v3.25.4
Income Taxes (Tables)
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Schedule of Earning Before Income Tax, Domestic and Foreign
Earnings before taxes consists of the following:
Year Ended December 31,
(Dollars in millions)202520242023
Earnings before taxes
Domestic$324 $236 $197 
Foreign12 28 (5)
Total
$336 $264 $192 
Schedule of Income Tax Provision
Income tax provision consists of the following:
Year Ended December 31,
(Dollars in millions)202520242023
Current:
Federal$17 $15 $61 
State8 11 14 
Foreign5 2 1 
Total current
30 28 76 
Deferred:
Federal27 16 (44)
State4 4 (7)
Foreign(3)3 (1)
Total deferred
28 23 (52)
Total
$58 $51 $24 
Schedule of Effective Income Tax Rate Reconciliation
The reconciliation from the statutory federal income tax rate to our effective income tax rate for the year ended December 31, 2025 follows:
Year Ended December 31, 2025
(Dollars in millions)$%
U.S. federal statutory income tax rate$71 21.0 %
Domestic state & local, net of federal benefit(1)
11 3.2 %
Tax credits:
Research and development(20)(5.8)%
Other(4)(1.3)%
Nontaxable and nondeductible items, net:
Excess tax benefit on stock-based compensation(8)(2.4)%
Nondeductible officer compensation6 1.8 %
Other1 0.3 %
Cross-border taxes:
Global intangible low-taxed income3 1.0 %
Other(1)(0.3)%
Foreign reconciling items:
Canada
Changes in valuation allowance3 1.0 %
Israel
Rate differential(2)(0.6)%
Other(2)(0.6)%
Income tax provision and effective tax rate$58 17.3 %
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(1)State taxes in Connecticut, Florida, and Pennsylvania comprise the majority (greater than 50 percent) of the taxes in this category.
The reconciliation from the statutory federal income tax rate to our effective income tax rate for the years ended December 31, 2024 and 2023 (as previously disclosed, prior to the adoption of ASU 2023-09) follows:
Year Ended December 31,
20242023
Statutory federal rate21.0 %21.0 %
State rate, net of federal benefit4.2 %2.5 %
Foreign rate differential(1.5)%0.1 %
Research and development credit, net of reserves(7.1)%(18.0)%
Excess tax benefit on stock-based compensation(1.2)%(0.1)%
Nondeductible officer compensation1.2 %0.8 %
Nondeductible expenses0.6 %0.2 %
Global intangible low-taxed income2.1 %0.2 %
Change in valuation allowance0.7 %1.0 %
Change in tax reserves0.2 %1.1 %
Purchase tax credits(0.7)%— %
Divestiture impact— %4.7 %
Other(0.2)%(1.0)%
Effective tax rate19.3 %12.5 %
Schedule of Deferred Tax Assets and Liabilities
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities at December 31, 2025 and 2024 are as follows:
 December 31,
(Dollars in millions)20252024
Deferred tax assets:
Federal net operating loss$1 $1 
State net operating loss6 6 
Foreign net operating loss11 7 
Tax credit carryforwards24 19 
Lease liabilities48 44 
Capitalized R&D, net of amortization77 143 
Accrued compensation and benefits29 27 
Contract liabilities20 20 
Accrued expenses4 3 
Pension and postretirement plans9 12 
Inventory capitalization9 8 
Other14 7 
Total gross deferred tax assets
252 297 
Less valuation allowance36 25 
Deferred tax assets216 272 
Deferred tax liabilities:
Right-of-use assets(43)(40)
Long-term contracts(30)(55)
Intangible assets(33)(39)
Property, plant and equipment, net(22)(23)
Other(3)(2)
Deferred tax liabilities
(131)(159)
Net deferred tax asset
$85 $113 
Schedule of Income Taxes Paid, Net
Cash paid for income taxes, net of refunds, in 2025 consists of the following:
(Dollars in millions)Year Ended December 31, 2025
Federal$12 
State and local
Pennsylvania4 
New Jersey3 
California2 
Other3 
Cash paid for income taxes, net of refunds$24 
Schedule of Unrecognized Tax Benefits The table below summarizes the activity associated with our unrecognized tax benefits:
(Dollars in millions)202520242023
Balance at January 1,
$48 $40 $24 
Increase related to prior year tax positions1 2 11 
Increase related to current year tax positions5 6 6 
Decreases related to prior year tax positions(2)— (1)
Balance at December 31,
$52 $48 $40