Income and Other Taxes (Tables)

12 Months Ended

Dec. 31, 2025

Schedule of Income Before Income Tax, Domestic and Foreign

Loss before income taxes was as follows:


	Year Ended December 31,
	2025		2024		2023
Domestic loss	$	(396)	$	(877)	$	(89)
Foreign (loss) income	(92)		(339)		61
Loss before Income taxes	$	(488)	$	(1,216)	$	(28)

Schedule of Components of Income Tax Expense (Benefit)

The components of Income tax expense (benefit) were as follows:


	Year Ended December 31,
	2025		2024		2023
Federal Income Taxes
Current	$	(3)	$	(15)	$	21
Deferred	424		(44)		(65)
Foreign Income Taxes
Current	42		34		18
Deferred	(23)		149		21
State Income Taxes
Current	—		(4)		—
Deferred	101		(15)		(24)
Income tax expense (benefit)	$	541	$	105	$	(29)

Schedule of Effective Income Tax Rate Reconciliation

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

	Amount		Percent
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	%
Other	3		(0.6)	%
Germany	6		(1.2)	%
Switzerland
Effect of rates different than statutory	10		(2.1)	%
Other	(5)		1.0	%
United Kingdom
Changes in valuation allowances	27		(5.5)	%
Other	(6)		1.2	%
Other foreign jurisdictions	2		(0.4)	%
Effect of cross-border tax laws
Subpart F	10		(2.1)	%
GILTI	30		(6.2)	%
Other	4		(0.8)	%
Tax credits
Other	(3)		0.6	%
Changes in valuation allowances	483		(99.0)	%
Non-taxable or non-deductible items
Stock-based compensation	7		(1.4)	%
Other	7		(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,
	2024		2023
U.S. federal statutory income tax rate	21.0	%	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 benefit	1.0	%	(21.9)	%
Audit and other tax return adjustments	0.6	%	83.0	%
Tax-exempt income, credits and incentives	1.1	%	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)	%	—	%
Divestitures	0.2	%	25.3	%
Other	0.3	%	(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.

Schedule of Income Taxes Paid by Jurisdiction

Summarized cash flow information is as follows:


Source/(Use)	Location in Statement of Cash Flows	Year Ended December 31,
		2025		2024		2023
Provision for receivables(1)	Operating	$	40	$	44	$	36
Provision for inventory	Operating	45		66		18

Depreciation of buildings and equipment	Operating	75		57		60
Depreciation and obsolescence of equipment on operating leases	Operating	143		117		111
Amortization of internal use software	Operating	30		27		37

Amortization of acquired intangible assets	Operating	83		73		43
Amortization of patents(2)	Operating	6		9		9
Amortization of customer contract costs(3)	Operating	67		64		69
Cost of additions to land, buildings and equipment	Investing	(37)		(27)		(29)
Cost of additions to internal use software	Investing	(54)		(17)		(8)
Payments to acquire noncontrolling interests - Xerox Holdings	Investing	(13)		(30)		(5)
Common stock dividends - Xerox Holdings	Financing	(57)		(127)		(151)
Preferred stock dividends - Xerox Holdings	Financing	(14)		(14)		(14)
Repurchases related to stock-based compensation - Xerox Holdings	Financing	(6)		(10)		(8)
Payments to noncontrolling interests	Financing	(2)		(2)		(2)

Proceeds from issuance of warrants	Financing	11		—		—
Commitment fees	Financing	(22)		—		—
Finance lease obligations payment	Financing	(10)		(10)		(7)

__________________________

(1)Provision for receivables includes adjustments for customer accommodations and contract terminations of $1, $2, and $8 for the three years ended December 31, 2025, 2024 and 2023, respectively.

(2)Amortization of patents is reported in Decrease (increase) in other current and long-term assets on the Consolidated Statements of Cash Flows.

(3)Amortization of customer contract costs is reported in Decrease (increase) in other current and long-term assets on the Consolidated Statements of Cash Flows. Refer to Note 3 - Revenue - Contract Costs for additional information.

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 local	2
Foreign
Canada	21
France	8
Ireland	5
Germany	4
Switzerland	4
Other foreign	20
Total foreign	62
Total cash paid for income taxes (net of refunds)	$	65

Schedule of Allocation of Income Tax Expense (Benefit)

Income taxes were allocated to the following items:


	Year Ended December 31,
	2025		2024		2023
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 hedges	1		(1)		1
Translation adjustments	—		(8)		—
Additional paid-in capital	—		6		—

Schedule of Unrecognized Tax Benefits Rollforward

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	2025		2024		2023
Balance at January 1	$	95	$	140	$	110
Additions related to current year	2		1		1
Additions related to prior years positions	—		—		57
Additions related to business acquisitions	20		—		—
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.

Schedule of Deferred Tax Assets and Liabilities

The tax effects of temporary differences that give rise to significant portions of the deferred taxes were as follows:


	December 31,
	2025		2024
Deferred Tax Assets
Research and development	$	249	$	227
Post-retirement medical benefits	44		43

Net operating losses	1,131		322
Operating reserves, accruals and deferrals	183		232
Tax credit carryforwards	90		80
Disallowed interest expense carryforward(1)	173		23
Deferred and share-based compensation	24		22
Pension	83		122
Finance lease and installment sales	127		64
Operating lease liabilities	75		33
Other(1)	63		45
Subtotal	2,242		1,213
Valuation allowance	(1,933)		(511)
Total	$	309	$	702

Deferred Tax Liabilities


Intangibles and goodwill	180		84
Depreciation	33		—
Unremitted earnings of foreign subsidiaries	29		26
Operating lease ROU assets	72		41
Other	35		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.