Celanese CorpCE
Celanese Corp Income Taxes Disclosure
Income Taxes
The Company proactively monitors new income tax guidance and assesses the expected impact, if any, on the Company's filing positions and will record the impacts as discrete income tax expense adjustments in the period the guidance is finalized or becomes effective.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. Key provisions of the OBBBA include the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act (the "TCJA"), impacting the period of cost recovery for capital expenditures, the calculation of allowable business interest expense, and the timing of deductions for domestic research and development expenses. The OBBBA also modifies international tax provisions to adjust tax rate increases scheduled for January 2026, the amount of allowable foreign tax credits to offset deemed income inclusions in the U.S., and the required allocation of U.S. expenses such as interest and stewardship to specific categories of international income. Certain provisions which impact the Company are effective starting in 2025, while others are not effective until 2026. Although the Company is still actively evaluating the entire impact of the OBBBA on its operations, it does not currently expect the OBBBA to have a material impact on its future effective tax rate and cash taxes, once it becomes fully effective.
Due to the 2017 TCJA and resulting uncertainty as to future foreign source income, the Company previously recorded a valuation allowance on its foreign tax credit carryforwards. The Company is currently evaluating tax planning strategies to enable the use of the Company's foreign tax credit carryforwards that may decrease the Company's effective tax rate in future periods as the valuation allowance is reversed.
In December 2021, the Organization for Economic Co-operation and Development ("OECD") issued final Model Rules for Pillars One and Two of its Base Erosion and Profit Shifting ("BEPS") project. In general, Pillar One addresses nexus concerns and the allocation of profits among companies in which a multinational enterprise ("MNE") conducts its business. Pillar Two aims to ensure that all MNEs pay an effective tax rate of no less than 15% on their adjusted net income in each of the jurisdictions in which they have operations. Pillar Two is more impactful to the Company as it allows for assessment even if the individual countries do not enact its minimum tax provisions. In effect, Pillar Two allows any country within which an MNE operates to levy tax upon that MNE to the extent it determines that the MNE is paying less than a 15% effective tax rate on its adjusted net income. The taxes levied may then be allocated among the jurisdictions that conform to the OECD rules.
In December 2022, the member states of the European Union ("EU") unanimously voted to adopt the OECD's minimum tax which was agreed to by consensus of the BEPS 2.0 (Pillars One and Two) signatory jurisdictions. Under the EU's minimum tax directive, member states are to adopt domestic legislation implementing the minimum tax rules effective for periods beginning on or after December 31, 2023, with Pillar Two's "under-taxed profit rule" to take effect for periods beginning on or after December 31, 2024. The EU effective dates are January 1, 2024, and January 1, 2025, for different aspects of the directive.
Legislatures in multiple countries outside of the EU have also enacted or drafted legislation to implement the OECD's minimum tax proposals.
In July 2023, the OECD published Administrative Guidance proposing certain safe harbor provisions, including an effective rate test and a routine profits test, which if satisfied effectively delay effective dates of Pillar Two to January 1, 2027. The EU and a significant number of other countries have or are expected to implement the safe harbor in local legislation. Based on these safe harbor provisions, the Company currently expects that several material jurisdictions, including the U.S., Netherlands, Switzerland, Germany, China, Singapore and Canada, will qualify for the safe harbor effectively delaying the application of the global minimum tax until January 1, 2027.
On January 5, 2026, the OECD issued administrative guidance that establishes an exemption from the income inclusion rule and the undertaxed profits rule for MNE groups whose ultimate parent entity is located in a jurisdiction with a qualified side by side regime. Upon initial review, the U.S. would appear to qualify because it has a qualified domestic tax system and a qualified worldwide tax system. As a result, U.S. based groups could potentially be exempt from the OECD Pillar Two requirements other than for domestic top-up taxes and for certain reporting requirements. The Company will actively monitor the local country implementation of the new administrative guidance to determine the impact of the side by side system on its future filing positions.
The Company will continue to monitor the developments and implementation of the OECD BEPS projects. Currently, the Company does not meet the requirements for the application of Pillar One. After an initial assessment of the application of the safe harbor provisions on a global basis, the Company determined that there was not a material impact from the local adoption of the OECD Pillar Two proposals in 2025, but is continuing to model the effect of these provisions, as well as the impact of the January 2026 administrative guidance, on its future effective tax rate and cash taxes.
Income Tax Provision
Earnings (loss) from continuing operations before tax by jurisdiction are as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In $ millions) | |||||||||||||||||
| U.S. | (1,491) | (2,292) | (185) | ||||||||||||||
| International | 271 | 1,273 | 1,346 | ||||||||||||||
| Total | (1,220) | (1,019) | 1,161 | ||||||||||||||
The income tax provision (benefit) consists of the following:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In $ millions) | |||||||||||||||||
| Current | |||||||||||||||||
U.S. - Federal | 2 | 70 | 4 | ||||||||||||||
U.S. - State | 1 | 9 | 4 | ||||||||||||||
| International | 158 | 239 | 162 | ||||||||||||||
| Total | 161 | 318 | 170 | ||||||||||||||
| Deferred | |||||||||||||||||
U.S. - Federal | (99) | (84) | (170) | ||||||||||||||
U.S. - State | (8) | (6) | (13) | ||||||||||||||
| International | (144) | 279 | (782) | ||||||||||||||
| Total | (251) | 189 | (965) | ||||||||||||||
| Total | (90) | 507 | (795) | ||||||||||||||
A reconciliation of the significant differences between the U.S. federal statutory tax rate of 21% and the effective income tax rate on income from continuing operations is as follows:
| Year Ended December 31, 2025 | |||||||||||
| (In $ millions, except percentages) | |||||||||||
| Income tax provision computed at U.S. federal statutory tax rate | (256) | 21.0 | % | ||||||||
U.S. | |||||||||||
| State and local income tax, net of federal income tax effect | (9) | 0.7 | % | ||||||||
Changes in valuation allowances | 39 | (3.2) | % | ||||||||
| Tax credits | (3) | 0.2 | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
Goodwill impairment losses | 239 | (19.6) | % | ||||||||
| Other | 10 | (0.8) | % | ||||||||
| Total Nontaxable or nondeductible items | 249 | (20.4) | % | ||||||||
| Effect of cross-border tax laws | |||||||||||
| Subpart F | 43 | (3.5) | % | ||||||||
| Global intangible low-taxed income | 21 | (1.7) | % | ||||||||
| Other | 11 | (0.9) | % | ||||||||
| Total Effect of cross-border tax laws | 75 | (6.1) | % | ||||||||
| Other, net | (3) | 0.3 | % | ||||||||
Total U.S. | 348 | (28.5) | % | ||||||||
| Foreign tax effects | |||||||||||
China | |||||||||||
Changes in valuation allowances | 25 | (2.0) | % | ||||||||
Other | 8 | (0.7) | % | ||||||||
Cyprus | |||||||||||
Nontaxable or nondeductible items | (45) | 3.7 | % | ||||||||
Other | (10) | 0.8 | % | ||||||||
Germany | |||||||||||
Asset transfers between wholly-owned foreign affiliates | (72) | 5.9 | % | ||||||||
Trade taxes | (47) | 3.9 | % | ||||||||
Other | (1) | 0.1 | % | ||||||||
Hong Kong | |||||||||||
Dividends | (25) | 2.0 | % | ||||||||
Other | (2) | 0.2 | % | ||||||||
Mexico | (7) | 0.6 | % | ||||||||
Netherlands | |||||||||||
| Changes in valuation allowances | (15) | 1.2 | % | ||||||||
| Other | 18 | (1.5) | % | ||||||||
Switzerland | |||||||||||
Asset and investment impairment | (10) | 0.8 | % | ||||||||
Asset transfers between wholly-owned foreign affiliates | 33 | (2.7) | % | ||||||||
Cantonal taxes | 18 | (1.5) | % | ||||||||
Foreign tax rate differential | 41 | (3.4) | % | ||||||||
Foreign exchange permanent items | (42) | 3.4 | % | ||||||||
Other | 19 | (1.5) | % | ||||||||
Other foreign jurisdictions | (18) | 1.5 | % | ||||||||
| Total Foreign tax effects | (132) | 10.8 | % | ||||||||
Changes in unrecognized tax benefits | (50) | 4.1 | % | ||||||||
| Income tax provision (benefit) | (90) | 7.4 | % | ||||||||
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| (In $ millions, except percentages) | |||||||||||
| Income tax provision computed at U.S. federal statutory tax rate | (212) | 243 | |||||||||
Change in valuation allowance | 370 | (150) | |||||||||
| Equity income and dividends | (41) | (27) | |||||||||
(Income) expense not resulting in tax impact, net | 327 | (9) | |||||||||
| U.S. tax effect of foreign earnings and dividends | 184 | 384 | |||||||||
| Foreign tax credits | (137) | (73) | |||||||||
| Other foreign tax rate differentials | (66) | (108) | |||||||||
| Legislative changes | (6) | (44) | |||||||||
| State income taxes, net of federal benefit | 12 | (8) | |||||||||
Asset transfers between wholly-owned foreign affiliates | 87 | (839) | |||||||||
Other, net | (11) | (164) | |||||||||
| Income tax provision (benefit) | 507 | (795) | |||||||||
Effective income tax rate | (49.8) | % | (68.5) | % | |||||||
In November 2022, the Company completed the acquisition of the Mobility & Materials business of DuPont de Nemours, Inc.(the "M&M Acquisition"). In 2023, in furtherance of its integration strategy for the M&M Acquisition, the Company continued to relocate certain intangible assets to better align with the acquired foreign operations. In addition, in late 2023, as part of its overall integration approach, the Company initiated a strategy to realign its European headquarters and principal operations to Switzerland to achieve operational efficiencies by leveraging an acquired site for future growth and improved alignment of ownership of intangible assets with future technology and innovation efforts to be conducted locally. These operational efficiencies are expected to include, (i) centralized regional manufacturing, sales and operational planning, procurement and business leadership and (ii) cost and facility savings.
The headquarters and principal operations realignment strategy, and the relocation of intangible assets to wholly-owned foreign affiliates, generated a net deferred tax benefit of approximately $725 million. In addition, the relocation of these intangible assets resulted in the utilization of approximately $230 million of the Company's existing U.S. foreign tax credit carryforwards. These carryforwards had previously been offset by a full valuation allowance.
During the three months ended June 30, 2024, the Company completed an internal integration-related restructuring of its acquired China operations in order to align with existing operations and to optimize the Company's internal treasury operations. This restructuring of the Chinese operations consisted of a sale within the Company that resulted in a China capital gains tax of approximately $87 million.
Included in the Other, net line in the effective income tax rate reconciliation above is the U.S. GAAP gain in excess of the tax gain related to the formation of the Nutrinova joint venture of $102 million for the year ended December 31, 2023 (Note 4). In addition, included in the Other, net line in the effective income tax rate reconciliation above are U.S. benefits of foreign derived intangible income of $0 million and $72 million, and changes in uncertain tax positions of $(2) million and $5 million for the years ended December 31, 2024, and 2023, respectively.
During the three months ended December 31, 2024, the Company recorded a noncash goodwill impairment loss of $1.5 billion in the Engineered Materials segment (Note 9). The impairment of goodwill is not deductible for tax purposes and the tax effect of this non-deductible expense of $319 million is included in the (Income) expense not resulting in tax impact, net line above. In addition, due to the changes in forecasted profits for the engineered materials reporting unit included in the impairment analysis, the Company also recorded a valuation allowance against certain local country, non-U.S. tax credit carryforwards of $386 million.
During the three months ended September 30, 2025, the Company recorded a noncash goodwill impairment loss of $1.1 billion in the Engineered Materials segment. As of December 31, 2025, the Engineered Materials segment had goodwill of $3.8 billion (Note 9). The tax effect of this non-deductible expense of $239 million is included in the U.S. jurisdiction Goodwill Impairment line above.
During the three months ended September 30, 2025, the Company further integrated global principal operations and relocated certain intangible assets among wholly-owned foreign affiliates, resulting in the recognition of deferred tax benefit. During the three months ended June 30, 2025, the Company settled tax examinations with the German tax authorities for the tax years 2008 through 2012 and recorded a tax benefit upon the closure of those examinations.
During the three months ended March 31, 2025, the Company increased its valuation allowance on U.S. foreign tax credit carryforwards due to revised forecasts of foreign sourced income and expenses during the carry forward period.
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 the amounts used for income tax purposes. Significant components of the consolidated deferred tax assets and liabilities are as follows:
| As of December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| (In $ millions) | |||||||||||
| Deferred Tax Assets | |||||||||||
| Pension and postretirement obligations | 35 | 58 | |||||||||
| Accrued expenses | 118 | 69 | |||||||||
| Depreciation and amortization | 149 | — | |||||||||
| Inventory | — | 18 | |||||||||
| Net operating loss carryforwards | 931 | 752 | |||||||||
| Tax credit carryforwards | 268 | 560 | |||||||||
Intangibles and other | 928 | 419 | |||||||||
| Subtotal | 2,429 | 1,876 | |||||||||
Valuation allowance(1) | (1,327) | (1,106) | |||||||||
| Total | 1,102 | 770 | |||||||||
| Deferred Tax Liabilities | |||||||||||
| Depreciation and amortization | — | 152 | |||||||||
| Inventory | 3 | — | |||||||||
| Investments in affiliates | 154 | 163 | |||||||||
| Other | 117 | 127 | |||||||||
| Total | 274 | 442 | |||||||||
Net deferred tax assets (liabilities)(2) | 828 | 328 | |||||||||
______________________________
(1)Includes deferred tax asset valuation allowances for the Company's deferred tax assets in Switzerland, the U.S., Luxembourg, Spain, China, Germany, the Netherlands, Mexico, the United Kingdom, Malta, Singapore, Hong Kong, Canada, Belgium and Austria. These valuation allowances relate primarily to net operating loss carryforward benefits, foreign tax credit carryforwards and other net deferred tax assets, all of which may not be realizable.
As a result of the TCJA, U.S. federal and state income taxes have been recorded on undistributed foreign earnings accumulated from 1986 through 2017. The Company's previously taxed income for its foreign subsidiaries significantly exceeds its offshore cash balances. The Company has not recorded a deferred tax liability for foreign withholding or other foreign local tax that would be due when cash is actually repatriated to the U.S. because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional local taxes. The determination of the amount of the unrecognized deferred tax liability related to the undistributed earnings is not practicable.
Tax Carryforwards
•Net Operating Loss and Capital Loss Carryforwards
As of December 31, 2025, the Company had available U.S. federal net operating loss carryforwards of $15 million that are subject to limitation. These net operating loss carryforwards begin to expire in 2036. As of December 31, 2025, the Company also had available state net operating loss carryforwards, net of federal tax impact, of $40 million, $27 million of which are offset by a valuation allowance due to uncertain recoverability. The Company also has foreign net operating loss carryforwards available as of December 31, 2025 of $5.0 billion primarily for Switzerland, Luxembourg, Malta, Spain, Singapore, the United Kingdom and China with various expiration dates. Net operating loss carryforwards of $190 million in China are scheduled to continue to expire through 2030. Net operating loss carryforwards of $2.0 billion in Switzerland, which includes Cantonal loss carryforwards, are partially offset by a valuation allowance of $788 million due to uncertain recoverability and are scheduled to continue to expire through 2031. Net operating losses in most other foreign jurisdictions do not have an expiration date. The Company acquired capital loss carryforwards of $173 million as part of the M&M Acquisition that are subject to annual limitation due to the ownership change. The Company fully offset these capital loss carryforwards with a valuation allowance due to uncertain recoverability. For the year ended December 31, 2025, the Company's U.S. state income tax expense was primarily concentrated in Virginia and Texas.
•Tax Credit Carryforwards
The Company had available $240 million of U.S. foreign tax credit carryforwards, which are offset by a valuation allowance of $240 million due to uncertain recoverability and $18 million of alternative minimum tax credit carryforwards in the U.S. The foreign tax credit carryforwards are subject to a ten-year carryforward period and begin to expire in 2027. The alternative minimum tax credits are subject to annual limitation due to prior ownership changes but have an unlimited carryforward period and can be used to offset federal tax liability in future years.
The Company evaluates its deferred tax assets on a quarterly basis to determine whether a valuation allowance is necessary. Realization of deferred tax assets ultimately depends on the existence of sufficient taxable income of the appropriate character in the applicable carryback or carryforward periods. Changes in the Company's estimates of future taxable income and prudent and feasible tax planning strategies will affect the estimate of the realization of the tax benefits of these foreign tax credit carryforwards. Accordingly, the Company is currently evaluating tax planning strategies to enable use of the foreign tax credit carryforwards that may decrease the Company's effective tax rate in future periods as the valuation allowance is reversed.
Uncertain Tax Positions
Activity related to uncertain tax positions is as follows:
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| (In $ millions) | |||||||||||||||||
| As of the beginning of the year | 213 | 224 | 275 | ||||||||||||||
| Increases (decreases) in tax positions for the current year | 3 | (3) | 10 | ||||||||||||||
| Increases in tax positions for prior years | 11 | 6 | 9 | ||||||||||||||
| Decreases in tax positions for prior years | (31) | (6) | (35) | ||||||||||||||
| Increases (decreases) due to settlements | (24) | (8) | (35) | ||||||||||||||
| As of the end of the year | 172 | 213 | 224 | ||||||||||||||
| Total uncertain tax positions that if recognized would impact the effective tax rate | 231 | 236 | 244 | ||||||||||||||
Total amount of interest expense (benefit) and penalties recognized in the consolidated statements of operations(1) | (14) | 7 | 22 | ||||||||||||||
| Total amount of interest expense and penalties recognized in the consolidated balance sheets | 63 | 77 | 71 | ||||||||||||||
______________________________
(1)Primarily interest on uncertain tax positions and the release of tax positions due to changes in assessment, statute lapses or audit closures that were reflected in the consolidated statements of operations.
Income Tax Examinations
The Company's tax returns have been under audit for the years 2013 through 2015 by the United States, Netherlands and Germany (the "Authorities"). In September 2021, the Company received a draft joint audit report proposing adjustments to transfer pricing and the reallocation of income between the related jurisdictions. The Authorities also proposed to apply these adjustments to open tax years through 2019. The Company and the Authorities were unable to reach an agreement jointly and therefore the audits continued on a separate jurisdictional basis. During the three months ended December 31, 2022, the Company concluded settlement discussions with the Dutch tax authority. During the three months ended September 30, 2024, the Company concluded settlement discussions with the German tax authority related to the German transfer pricing audit. The Company is engaged in continuing discussions with the U.S. tax authority on joint audit matters, as well as other separate matters, and is currently evaluating all additional potential remedies regarding the ongoing examinations.
In addition, the Company's income tax returns in Mexico are under audit for the years 2018 through 2020, in Canada for the years 2016 through 2022, in the U.S. for the years 2016 through 2020, and in Germany for the years after 2012. In August 2023, the Company negotiated a partial settlement with the Mexico tax authorities for its audit for the year 2018. The partial settlement did not have a material impact on income tax expense in the consolidated statements of operations. The Company is in discussions with the Mexican tax authorities regarding the preliminary findings from the 2019 audit. In September 2023, the Canadian tax authorities opened tax audits for the years 2019 through 2022, and the audits are in the preliminary stages. The Company is in ongoing discussions regarding the audit findings with the Canadian tax authorities for the years 2016 through 2018 and does not expect a material impact to income tax expense resulting from the audit. The audit in the U.S. for the years 2016 through 2020 is in the data gathering phase. During the three months ended March 31, 2025, the Company began settlement discussions with the German tax authorities on certain matters related to the German audit for the years after 2007, and during the three months ended June 30, 2025, the Company concluded settlement discussions with the German tax authorities for the years 2008 through 2012. The associated tax effects from the settlement discussions are included in income tax expense in the consolidated statements of operations for the year ended December 31, 2025. The Company will record the impacts of any additional audit settlements as they are concluded but currently does not expect material impacts to the consolidated statements of operations.
As of December 31, 2025, the Company believes that an adequate provision for income taxes has been made for all open tax years related to the examinations by governmental authorities. However, the outcome of tax audits cannot be predicted with certainty. If any issues raised by the governmental authorities are resolved in a manner inconsistent with the Company's expectations or the Company is unsuccessful in defending its position, the Company could be required to adjust its provision for income taxes in the period such resolution occurs. If required, any such adjustments could be material to the statements of operations and cash flows in the period(s) recorded.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 23, 2024 | |
| 2022 | Feb 24, 2023 | |
| 2021 | Feb 10, 2022 | |
| 2020 | Feb 11, 2021 | |
| 2019 | Feb 6, 2020 | |
| 2018 | Feb 7, 2019 | |
| 2017 | Feb 9, 2018 | |
| 2016 | Feb 10, 2017 | |
| 2015 | Feb 5, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.