LOCKHEED MARTIN CORPLMT
LOCKHEED MARTIN CORP Income Taxes Disclosure
Income Taxes
Income before Income Tax Expense
U.S. and foreign income before income tax expense are as follows (in millions):
| 2025 | |||||||||||
| Income before income tax expense: | |||||||||||
| U.S. | $ | 5,531 | |||||||||
| Foreign | 391 | ||||||||||
| Total income before income tax expense | $ | 5,922 | |||||||||
Income Tax Provisions
Federal and foreign income tax expense consisted of the following (in millions):
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Federal income tax expense (benefit): | ||||||||||||||||||||
| Current | $ | 411 | $ | 1,352 | $ | 1,574 | ||||||||||||||
| Deferred | 374 | (604) | (503) | |||||||||||||||||
| Total federal income tax expense | 785 | 748 | 1,071 | |||||||||||||||||
| Foreign income tax expense (benefit): | ||||||||||||||||||||
| Current | 122 | 120 | 102 | |||||||||||||||||
| Deferred | (2) | 16 | 5 | |||||||||||||||||
| Total foreign income tax expense | 120 | 136 | 107 | |||||||||||||||||
| Total federal and foreign income tax expense | $ | 905 | $ | 884 | $ | 1,178 | ||||||||||||||
Our total net state income tax expense was $84 million for 2025, $121 million for 2024, and $115 million for 2023. State income taxes are allowable costs in establishing prices for the products and services we sell to the U.S. Government. Therefore, state income tax expenses are included in operating costs and expenses. As a result, the impact of certain transactions on our operating profit and of other matters presented in these consolidated financial statements is disclosed net of state income taxes.
A reconciliation of the U.S. federal statutory income tax expense to actual income tax expense is as follows (in millions):
| 2025 | |||||||||||||||||
| Amount | Rate | ||||||||||||||||
| $ | 1,244 | 21.0 | % | ||||||||||||||
| Research and development tax credit | (187) | (3.2) | |||||||||||||||
| Effects of cross-border tax laws | (97) | (1.6) | |||||||||||||||
| Changes in unrecognized tax benefits | |||||||||||||||||
| Research and development tax credit | (142) | (2.4) | |||||||||||||||
| Settlement with tax authorities | 110 | 1.9 | |||||||||||||||
| Other | (48) | (0.7) | |||||||||||||||
| Foreign tax effects | 72 | 1.2 | |||||||||||||||
| Tax deductible dividends | (68) | (1.1) | |||||||||||||||
| Other adjustments | 21 | 0.2 | |||||||||||||||
| Income tax expense | $ | 905 | 15.3 | % | |||||||||||||
A reconciliation of the U.S. federal statutory income tax expense to actual income tax expense is as follows (in millions):
| 2024 | 2023 | |||||||||||||||||||||||||
| Amount | Rate | Amount | Rate | |||||||||||||||||||||||
| $ | 1,306 | 21.0 | % | $ | 1,701 | 21.0 | % | |||||||||||||||||||
| Foreign derived intangible income deduction | (210) | (3.4) | (185) | (2.3) | ||||||||||||||||||||||
| Research and development tax credit | (207) | (3.3) | (227) | (2.8) | ||||||||||||||||||||||
| Tax deductible dividends | (69) | (1.1) | (69) | (0.9) | ||||||||||||||||||||||
| Excess tax benefits for stock-based payment awards | (20) | (0.3) | (25) | (0.3) | ||||||||||||||||||||||
Other, net (a) | 84 | 1.3 | (17) | (0.2) | ||||||||||||||||||||||
| Income tax expense | $ | 884 | 14.2 | % | $ | 1,178 | 14.5 | % | ||||||||||||||||||
(a)Other, net includes foreign income tax expenses for all years.
The higher effective income tax rate in 2025 was attributable to the One Big Beautiful Bill Act (the Tax Act) primarily driven by lower tax deductions for foreign derived intangible income partially offset by the favorable resolution of certain federal income tax audit items with the Internal Revenue Service (IRS). The rates for all periods benefited from research and development tax credits, dividends paid to our defined contribution plans with an employee stock ownership plan feature, tax deductions for foreign derived intangible income and employee equity awards.
Income Tax Payments
The income taxes paid by jurisdiction consisted of the following (in millions):
| 2025 | |||||||||||
| Federal | $ | 644 | |||||||||
| Foreign | 144 | ||||||||||
| Total income taxes paid | $ | 788 | |||||||||
Our federal and foreign income tax payments, net of refunds, were $788 million in 2025, $1.3 billion in 2024 and $1.8 billion in 2023.
Uncertain Tax Positions
The change in unrecognized tax benefits were as follows (in millions):
| 2025 | 2024 | 2023 | ||||||||||||||||||
| Balance at January 1 | $ | 229 | $ | 146 | $ | 1,622 | ||||||||||||||
| Additions based on tax positions related to the current year | 13 | 78 | 50 | |||||||||||||||||
| Additions for tax positions of prior years | — | 8 | 32 | |||||||||||||||||
| Reductions for tax positions of prior years | (100) | (2) | (1,526) | |||||||||||||||||
| Settlements with tax authorities | (90) | — | (33) | |||||||||||||||||
| Other, net | — | (1) | 1 | |||||||||||||||||
| Balance at December 31 | $ | 52 | $ | 229 | $ | 146 | ||||||||||||||
As of December 31, 2025, our liabilities associated with uncertain tax positions were $52 million compared to $229 million as of December 31, 2024. The decrease was primarily attributable to the favorable resolution of certain federal income tax audit items with the IRS as discussed below. This uncertain tax position, if recognized, would have an immaterial impact to our effective tax rate.
During the second quarter of 2025, the IRS issued a Notice of Proposed Adjustment (NOPA) dated May 20, 2025 for 2018‑2020. The proposed adjustments stemmed from a tax‑accounting method change that was adopted in 2018 in connection with our ASC 606 implementation and the 2017 Tax Cuts and Jobs Act. This matter was resolved in the fourth quarter of 2025, and the corresponding uncertain tax position, along with any accrued interest and penalties, recorded in the second and third quarters of 2025 was removed from our December 31, 2025 balance. Also during the fourth quarter of 2025, we entered into an agreed Revenue Agent Report (RAR) for the 2018-2022 federal income tax returns, resolving the remaining open federal income tax audit issues for those years.
Additionally, we recognize accrued interest and penalties related to unrecognized tax benefits as part of our income tax expense. For the years ended December 31, 2025, 2024 and 2023, our accrued interest and penalties related to unrecognized tax benefits were not material.
Deferred Income Taxes
The primary components of our federal and foreign deferred income tax assets and liabilities at December 31 were as follows (in millions):
| 2025 | 2024 | |||||||||||||
| Deferred tax assets related to: | ||||||||||||||
| Pensions | $ | 999 | $ | 1,184 | ||||||||||
| Accrued compensation and benefits | 764 | 741 | ||||||||||||
| Contract accounting methods | 1,217 | 949 | ||||||||||||
| Research and development expenditures | 1,200 | 1,643 | ||||||||||||
Domestic company operating losses and credits (a) | 269 | 83 | ||||||||||||
Other (b) | 343 | 528 | ||||||||||||
| Valuation allowance | (60) | (41) | ||||||||||||
| Deferred tax assets, net | 4,732 | 5,087 | ||||||||||||
| Deferred tax liabilities related to: | ||||||||||||||
| Goodwill and intangible assets | 580 | 545 | ||||||||||||
| Property, plant and equipment | 512 | 371 | ||||||||||||
Other (b) | 683 | 638 | ||||||||||||
| Deferred tax liabilities | 1,775 | 1,554 | ||||||||||||
| Net deferred tax assets | $ | 2,957 | $ | 3,533 | ||||||||||
(a)Federal net operating losses do not expire. Includes foreign tax credit carryforward for 2025.
(b)Includes deferred tax assets and liabilities related to lease liabilities and ROU assets.
We and our subsidiaries file federal income tax returns in the U.S. and income tax returns in various foreign jurisdictions. With few exceptions, the statute of limitations for these jurisdictions is no longer open for audit or examination for the years
before 2018 with respect to various foreign jurisdictions and federal income taxes in the U.S.
We are also subject to taxation in various states and foreign jurisdictions including Australia, Canada, India, Italy, Japan, Poland, and the United Kingdom. We are under, or may be subject to, audit or examination and additional assessments by the relevant authorities.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Jan 29, 2026 | Showing above |
| 2024 | Jan 28, 2025 | |
| 2023 | Jan 23, 2024 | |
| 2022 | Jan 26, 2023 | |
| 2021 | Jan 25, 2022 | |
| 2020 | Jan 28, 2021 | |
| 2019 | Feb 7, 2020 | |
| 2018 | Feb 8, 2019 | |
| 2017 | Feb 6, 2018 | |
| 2016 | Feb 9, 2017 | |
| 2015 | Feb 24, 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.