INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2025

Summary of Components of Income (Loss) Before Income Taxes

For the years ended December 31, 2025, 2024, and 2023, the components of income before income taxes are as follows:


	Year Ended December 31,
	2025		2024		2023
U.S. earnings	$	251	$	177	$	186
Foreign earnings	162		153		46
Total earnings	$	413	$	330	$	232

Summary of Income Tax Provision

The income tax provision for the years ended December 31, 2025, 2024, and 2023, consisted of the following:


	Year Ended December 31,
	2025		2024		2023
Current:
U.S. federal	$	21	$	47	$	48
State	20		14		23
Foreign	56		46		40
Total current tax provision	$	97	$	107	$	111

Deferred:
U.S. federal	$	33	$	(15)	$	(10)
State	2		—		(1)
Foreign	(21)		(12)		(21)
Total deferred tax benefit	$	14	$	(27)	$	(32)

Total:
U.S. federal	$	54	$	32	$	38
State	22		14		22
Foreign	35		34		19
Total income tax provision	$	111	$	80	$	79

Summary of Reconciliation of Federal Statutory Income Tax Rate

The Company has elected to prospectively adopt the guidance in ASU No, 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes Disclosures. The reconciliation of the federal statutory income tax rate to the Company's provision for income taxes for the year ended December 31, 2025 in accordance with the guidance in ASU No. 2023-09 is as follows:


	Year Ended December 31, 2025
U.S. federal statutory tax rate	$	87	21.0	%
State and local income taxes, net of federal income tax effect(1)	18		4.4	%
Foreign tax effects
United Kingdom
Other permanent differences	(4)		(1.0)	%
Other adjustments	(2)		(0.5)	%
Other foreign jurisdictions	6		1.5	%
Effect of cross-border tax laws
Cross-border financing arrangement	(6)		(1.5)	%
Other	1		0.2	%
Nontaxable or nondeductible items
Section 162(m) limitation	6		1.5	%
Other adjustments	5		1.3	%
Total provision for income taxes	$	111	26.9	%

(1) State taxes in Minnesota, New Jersey, Illinois, Wisconsin, and Tennessee made up the majority (greater than 50%) of the tax effect in this category.

The reconciliation of the federal statutory income tax rate to the Company’s provision for income taxes for the years ended December 31, 2024 and 2023 in accordance with the guidance prior to the adoption of ASU 2023-09 is as follows:


	Year Ended December 31,
	2024				2023
Expected provision at statutory federal rate	$	70	21.0	%	$	49	21.0	%
State tax provision, net of federal benefit	11		3.3	%	17		7.3	%
Foreign rate differential	(3)		(0.9	%)	(1)		(0.4	%)
Valuation allowance	(5)		(1.5	%)	8		3.4	%
Permanent differences and other	3		0.9	%	3		1.3	%
Transaction costs	1		0.3	%	—		—	%
Section 162(m) limitation	3		0.9	%	3		1.3	%
Total provision for income taxes	$	80	24.0	%	$	79	33.9	%

Schedule of Income Taxes Paid

The income taxes paid for the year ended December 31, 2025 consisted of the following:


	Year Ended December 31, 2025
U.S. federal	$	42
State	20
Australia	9
Canada	7
France	14
Hong Kong	8
United Kingdom	6
Other foreign	5
Total	$	111

Summary of Components of Deferred Tax Assets And Liabilities

The components of deferred tax assets and liabilities consisted of the following:


	December 31,
	2025		2024
Deferred tax assets:
Operating and finance lease liabilities	$	45	$	68
Accrued compensation	43		42
Accrued expenses	32		27
Net operating loss carryforwards	17		22
Contingent consideration and compensation liabilities	9		14
Capital loss carryforwards	55		51
Credits	40		37
Reserves and allowances	4		6
Interest limitation	29		36
Derivatives	1		—
Other	14		7
Gross deferred tax assets	289		310
Valuation allowances	(107)		(92)
Net deferred tax assets	$	182	$	218

Deferred tax liabilities:
Depreciation on fixed assets	$	41	$	39
Goodwill	69		44
Amortization on identified intangible assets	174		177
Operating lease right-of-use assets	43		67
Derivatives	—		7
Deferred payments	3		3
Pension and post-retirement obligations	15		16
Other	2		6
Gross deferred tax liabilities	$	347	$	359

Net deferred tax liabilities	$	165	$	141

Summary of Reconciliation of Beginning and Ending Amount of Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:


	Year Ended December 31,
	2025		2024		2023
Gross unrecognized tax benefits at the beginning of the year	$	9	$	7	$	8
Additions for tax positions taken in a prior period (including acquired uncertain tax positions)	—		3		—
Reductions for tax positions taken in a prior period (including acquired uncertain tax positions)	—		(1)		(1)
Additions for tax positions taken in the current period	—		—		1
Reductions for tax positions due to lapse in statute of limitations	—		—		(1)
Gross unrecognized tax benefits as of the end of the year	$	9	$	9	$	7

APi Group Corp 10-K