v3.26.1
Income Taxes
 3 Months Ended
Mar. 31, 2026
Income Tax Disclosure [Abstract]  
Income Taxes
13. INCOME TAXES
At the end of each interim period, the Company makes its best estimate of the annual expected effective income tax rate and applies that rate to its ordinary year-to-date earnings or loss. The income tax provision or benefit related to unusual or infrequent items, if applicable, that will be separately reported or reported net of their related tax effects are individually computed and recognized in the interim period in which those items occur. In addition, the effect of changes in enacted tax laws or rates, tax status, judgment on the realizability of a beginning-of-the-year deferred tax asset in future years or income tax contingencies is recognized in the interim period in which the change occurs.
The computation of the annual expected effective income tax rate at each interim period requires certain estimates and assumptions including, but not limited to, the expected pre-tax income (or loss) for the year, projections of the proportion of income (and/or loss) earned and taxed in respective jurisdictions, permanent and temporary differences, and the likelihood of the realizability of deferred tax assets generated in the current year. Global economic conditions and geopolitical factors are difficult to predict and may cause fluctuations in our expected results of operations for the year, which could create volatility in our annual expected effective income tax rate. Jurisdictions with a projected loss for the year or a year-to-date loss for which no tax benefit or expense can be recognized due to a valuation allowance are excluded from the estimated annual effective tax rate. The impact of such an exclusion could result in a higher or lower effective tax rate during a particular quarter, based upon the composition and timing of actual earnings compared to annual projections. The estimates used to compute the provision or benefit for income taxes may change as new events occur, additional information is obtained or as our tax environment changes. To the extent that the expected annual effective income tax rate changes, the effect of the change on prior interim periods is included in the income tax provision in the period in which the change in estimate occurs.
The Company’s income tax (benefit) expense and effective tax rates for the three months ended March 31, 2026 and 2025 were as follows:
 Three Months Ended March 31,
 20262025
 (dollars in millions)
Income tax (benefit) expense$(9)$29 
Effective tax rate(13)%24 %
The Company’s tax rate is affected by the fact that its parent entity is a Swiss resident tax payer, the tax rates in Switzerland and other jurisdictions in which the Company operates, the relative amount of income earned by jurisdiction and the relative amount of losses or income for which no tax benefit or expense was recognized due to a valuation allowance. The Company’s effective tax rate is also impacted by the receipt of certain tax incentives and holidays that reduce the effective tax rate for certain subsidiaries below the statutory rate.
The Company’s effective tax rate for the three months ended March 31, 2026 and 2025 includes net discrete tax benefits of approximately $24 million and net discrete tax expenses of $2 million, respectively. The net discrete tax benefits for the three months ended March 31, 2026 are primarily related to changes in reserves. The net discrete tax expenses for the three months ended March 31, 2025 are primarily related to provision to return adjustments.
Versigent is a Swiss resident taxpayer and not a domestic corporation for U.S. federal income tax purposes. As such, it is not subject to U.S. tax on remitted foreign earnings and, as a result of its capital structure, is also generally not subject to Swiss tax on the repatriation of foreign earnings.
Cash paid or withheld for income taxes was $24 million and $27 million for the three months ended March 31, 2026 and 2025, respectively.
As part of the Spin-Off, we entered into a number of agreements with the Parent to govern the Separation and our relationship with the Parent following the Separation including a Tax Matters Agreement. Pursuant to the Tax Matters Agreement executed in connection with the Spin-Off, Aptiv will generally be responsible and indemnify us for taxes imposed on a joint return basis for periods ending on the Distribution Date. As a result of the execution of the Tax Matters Agreement during the quarter ended March 31, 2026, the Company released its remaining tax indemnification liability to the Parent through Net Parent Investment related to any joint return basis positions for periods ending on the Distribution Date.
On January 15, 2025, the OECD released Administrative Guidance (the “Guidance”) on Article 9.1 of the Global Anti-Base Erosion Model Rules (the “Model Rules”) which amends the Pillar Two Framework. Jurisdictions that have adopted the Framework may implement and administer their domestic laws consistent with the Model Rules and Guidance. The Guidance eliminates the tax basis in certain deferred tax assets including tax credit carryforwards for purposes of the global minimum tax established under the Framework. While the Guidance is applicable to the tax incentive granted to the Company’s Swiss
subsidiary in 2023, a full valuation allowance against this attribute has been maintained since 2023. Therefore, the Guidance did not result in a change during the three months ended March 31, 2026 and 2025. No other deferred tax assets are impacted by the Guidance.
On July 4, 2025, the One Big Beautiful Bill Act (the “Act”) was enacted into law. The Act includes changes to U.S. tax law that will be applicable to the Company beginning in 2025, with additional provisions applying in subsequent years. Included in these changes are favorable adjustments to deductions for interest, qualified property, and research and development expenditures, as well as reforms to the international tax framework. The Act will not have a material impact on the Company’s combined financial statements.