INCOME TAXES |
6 Months Ended |
|---|---|
Jun. 30, 2026 | |
| Income Tax Disclosure [Abstract] | |
| INCOME TAXES | INCOME TAXES The Company accounts for income tax expense in accordance with ASC 740, Income Taxes ("ASC 740"), which requires an estimate of the annual effective income tax rate for the full year to be applied to the respective interim period, taking into account year-to-date amounts, projected results for the full year, and tax items recorded discretely in the period. The effective tax rate was 25.0% for the three months ended June 30, 2026, compared with 20.0% for the three months ended June 30, 2025. The year-over-year increase was primarily driven by the $46 million non-deductible impairment charge on Riello and a $10 million increase in tax expense associated with a higher German effective tax rate during the three months ended June 30, 2026. The three months ended June 30, 2025, included a state tax benefit of $6 million related to the utilization of a capital loss and a tax benefit of $6 million from the conclusion of the UTC 2020 U.S. Internal Revenue Service ("IRS") tax audit. The effective tax rate for the six months ended June 30, 2026, was 9.4% compared with 20.1% for the six months ended June 30, 2025. The year-over-year decrease was primarily driven by a net $99 million tax benefit from the partial release of a valuation allowance associated with our operations in a Swiss subsidiary and a favorable settlement of $18 million related to a state income tax audit in the six months ended June 30, 2026. These tax benefits were partially offset by the $46 million non-deductible impairment charge on Riello and a $10 million increase in tax expense associated with a higher German effective tax rate, both in the current period. The six months ended June 30, 2025, included a $12 million tax benefit generated by the purchase of investment tax credits from a third-party, a state tax benefit of $6 million related to the utilization of a capital loss and a tax benefit of $6 million from the conclusion of the UTC 2020 U.S. Internal Revenue Service ("IRS") tax audit. The Company assesses the realizability of its deferred tax assets on a quarterly basis through an analysis of potential sources of future taxable income, including prior year taxable income that may be available to absorb a carryback of tax losses, reversals of existing taxable temporary differences, tax planning strategies, and forecasts of taxable income. The Company considers all negative and positive evidence, including the weight of the evidence, to determine whether valuation allowances against deferred tax assets are required. The Company maintains valuation allowances against certain deferred tax assets. The Company conducts business globally and files income tax returns in U.S. federal, state, and foreign jurisdictions. In certain jurisdictions, the Company's operations were included in UTC's combined tax returns for the periods through the Distribution. Carrier's tax year 2022 is under examination by the IRS with closure of the examination expected in 2027. The Australia Tax Office is auditing the Company's 2021 tax return, including the review of the disentanglement of the Chubb Australia business, with the audit expected to close in early 2027. In the normal course of business, the Company is subject to examination by taxing authorities throughout the world, including Australia, Canada, China, France, Germany, Hong Kong, India, Italy, Mexico, the Netherlands, Poland, Singapore, the United Kingdom, and the United States. The Company is no longer subject to U.S. federal income tax examination for years prior to 2022 and, with few exceptions, is no longer subject to state, local, and foreign income tax examinations for tax years prior to 2014. In the ordinary course of business, there is inherent uncertainty in quantifying the Company's income tax positions. The Company assesses its income tax positions and records tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting date. The Company believes that it is reasonably possible that a net decrease in unrecognized tax benefits of $5 million to $95 million may occur within 12 months as a result of additional uncertain tax positions, the revaluation of uncertain tax positions arising from examinations, appeals, court decisions, and/or the expiration of tax statutes. On July 4, 2025, the One Big Beautiful Bill Act was enacted in the U.S., making permanent key provisions from the Tax Cuts and Jobs Act including full expensing of capital investments and U.S. incurred research and development costs, while also modifying the international tax framework and reinstating favorable treatment for certain business tax items. The legislation has staggered effective dates from 2025 through 2027. The U.S. law change did not have a material impact on the Company's Statement of Operations.
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