Annual report [Section 13 and 15(d), not S-K Item 405]

INCOME TAXES

v3.25.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Income Taxes
NOTE 11 - INCOME TAXES
Income (loss) from continuing operations before income taxes includes the following components:
Year Ended December 31,
(In millions) 2025 2024 2023
United States $ (1,546) $ (901) $ 582 
Foreign (458) (49) (3)
Total $ (2,004) $ (950) $ 579 
The components of the income tax expense (benefit) from continuing operations consist of the following:
Year Ended December 31,
(In millions) 2025 2024 2023
Current provision:
United States federal $ (70) $ (38) $ 4 
United States state & local (5) (6) 25 
Foreign —  3  4 
(75) (41) 33 
Deferred provision (benefit):
United States federal (324) (153) 94 
United States state & local (58) (33) 7 
  Foreign (124) (9) 10 
Total income tax expense (benefit) from continuing operations $ (581) $ (236) $ 144 
Reconciliation of our income tax attributable to continuing operations computed at the U.S. federal statutory rate as required by the newly adopted ASU No. 2023-09 for the year ended December 31, 2025 is as follows:
(In millions) 2025
Tax at U.S. statutory rate $ (421) 21  %
Increase (decrease) due to:
State and local income taxes, net of federal income tax1
(50) 3  %
Foreign tax effects
Canada
Statutory rate difference (19) 1  %
Tax credits (7) —  %
Change in valuation allowance (3) —  %
Other adjustments (1) —  %
Other foreign jurisdictions
 1  —  %
Non-taxable or nondeductible items
Depletion (1) —  %
Changes in unrecognized tax benefits (70) 3  %
Other adjustments
Provision to return (10) 1  %
Noncontrolling interest (10) 1  %
Other 10  (1) %
Provision for income tax expense (benefit) and effective income tax rate including discrete items
 $ (581) 29  %
1State taxes in Illinois, Indiana and Michigan made up the majority (greater than 50 percent) of the tax effect in this category.
Reconciliation of our income tax attributable to continuing operations computed at the U.S. federal statutory rate before the adoption of ASU No. 2023-09 for the years ended December 31, 2024 and December 31, 2023 is as follows:
(In millions) 2024 2023
Tax at U.S. statutory rate $ (199) 21  % $ 122  21  %
Increase (decrease) due to:
Percentage depletion in excess of cost depletion (20) 2  (32) (5)
Valuation allowance —  —  14  2 
Unrecognized tax benefits 7  —  7  1 
State taxes, net (30) 3  27  5 
Federal & state provision to return (4) —  (20) (3)
Income not subject to tax (10) 1  (11) (2)
Goodwill impairment —  —  26  4 
Other items, net 20  (2) 11  2 
Provision for income tax expense (benefit) and effective income tax rate including discrete items $ (236) 25  % $ 144  25  %
The components of cash payments in excess of refunds received (refunds in excess of payments made) by jurisdiction are as follows:
Year Ended December 31,
(In millions) 2025 2024 2023
U.S. Federal
 $ — 
State
Illinois (6)
Michigan (3)
Alabama (2)
Ohio (1)
State total (12)
Foreign
Canada (5)
Other 1 
Foreign total (4)
Total refunds in excess of payments made $ (16)
Total refunds in excess of payments made (prior to ASU 2023-09) $ (30) $ (111)
The components of income taxes for other than continuing operations consisted of the following:
(In millions) 2025 2024 2023
Other comprehensive income (loss):
Pension and OPEB $ 51  $ 55  $ 10 
Derivative instruments (11) (37) 47 
Foreign currency translation (4) —  — 
Total $ 36  $ 18  $ 57 
Significant components of our deferred tax assets and liabilities are as follows:
(In millions) 2025 2024
Deferred tax assets:
Operating loss and other carryforwards $ 778  $ 589 
Pension and OPEB liabilities 154  129 
Environmental 77  69 
Product inventories 62  53 
State and local 93  36 
Employee-based compensation 71  71 
Interest limitation 201  19 
Lease liabilities 154  87 
Other liabilities 107  69 
Total deferred tax assets before valuation allowance 1,697  1,122 
Deferred tax asset valuation allowance (394) (388)
Net deferred tax assets 1,303  734 
Deferred tax liabilities:
Investment in ventures (179) (181)
Lease assets (125) (88)
Property, plant and equipment and mineral rights (1,015) (811)
Intangible assets (243) (441)
Other assets (53) (59)
Total deferred tax liabilities (1,615) (1,580)
Net deferred tax liabilities $ (312) $ (846)
NOL and interest limitation carryforwards are as follows:
(In millions) 2025 2024
Gross domestic (including states) NOL carryforwards1
$ 4,827  $ 3,549 
Gross foreign NOL carryforwards2
1,673  1,507 
Gross U.S. interest expense limitation carryforward 789  92 
Gross Canadian interest expense limitation carryforward 141  — 
1If unused, Federal and state NOL carryforwards begin to expire in 2034 and 2026, respectively.
2If unused, foreign NOL carryforwards begin to expire in 2035.
The changes in the valuation allowance are presented below:
(In millions) 2025 2024 2023
Balance at beginning of year $ 388  $ 396  $ 390 
Change in valuation allowance:
Income tax (benefit) expense 6  (8) 6 
Balance at end of year $ 394  $ 388  $ 396 
As of December 31, 2025 and 2024, we have a valuation allowance recorded of $347 million and $349 million, respectively, related to foreign deferred tax assets, and an additional $47 million and $39 million, respectively, against certain state NOLs, which are expected to expire before utilization.
Our losses in Luxembourg and certain Canadian entities in recent periods represent sufficient negative evidence to require a full valuation allowance against the deferred tax assets in those jurisdictions. We intend to maintain a valuation allowance against the deferred tax assets related to the operating losses in these jurisdictions, unless and until sufficient positive evidence exists to support the realization of such assets.
As of December 31, 2025 and 2024, we had no cumulative undistributed earnings of foreign subsidiaries included in retained earnings. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of earnings.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
(In millions) 2025 2024 2023
Unrecognized tax benefits balance as of January 1 $ 121  $ 76  $ 58 
Increases for tax positions in current year 35  46  18 
Decrease due to tax positions in prior year (2) (1) — 
Lapses in statutes of limitations (57) —  — 
Unrecognized tax benefits balance as of December 31 $ 97  $ 121  $ 76 
As of December 31, 2025 and 2024, we had unrecognized tax benefits of $97 million and $121 million, respectively. Of these amounts, $16 million and $75 million were included in Other non-current liabilities on the Statements of Consolidated Financial Position. Additionally, $81 million and $46 million were included in Deferred income taxes as of December 31, 2025 and 2024, respectively. If the unrecognized tax benefits were recognized, $16 million would impact the effective tax rate. Interest and penalties related to unrecognized tax benefits are $4 million and $15 million for the years ended December 31, 2025 and 2024, respectively.
Tax years 2022 and forward remain subject to examination for the U.S., and tax years 2021 and forward remain subject to examination for Canada.