v3.26.1
Income and Other Taxes
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income and Other Taxes Income and Other Taxes
Loss before income taxes was as follows:
Year Ended December 31,
 202520242023
Domestic loss$(396)$(877)$(89)
Foreign (loss) income(92)(339)61 
Loss before Income taxes$(488)$(1,216)$(28)
The components of Income tax expense (benefit) were as follows:
Year Ended December 31,
 202520242023
Federal Income Taxes
Current$(3)$(15)$21 
Deferred424 (44)(65)
Foreign Income Taxes
Current42 34 18 
Deferred(23)149 21 
State Income Taxes
Current— (4)— 
Deferred101 (15)(24)
Income tax expense (benefit)$541 $105 $(29)
A reconciliation of the U.S. federal statutory income tax rate to the consolidated income tax rate pursuant to the disclosure requirements of ASU 2023-09 was as follows:
Year Ended December 31, 2025
 AmountPercent
Loss before Income Taxes$(488)
U.S. federal statutory income tax rate(102)21.0 %
State and local income taxes, net of federal (national) income tax effect(1)
80 (16.4)%
Foreign tax effects
Brazil
Changes in valuation allowances(6)1.2 %
Other3 (0.6)%
Germany6 (1.2)%
Switzerland
Effect of rates different than statutory10 (2.1)%
Other(5)1.0 %
United Kingdom
Changes in valuation allowances27 (5.5)%
Other(6)1.2 %
Other foreign jurisdictions2 (0.4)%
Effect of cross-border tax laws
Subpart F10 (2.1)%
GILTI30 (6.2)%
Other4 (0.8)%
Tax credits
Other(3)0.6 %
Changes in valuation allowances483 (99.0)%
Non-taxable or non-deductible items
Stock-based compensation7 (1.4)%
Other7 (1.4)%
Other Adjustments(3)0.6 %
Changes in unrecognized tax benefits (3)0.6 %
Effective Tax Rate$541 (110.9)%
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(1)State Taxes in Illinois, New Jersey, New York, Connecticut, Florida, Maryland, Georgia and Alabama make up the majority (greater than 50%) of the tax effect in this category.
A reconciliation of the U.S. federal statutory income tax rate to the consolidated effective income tax rate for the years ended December 31, 2024, and 2023 was as follows:
Year Ended December 31,
 20242023
U.S. federal statutory income tax rate21.0 %21.0 %
Nondeductible expenses(0.8)%(32.2)%
Effect of tax law changes— %— %
Change in valuation allowance for deferred tax assets(16.0)%15.6 %
State taxes, net of federal benefit1.0 %(21.9)%
Audit and other tax return adjustments0.6 %83.0 %
Tax-exempt income, credits and incentives1.1 %59.0 %
Foreign rate differential adjusted for U.S. taxation of foreign profits(1)
(0.5)%(32.3)%
Stock-based compensation(0.2)%(13.0)%
Goodwill impairment(15.3)%— %
Divestitures0.2 %25.3 %
Other0.3 %(0.9)%
Effective income tax rate(8.6)%103.6 %
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(1)The “U.S. taxation of foreign profits” represents the U.S. tax, net of foreign tax credits, associated with actual and deemed repatriations of earnings from our non-U.S. subsidiaries.
A summary of income taxes paid by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 was as follows:
Year Ended December 31, 2025
Federal$1 
State and local2 
Foreign
Canada21 
France8 
Ireland5 
Germany4 
Switzerland4 
Other foreign20 
Total foreign62 
Total cash paid for income taxes (net of refunds)$65 
On a consolidated basis, we paid a total of $65, $65 and $51 in income taxes to federal, foreign and state jurisdictions during the three years ended December 31, 2025, 2024 and 2023, respectively.
Income taxes were allocated to the following items:
Year Ended December 31,
 202520242023
Income tax expense (benefit) on Loss before income taxes$541 $105 $(29)
Income tax (expense) benefit Common shareholders' equity:
Changes in defined benefit plans(23)(10)93 
Cash flow hedges1 (1)1 
Translation adjustments— (8)— 
Additional paid-in capital— 6 — 
Unrecognized Tax Benefits and Audit Resolutions
We recognize tax liabilities when, despite our belief that our tax return positions are supportable, we believe that certain positions may not be fully sustained upon review by tax authorities. Each period, we assess uncertain tax positions for recognition, measurement and effective settlement. Benefits from uncertain tax positions are measured at the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement - the more-likely-than-not recognition threshold. Where we have determined that our tax return filing position does not satisfy the more-likely-than not recognition threshold, we have recorded no tax benefits. These assessments require the use of considerable estimates and judgments and can increase or decrease our effective tax rate, as well as impact our operating results. A difference in the ultimate resolution of uncertain tax positions from what is currently estimated could have a material impact on our results of operations and financial condition.
The calculation of our tax liabilities involves dealing with uncertainties in the application of complex tax laws and regulations in a variety of jurisdictions. We are also subject to ongoing tax examinations in numerous jurisdictions due to the extensive geographical scope of our operations. As a result, we have received, and may in the future receive, proposed tax adjustments and tax assessments in multiple jurisdictions. We regularly assess the likelihood of the outcomes resulting from these ongoing tax examinations as part of our continuing assessment of uncertain tax positions to determine our provision for income taxes. The specific timing of when the resolution of each tax position will be reached is uncertain.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
202520242023
Balance at January 1$95 $140 $110 
Additions related to current year2 1 1 
Additions related to prior years positions— — 57 
Additions related to business acquisitions20 — — 
Reductions related to prior years positions(1)— (14)
Settlements with taxing authorities(1)
— (29)(13)
Reductions related to lapse of statute of limitations(80)(18)(2)
Currency(1)1 1 
Balance at December 31$35 $95 $140 
_____________
(1)The majority of settlements did not result in the utilization of cash.
Included in the balances at December 31, 2025, 2024 and 2023 are $(2), $(2) and $(31), respectively, of tax positions that are highly certain of realizability but for which there is uncertainty about the timing or that they may be reduced through an indirect benefit from other taxing jurisdictions. Because of the impact of deferred tax accounting, other than for the possible incurrence of interest and penalties, the disallowance of these positions would not affect the annual effective tax rate.
Within income tax expense, we recognize interest and penalties accrued on unrecognized tax benefits, as well as interest received from favorable settlements. We had $6, $0 and $(2) accrued for the payment of interest and penalties associated with unrecognized tax benefits at December 31, 2025, 2024 and 2023, respectively.
In the U.S., we are no longer subject to U.S. federal income tax examinations for years before 2022. With respect to our major foreign jurisdictions, we are no longer subject to tax examinations by tax authorities for years before 2017.
Deferred Income Taxes
At December 31, 2025 we have not provided deferred taxes on our undistributed pre-1987 Earnings & Profits as such undistributed earnings have been determined to be indefinitely reinvested and we currently do not plan to initiate any action that would precipitate a deferred tax impact. Further, post-1986 earnings and profits associated with those foreign subsidiaries acquired in the Lexmark Acquisition have been determined to be indefinitely reinvested. Additionally, we have also not provided deferred taxes on the outside basis differences in our investments in foreign subsidiaries that are unrelated to undistributed earnings. These basis differences are also indefinitely reinvested. A determination of the unrecognized deferred taxes related to these components is not practicable.
The tax effects of temporary differences that give rise to significant portions of the deferred taxes were as follows:
December 31,
 20252024
Deferred Tax Assets  
Research and development$249 $227 
Post-retirement medical benefits44 43 
Net operating losses1,131 322 
Operating reserves, accruals and deferrals183 232 
Tax credit carryforwards90 80 
Disallowed interest expense carryforward(1)
173 23 
Deferred and share-based compensation24 22 
Pension83 122 
Finance lease and installment sales127 64 
Operating lease liabilities75 33 
Other(1)
63 45 
Subtotal2,242 1,213 
Valuation allowance(1,933)(511)
Total$309 $702 
Deferred Tax Liabilities
Intangibles and goodwill180 84 
Depreciation33 — 
Unremitted earnings of foreign subsidiaries29 26 
Operating lease ROU assets72 41 
Other35 21 
Total$349 $172 
Total Deferred tax (liability) asset, net$(40)$530 
Reconciliation to the Consolidated Balance Sheets
Deferred tax assets$98 $615 
Deferred tax liabilities(2)
(138)(85)
Total Deferred tax (liability) asset, net$(40)$530 
_____________
(1)Prior year amounts have been reclassified to conform to the current year presentation.
(2)Represents the deferred tax liabilities recorded in Other long-term liabilities - refer to Note 14 - Supplementary Financial Information.
We record the estimated future tax effects of temporary differences between the tax basis of assets and liabilities and the amounts reported, as well as net operating loss and tax credit carryforwards. Deferred tax assets are assessed for realizability and, where applicable, a valuation allowance is recorded to reduce the total deferred tax asset to an amount that will, more-likely-than-not, be realized in the future. We apply judgment in assessing the realizability of these deferred tax assets and the need for any valuation allowances. In determining the amount of deferred tax assets that are more-likely-than-not to be realized, we considered historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies.
The net change in the total valuation allowance for the three years ended December 31, 2025, 2024 and 2023 was an increase of $1,422, $136 and $9, respectively. The valuation allowance relates primarily to certain net operating loss carryforwards, tax credit carryforwards and deductible temporary differences for which we have concluded it is more-likely-than-not that these items will not be realized in the ordinary course of operations.
At December 31, 2025, we had tax credit carryforwards of $90 available to offset future income taxes, of which $1 is available to carryforward indefinitely while the majority of the remaining $89 will expire in 2026, if not utilized. We also had net operating loss carryforwards for income tax purposes of $6.5 billion that will begin to expire in 2026 through 2045, if not utilized, and $1.6 billion available to offset future taxable income indefinitely.