (1)
Valuation AllowanceNet Carryforwards
Carryforwards (1)
Valuation AllowanceNet Carryforwards
Net operating losses and
tax benefits
U.S. Federal jurisdictions
(expires 2034 - 2037)
$8 $(2)$6 $6 $(3)$3 
U.S. Federal jurisdictions (with no expiration)
25 — 25 11 — 11 
U.S. State jurisdictions
(expires 2026 - 2045)
26 (1)25 27 — 27 
U.S. State jurisdictions
(with no expiration)
5 — 5 3 — 3 
Foreign jurisdictions
(expires 2031 - 2043)
5 (5)— 7 (7)— 
Foreign jurisdictions
(with no expiration)
5 (6)(1)4 (2)2 
Total carryforwards$74 $(14)$60 $58 $(12)$46 
_______________
(1)Net operating losses are shown before unrecognized tax benefits. State amounts presented net of federal benefits.

Amounts in the table may not be additive due to rounding.
U.S. federal net operating loss deductions are limited to 80% of taxable income for losses generated in taxable years beginning after December 31, 2017. As of December 31, 2025, $14 million of our U.S. federal net operating loss carryforwards are subject to limitations under IRC Section 382.
Uncertain Tax Positions
In many cases, our uncertain tax positions are related to tax years that remain subject to examination by the relevant taxing authorities. The following table summarizes these open tax years by jurisdiction:
JurisdictionOpen Tax Year
United States (Federal)2019, 2022 - 2025
Canada2013 - 2015, 2018 - 2025
Mexico2020 - 2025
United Kingdom (discontinued operations)2024 - 2025
Brazil (discontinued operations)2021- 2025
The following table summarizes the activity related to unrecognized tax benefits (excluding the federal benefit received from state positions):
(In millions)
202520242023
Balance at January 1$26 $32 $34 
Increases related to tax positions taken during the current year
1 2 2 
Increases related to tax positions taken during prior years
7 — — 
Reductions due to lapse of applicable statutes of limitation(7)(8)(4)
Total before interest and penalties at December 3127 26 32 
Interest and penalties2 3 3 
Balance at December 31$29 $29 $35 
Of the total unrecognized tax benefits as of December 31, 2025, $25 million (net of the federal benefit on state issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate in future periods.