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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
The Company's earnings are primarily domestic, and its effective tax rate on earnings from operations for the year ended December 31, 2024, was 14.5%, compared with 20.2% and 19.5% for 2023 and 2022, respectively.

For the years ended December 31, 2024, 2023, and 2022, the Company's effective tax rate differed from the statutory federal corporate income tax rate primarily as a result of research and development tax credits.

Non-current state income taxes include deferred state income taxes, which reflect the change in deferred state tax assets and liabilities and the tax expense or benefit associated with changes in state unrecognized tax benefits in the relevant period. These amounts are recorded within operating income. Current period state income tax expense is charged to contract costs and included in cost of sales and service revenues in segment operating income. For the years ended December 31, 2024, 2023, and 2022, state income taxes in Virginia make up the majority of the state income tax expense.

Federal and foreign income tax expense for the years ended December 31, 2024, 2023, and 2022, consisted of the following:
Year Ended December 31
($ in millions)202420232022
Income Taxes on Operations
Federal and foreign income taxes currently payable (receivable)$193 $273 $138 
Change in deferred federal and foreign income taxes(100)(101)2 
Total federal and foreign income taxes$93 $172 $140 

Earnings and income tax from foreign operations are not material for any periods presented.

The following table reconciles the Company's actual income tax expense to income tax expense based on the statutory federal corporate income tax rate:
Year Ended December 31
202420232022
($ in millions)DollarsPercentDollarsPercentDollarsPercent
U.S. federal statutory tax rate$135 21.0 %$179 21.0 %$151 21.0 %
Foreign tax effects2 0.3 %— — %— — %
Effect of cross-border tax laws(3)(0.5)%(1)(0.1)%— — %
Tax credits:
Research and development tax credit(49)(7.6)%(22)(2.6)%(22)(3.1)%
Other(2)(0.3)%(2)(0.2)%(1)(0.1)%
Nontaxable or nondeductible items1 0.2 %6 0.7 %6 0.8 %
Changes in unrecognized tax benefits18 2.8 %10 1.2 %8 1.1 %
Interest accrual on tax refunds(8)(1.2)%(6)(0.7)%(3)(0.4)%
Other adjustments(1)(0.2)%8 0.9 %1 0.2 %
Effective income tax rate$93 14.5 %$172 20.2 %$140 19.5 %
Cash paid for income taxes (net of refunds) consisted of the following:
December 31
($ in millions)202420232022
Federal$182 $273 $96 
State:
Virginia56 30 13 
Mississippi(a)(a)8 
Other17 26 10 
Total state73 56 31 
Foreign— 1 — 
Cash paid for income taxes (net of refunds)$255 $330 $127 
(a) The amount of income taxes paid during the year does not meet the 5% disaggregation threshold and is included in 'Other.'

Unrecognized Tax Benefits - Unrecognized tax benefits represent the gross value of the Company's uncertain tax positions that have not been reflected in the consolidated statements of operations and comprehensive income. If the income tax benefits from federal tax positions are ultimately realized, such realization would affect the Company's income tax expense, while the realization of state tax benefits would be recorded in general and administrative expenses.

The changes in unrecognized tax benefits (exclusive of interest and penalties) for the years ended December 31, 2024, 2023, and 2022 are summarized in the following table:
December 31
($ in millions)202420232022
Unrecognized tax benefits at beginning of the year$98 $90 $81 
Additions based on tax positions related to the current year13 11 8 
Additions based on tax positions related to prior years4 — 3 
Lapse of statute of limitations(5)(3)(2)
Net change in unrecognized tax benefits12 8 9 
Unrecognized tax benefits at end of the year$110 $98 90 

Assuming sustainment of these positions, as of December 31, 2024, 2023, and 2022, the reversal of $91 million, $76 million, and $70 million, respectively, of the accrued amounts would favorably affect the Company's effective federal income tax rate in future periods.

The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. As a result of the unrecognized tax benefits noted above, income tax expense increased by $5 million in 2024 for interest, resulting in an interest liability of $14 million as of December 31, 2024. In 2023, income tax expense increased $4 million for interest, resulting in an interest liability of $9 million as of December 31, 2023. In 2022, income tax expense increased $2 million for interest, resulting in an interest liability of $5 million as of December 31, 2022.
The following table summarizes the tax years that are either currently under examination or remain open under the applicable statute of limitations and subject to examination by the major tax jurisdictions in which the Company operates:
JurisdictionYears
United States - Federal(1)
2016-2023
Connecticut2021-2023
Mississippi2018-2023
Virginia2021-2023
(1) Returns for the 2016, 2018, 2019, 2021, and 2022 tax years were filed under the Compliance Assurance Process ("CAP") program and accepted by the IRS with the exception of the research and development tax credit. The 2017 tax year was also filed under the CAP program and was accepted by the IRS with the exception of the manufacturing deduction and the research and development tax credit. The statute of limitations for the 2020 tax year has been extended to October 8, 2025.

IRS Audits - The Company was part of the IRS CAP program for the 2014 through 2023 tax years. Tax years through 2015 have been closed with the IRS. In calendar years 2020, 2021, and 2022, the Company filed refund claims for the research and development ("R&D") tax credit for tax years 2016-2019. Since these are refund claims, any adjustments to the amount claimed would not result in cash tax payments to the IRS. In addition, the Company has claimed R&D tax credits on its original filed returns since 2020. The status of the pending R&D tax credits is reviewed below.

2016-2017 claims - In December 2024, following an audit, an IRS examination team issued a Notice of Proposed Adjustment ("NOPA") proposing to disallow the Company’s 2016-2017 R&D tax credit refund claims. The Company plans to pursue IRS administrative appeals in an effort to resolve issues raised by the NOPA. If acceptable resolutions are not achieved through IRS administrative processes, the Company intends to vigorously defend its positions through litigation, which will likely take several years to achieve resolution.

2018 claim - In March 2023, the IRS notified the Company that the IRS would not process its 2018 refund claim for the R&D tax credit because the agency determined the claim did not satisfy the requirements of Chief Counsel Memorandum 20214101F, an internal agency memorandum addressing the required contents of R&D tax credit refund claims. The Company disagrees with that determination and believes the 2018 claim was well-supported, met all applicable requirements, and should have been processed. The Company will take all necessary steps to pursue the 2018 refund claim including litigation, which will likely take several years to resolve.

2019 claim - The IRS has processed the company’s amended R&D tax credit refund claim for 2019 and assigned it to IRS exam for audit. The amended refund claim was filed in October 2023 with a claimed credit amount that was substantively the same as the Company’s original refund claim for the 2019 tax year.

2020-2023 credits - The IRS initiated audits for the 2020, 2021, and 2022 tax years, with minimal activity to date. The audits for 2021 and 2022 are limited to the R&D tax credit as the returns for those years were filed under the CAP program and were accepted by the IRS with the exception of the R&D tax credit.

The Company’s conclusion that it is more likely than not the Company’s R&D tax credit positions will ultimately be sustained is unchanged as of December 31, 2024. While the Company believes it has adequately provided for all unrecognized tax benefits, the Company might ultimately settle any disputed item for amounts greater than or less than the Company's accrued position. Accordingly, additional provisions for federal and state income tax related matters could be recorded in the future, and may be material, as revised estimates are made or the underlying matters are effectively settled or otherwise resolved.

Deferred Income Taxes - Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and for income tax purposes. As described above, deferred tax assets and liabilities are calculated as of the balance sheet date using current tax laws and rates expected to be in effect when the deferred tax items reverse in future periods. Net deferred tax liabilities are classified as long-term deferred tax liabilities in the consolidated statements of financial position.
The tax effects of significant temporary differences and carry-forwards that resulted in year-end deferred tax balances, as presented in the consolidated statements of financial position, were as follows:
December 31
($ in millions)20242023
Deferred Tax Assets
Workers' compensation$150 $157 
Operating lease liabilities67 77 
Reserves not currently deductible for tax purposes71 61 
Stock compensation8 7 
Net operating losses, tax credit and other carry-forwards33 35 
Capitalized research and development expenses315 200 
Other11 10 
Gross deferred tax assets655 547 
Less valuation allowance26 29 
Net deferred tax assets629 518 
Deferred Tax Liabilities
Depreciation and amortization457 447 
Contract accounting differences47 78 
Purchased intangibles212 234 
Operating lease assets62 72 
Retirement benefits216 54 
Other13 — 
Gross deferred tax liabilities1,007 885 
Total net deferred tax liabilities$(378)$(367)

As of December 31, 2024, the Company had state income tax credit carry-forwards of approximately $17 million, which expire from 2025 through 2027. A deferred tax asset of approximately $14 million (net of federal benefit) related to these state income tax credit carry-forwards has been recorded, with a valuation allowance of $12 million against such deferred tax asset as of December 31, 2024. State net operating loss carry-forwards are individually and cumulatively immaterial to the Company’s deferred tax balances and expire from 2030 through 2043.