11. Income Taxes

Income tax expense for the three years ended December 31, 2025, 2024, and 2023 differs from the U.S. federal statutory rate primarily due to the tax treatment of income attributable to noncontrolling interests in IBG LLC. These noncontrolling interests are held directly through a U.S. partnership. Accordingly, the income attributable to these noncontrolling interests is reported in the consolidated statements of comprehensive income, but the related U.S. income tax expense attributable to these noncontrolling interests is not reported by the Company as it is generally the obligation of the noncontrolling interests. Income tax expense is also affected by the differing effective tax rates in foreign, state and local jurisdictions where certain of the Company’s subsidiaries are subject to corporate taxation.

Deferred income taxes arise primarily due to the amortization of the deferred tax assets recognized in connection with the common stock offerings (see Note 4), differences in the valuation of financial assets and liabilities, net operating losses and for other temporary differences arising from the deductibility of compensation and depreciation expenses in different periods for accounting and income tax return purposes.

Under U.S. GAAP, the Company is allowed to make an accounting policy election of either (1) treating taxes due on future U.S. inclusions in taxable income related to global intangible low tax income as a current-period expense when incurred (the “period cost method”) or (2) factoring such amounts into the Company’s measurement of its deferred taxes (the “deferred method”). The Company has elected the period cost method.

As of and for the years ended December 31, 2025 and 2024, the Company had no material valuation allowances on deferred tax assets.

The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. As of December 31, 2025, the Company is no longer subject to U.S. federal, state and non-U.S. income tax examinations for tax years before 2011.

As of December 31, 2025, accumulated earnings held by non-U.S. subsidiaries totaled $4.3 billion ($3.2 billion as of December 31, 2024), of which $4.1 billion of such earnings are indefinitely reinvested abroad due to regulatory and other capital requirements and business needs in foreign jurisdictions. As a result, the Company has not provided for its proportionate share of additional foreign taxes or deferred U.S. taxes with respect to gains/or losses on previously taxed earnings and profits computed under Section 986 of the Internal Revenue Code ("IRC") and any local foreign withholding taxes associated with the repatriation of such earnings and profits. If the Company were to record a deferred tax liability due to a hypothetical repatriation of such earnings and profits, the estimated amount of such taxes would be approximately $58 million as of December 31, 2025.

Under U.S. GAAP, a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. Based upon the Company’s review of its federal, state, local and foreign income tax returns and tax filing positions, as of December 31, 2025, the Company has recorded a reserve of $12 million (including interest) for uncertain tax positions primarily related to an Internal Revenue Services ("IRS") audit of IRC Section 199 Domestic Production Activities deductions and certain U.S. state income tax liabilities.

On July 4, 2025, H.R. 1, commonly referred to as the “One Big Beautiful Bill Act” (“OBBBA”), was signed into law. The OBBBA makes permanent key elements of the Tax Cuts and Jobs Act of 2017, including 100% bonus depreciation and domestic research cost expensing. Additionally, OBBBA modifies the rules for Global Intangible Low Taxed Income (“GILTI”), renamed as Net CFC Tested Income (“NCTI”) under the OBBBA. ASC Topic 740 requires the effects of changes in tax rates and laws on deferred tax balances be recognized in the period in which the legislation is enacted. The Company included the impact of the OBBBA on its consolidated financial statements as of December 31, 2025.