NOV Inc. Income Taxes Disclosure

15. Income Taxes

The effective tax rate for the year ended December 31, 2025 was 59.7%, compared to 23.6% for 2024. For 2025, the effective tax rate was negatively impacted by the establishment of additional valuation allowances for foreign tax credit carryforwards and losses in certain jurisdictions with no tax benefit, an unfavorable earnings mix including withholding taxes in higher tax rate jurisdictions, and the impairment of nondeductible goodwill, partially offset by the release of reserves for unrecognized tax benefits.

The effective tax rate for the year ended December 31, 2024 was 23.6%, compared to (60.9)% for 2023. For 2024, the effective tax rate was negatively impacted by increased withholding taxes, nondeductible expenses, and losses in certain jurisdictions with no tax benefit, partially offset by a lower rate of U.S. tax on global intangible low-taxed income (GILTI) and the deduction of foreign-derived intangible income (FDII) and the release of valuation allowances in certain jurisdictions as a result of improving forecasted taxable income and availability of net operating losses.

The valuation allowance increased by $86 million during 2025 to $352 million as of December 31, 2025. The valuation allowance primarily related to foreign tax credit carryforwards in the United States and deferred tax assets in certain other jurisdictions due to several factors, including specific jurisdictions in which the Company does not project to generate sufficient future taxable income to realize all or a portion of its deferred tax assets specific to that jurisdiction; the specific nature and timing of future taxable income required to realize certain tax credit carryforwards, most notably U.S. foreign tax credits; and the timing of expiration of certain tax credit carryforwards. This increase in valuation allowance was comprised of $82 million due to the Company’s evaluation of the realizability of deferred tax assets based on future projections of taxable income and $4 million related to foreign currency exchange rate changes.

Substantially all of the unrecognized tax benefits, if ultimately realized, would be recorded as a reduction to income tax expense in the period realized. To the extent penalties and interest would be assessed on any underpayment of income tax, or interest would be received on tax payments made in connection with tax disputes, such accrued amounts have been classified as a component of income tax expense in the financial statements consistent with the Company’s policy. For the years ended December 31, 2025, 2024 and 2023, we recorded income tax expense (benefit) of $(27) million, $4 million and $5 million, respectively, for interest and penalty related to unrecognized tax benefits. As of December 31, 2025 and 2024, the Company had accrued a receivable (payable) of $7 million and $(24) million, respectively, of interest and penalty relating to unrecognized tax benefits.

The Company is subject to taxation in the United States as well as various states and foreign jurisdictions. The Company has significant operations in the United States, Norway, Saudi Arabia, Brazil, China, the United Kingdom, the Netherlands, Denmark, Canada, and Mexico. Tax years that remain subject to examination by major tax jurisdictions vary by legal entity, but are open in the U.S. for tax years 2017, 2018, and tax years ending after 2021 and outside the U.S. for tax years generally ending after 2018.

The Company has $285 million of excess foreign tax credits in the United States as of December 31, 2025, of which $116 million and $92 million will expire in 2027 and 2028, respectively. The remaining foreign tax credits of $77 million generally expire between 2030 and 2035.