Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2026 | |
| Income Tax Disclosure [Abstract] | |
| Income Taxes | Income Taxes The Company’s effective tax rate was 20.0% and 15.1% for the three months ended March 31, 2026 and 2025, respectively. The effective tax rate for the three months ended March 31, 2026 was lower than the statutory rate as a result of tax preferred items including incentive compensation and foreign tax credits, net of addback, partially offset by state income taxes, net of federal income tax effect. The effective tax rate for the three months ended March 31, 2025 was lower than the statutory rate as a result of tax preferred items including incentive compensation and foreign tax credits, net of addback, partially offset by state income taxes, net of federal income tax effect and unrecognized tax benefits. The increase in the effective tax rate for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to higher pretax income in the current period compared to the prior year period and the related impact on tax preferred items and a decrease in the benefit for incentive compensation. Included in the Company’s deferred income tax assets are tax benefits related to foreign net operating losses of $48 million, which do not expire, corporate alternative minimum tax (“CAMT”) credit carryforwards of $60 million, which do not expire, and state net operating losses of $34 million, net of federal income tax effect, which will expire beginning December 31, 2026. The Company is required to establish a valuation allowance for any portion of its deferred tax assets that management believes will not be realized. Significant judgment is required in determining if a valuation allowance should be established and the amount of such allowance if required. Factors used in making this determination include estimates relating to the performance of the business. Consideration is given to, among other things in making this determination: (i) future taxable income exclusive of reversing temporary differences and carryforwards; (ii) future reversals of existing taxable temporary differences; (iii) taxable income in prior carryback years; and (iv) tax planning strategies. Based on analysis of the Company’s tax position as of March 31, 2026, management believes it is more likely than not that the Company will not realize certain state net operating losses of $29 million, state deferred tax assets of $2 million (both net of federal income tax effect), and foreign net operating losses of $33 million; therefore, a valuation allowance has been established. The valuation allowance was $64 million and $65 million as of March 31, 2026 and December 31, 2025, respectively. As of March 31, 2026 and December 31, 2025, the Company had $169 million and $168 million, respectively, of gross unrecognized tax benefits. If recognized, approximately $140 million and $137 million, net of federal income tax effect, of unrecognized tax benefits as of March 31, 2026 and December 31, 2025, respectively, would affect the effective tax rate. The Company recognizes interest and penalties related to unrecognized tax benefits as a component of the income tax provision. The Company recognized a net increase of $4 million and $7 million in interest and penalties for the three months ended March 31, 2026 and 2025, respectively. As of March 31, 2026 and December 31, 2025, the Company had a payable of $59 million and $55 million, respectively, related to accrued interest and penalties. The Company or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. The federal statutes of limitations are closed on years through 2018, except for two issues for 2016 which were claimed on an amended return. During 2025, the Internal Revenue Service (“IRS”) finalized the audit of tax years 2019 and 2020, except for one issue for 2020, which remains open. The IRS is currently auditing the Company’s U.S income tax returns for 2021 through 2023. The Company’s state income tax returns are currently under examination by various jurisdictions for years ranging from 2018 through 2024. The Company is an applicable corporation required to compute CAMT, however, as of March 31, 2026, based on current estimates, the Company does not expect to be liable for CAMT in 2026. This estimate is based on interpretations and assumptions of available guidance, including proposed regulations and notices, that the Company has made regarding the CAMT provisions of the Inflation Reduction Act of 2022. In December 2021, the Organization for Economic Co-operation and Development published the Pillar Two model rules which introduce new taxing mechanisms aimed at ensuring multinational enterprises pay a minimum level of tax on profits from each jurisdiction in which they operate. As of March 31, 2026, the tax impact was not material to the consolidated financial statements. The Company continues to monitor the adoption and implementation of these rules and evaluate the potential impact on its consolidated financial statements. The legislation commonly referred to as the One Big Beautiful Bill Act (“OBBBA”) was enacted on July 4, 2025. The corporate tax law changes resulting from the OBBBA did not have a material impact to the Company’s consolidated financial statements as of March 31, 2026 and, based on current guidance, the Company does not expect to record any material impacts in the future.
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