Income Taxes |
3 Months Ended |
|---|---|
Mar. 31, 2026 | |
| Income Taxes | |
| Income Taxes | Note 7—Income Taxes The effective tax rate was 60.2% for the three months ended March 31, 2026, compared to 29.4% for the three months ended March 31, 2025. The change in these rates was primarily from changes in results of operations and changes in forecasted results reflected in the tax rates. The liability for unrecognized tax benefits was $32 million and $49 million at March 31, 2026 and December 31, 2025. Included in the liability at March 31, 2026 and December 31, 2025 were no tax positions for which ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. On August 26, 2020, we received a Notice of Proposed Adjustment (NOPA) from the Internal Revenue Service (IRS) regarding our 2015 and 2016 consolidated income tax returns. On June 30, 2021, we received a NOPA from the IRS regarding our 2017 and 2018 consolidated income tax returns. Within the NOPAs, the IRS has asserted that our taxable income for the aforementioned years should be higher based on their assessment of the appropriate amount of taxable income that we should report in the U.S. in connection with our sourcing of products by our foreign subsidiaries for sale in the U.S. by our domestic subsidiaries. The transfer pricing methodology was consistently applied for all years subject to the NOPAs and 2019 into 2022, but is no longer employed. In June 2024, the IRS and the relevant foreign taxing authority mutually agreed to proposed adjustments to our 2015 through 2018 consolidated tax returns. As a result, we remeasured the uncertain tax position for the 2015 through 2018 tax years, as well as the affected 2019 through 2022 tax years, to the amount expected to be paid upon a final agreement with the IRS. In June 2025, we received the final assessment from the IRS for the 2015 through 2018 tax years, including interest. The uncertain tax position for these years and related accrued interest have been remeasured to reflect the final amount to be paid. This matter does not impact our 2023, 2024 or future tax years. In March 2026, we paid $19 million to the to settle the audit years, inclusive of $5.8 million of accrued interest. As of March 31, 2026, the remaining amount owed associated with the transfer pricing matter was $16 million, which includes $5.2 million of interest accrued on the matter through March 31, 2026. The balance sheet classification and amount owed may be subject to change depending on the timing of a final assessment from the IRS for the 2019-2022 audit years. On July 4, 2025, the U.S. Congress enacted budget reconciliation bill H.R. 1 referred to as the One Big Beautiful Bill (OBBB). The OBBB contains several changes to corporate taxation including modification to limitations on deductions for interest expense and accelerated fixed asset depreciation. We expect the legislation to decrease future U.S. cash taxes with no material impact to the effective tax rate. |