NORFOLK SOUTHERN CORPNSC
NORFOLK SOUTHERN CORP Income Taxes Disclosure
Income Taxes
The statute of limitations on Internal Revenue Service (IRS) examinations has expired for all years prior to 2020. The IRS audits of our consolidated federal income tax returns for 2019 through 2021 are being finalized. State income tax returns are generally subject to examination for a period of three to four years after the return. In addition, we are generally obligated to report changes in taxable income arising from federal income tax examinations to the states within a period of up to two years from the date the federal examination is final. We have various state income tax returns either under examination, administrative appeal, or litigation.
| 2025 | 2024 | 2023 | |||||||||||||||
| ($ in millions) | |||||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 410 | $ | 445 | $ | 437 | |||||||||||
| State | 105 | 86 | 105 | ||||||||||||||
| Total current taxes | 515 | 531 | 542 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 312 | 198 | (27) | ||||||||||||||
| State | (35) | (22) | (22) | ||||||||||||||
| Total deferred taxes | 277 | 176 | (49) | ||||||||||||||
| Income taxes | $ | 792 | $ | 707 | $ | 493 | |||||||||||
We recorded a $50 million discrete benefit in 2025 resulting from the resolution of a state tax matter and recorded a $27 million deferred income tax benefit in 2024 as a result of a subsidiary restructuring. Both amounts are presented net of federal effects.
On July 4, 2025, the OBBBA was signed into law. The OBBBA makes permanent or introduces certain changes to the Internal Revenue Code, including 100% bonus depreciation, the deductibility of business interest expense, and expensing of domestic research costs. FASB ASC 740 “Income Taxes” requires that the effect of changes in tax rates and laws be recognized in the period in which the legislation is enacted. The impact of this change is primarily a reclassification from current to deferred taxes.
Reconciliation of Statutory Rate to Effective Rate
“Income taxes” on the Consolidated Statements of Income differs from the amounts computed by applying the statutory federal corporate tax rate as follows:
| 2025 | |||||||||||
| Amount | % | ||||||||||
| ($ in millions) | |||||||||||
| $ | 770 | 21.0 | |||||||||
| State and local income taxes, net of federal income tax effect * | 101 | 2.8 | |||||||||
| Nontaxable or nondeductible items | (9) | (0.2) | |||||||||
| Tax credits | (25) | (0.7) | |||||||||
| Changes in unrecognized tax benefits | (45) | (1.3) | |||||||||
| Income taxes | $ | 792 | 21.6 | ||||||||
*State taxes in Pennsylvania, Virginia, and Indiana made up the majority (greater than 50%) of the tax effect in this category.
| 2024 | 2023 | ||||||||||||||||||||||
| Amount | % | Amount | % | ||||||||||||||||||||
| ($ in millions) | |||||||||||||||||||||||
| Federal income tax at statutory rate | $ | 699 | 21.0 | $ | 487 | 21.0 | |||||||||||||||||
| State income taxes, net of federal tax effect | 51 | 1.6 | 65 | 2.9 | |||||||||||||||||||
| Tax credits | (14) | (0.4) | (27) | (1.2) | |||||||||||||||||||
| Other, net | (29) | (1.0) | (32) | (1.4) | |||||||||||||||||||
| Income taxes | $ | 707 | 21.2 | $ | 493 | 21.3 | |||||||||||||||||
Income Taxes Paid
| 2025 | |||||
| ($ in millions) | |||||
| Federal | $ | 389 | |||
| State | 102 | ||||
| Total income taxes paid, net of refunds | $ | 491 | |||
Income taxes paid, net of refunds, for 2024 and 2023 were $305 million and $681 million, respectively.
Deferred Tax Assets and Liabilities
Certain items are reported in different periods for financial reporting and income tax purposes. Deferred tax assets and liabilities are recorded in recognition of these differences. The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| ($ in millions) | |||||||||||
| Deferred tax assets: | |||||||||||
| Accruals, including casualty and other claims | $ | 190 | $ | 289 | |||||||
| Compensation and benefits, including postretirement benefits | — | 21 | |||||||||
| Other | 222 | 157 | |||||||||
| Total gross deferred tax assets | 412 | 467 | |||||||||
| Less valuation allowance | (45) | (42) | |||||||||
| Net deferred tax assets | 367 | 425 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property | (7,621) | (7,397) | |||||||||
| Other | (457) | (448) | |||||||||
| Total deferred tax liabilities | (8,078) | (7,845) | |||||||||
| Deferred income taxes | $ | (7,711) | $ | (7,420) | |||||||
Except for amounts for which a valuation allowance has been provided, we believe that it is more likely than not that the results of future operations will generate sufficient taxable income to realize the deferred tax assets. The valuation allowance at the end of each year primarily relates to subsidiary state income tax net operating losses and state investment tax credits that may not be utilized prior to their expiration. The total valuation allowance increased by $3 million in 2025, increased by $11 million in 2024, and decreased by $10 million in 2023.
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| ($ in millions) | |||||||||||
| Balance at beginning of year | $ | 82 | $ | 55 | |||||||
| Additions based on tax positions related to the current year | 4 | 26 | |||||||||
| Additions for tax positions of prior years | 1 | 3 | |||||||||
| Reductions for tax positions of prior years | (49) | (1) | |||||||||
| Lapse of statutes of limitations | (1) | (1) | |||||||||
| Balance at end of year | $ | 37 | $ | 82 | |||||||
Included in the balance of unrecognized tax benefits at December 31, 2025 are potential benefits of $30 million that would affect the effective tax rate if recognized. Unrecognized tax benefits are adjusted in the period in which new information about a tax position becomes available or the final outcome differs from the amount recorded.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 9, 2026 | Showing above |
| 2024 | Feb 10, 2025 | |
| 2023 | Feb 5, 2024 | |
| 2022 | Feb 3, 2023 | |
| 2021 | Feb 4, 2022 | |
| 2020 | Feb 4, 2021 | |
| 2019 | Feb 6, 2020 | |
| 2018 | Feb 8, 2019 | |
| 2017 | Feb 5, 2018 | |
| 2016 | Feb 6, 2017 | |
| 2015 | Feb 8, 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.