Owens CorningOC
Owens Corning Income Taxes Disclosure
INCOME TAXES
The following table summarizes our Earnings before taxes and Income tax expense:
| Twelve Months Ended December 31, | |||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||
| Earnings before taxes: | |||||||||||
| United States | $ | (138) | $ | 1,259 | $ | 1,250 | |||||
| Foreign | 242 | 16 | 172 | ||||||||
| Total | $ | 104 | $ | 1,275 | $ | 1,422 | |||||
| Twelve Months Ended December 31, | |||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||
| Income tax expense: | |||||||||||
| Current | |||||||||||
| Federal | $ | 144 | $ | 206 | $ | 269 | |||||
| State and local | 38 | 37 | 50 | ||||||||
| Foreign | 84 | 80 | 56 | ||||||||
| Total current | 266 | 323 | 375 | ||||||||
| Deferred | |||||||||||
| Federal | 44 | 49 | (3) | ||||||||
| State and local | (7) | 3 | 5 | ||||||||
| Foreign | (10) | (41) | (13) | ||||||||
| Total deferred | 27 | 11 | (11) | ||||||||
| Total income tax expense | $ | 293 | $ | 334 | $ | 364 | |||||
As further described in Note 1, Business and Summary of Significant Accounting Policies, the Company has elected to prospectively adopt the guidance in ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Taxes Disclosures ("ASU 2023-09"). The following table is a reconciliation of the U.S. federal statutory rate of 21% to the Company's effective rate for the year ended December 31, 2025 in accordance with the guidance in ASU 2023-09:
| Twelve Months Ended December 31, | ||||||||
| (In millions) | 2025 | |||||||
| United states federal statutory income tax rate | $ | 22 | 21 | % | ||||
| Domestic state and local income tax, net of federal income tax effect (a) | 32 | 31 | ||||||
| Foreign tax effects | 22 | 21 | ||||||
| Effects of cross-border tax law: | ||||||||
| Subpart F | 9 | 9 | ||||||
| Other | (7) | (7) | ||||||
| Non-taxable or non-deductible items: | ||||||||
| Non-deductible goodwill impairment | 223 | 214 | ||||||
| Other | (3) | (3) | ||||||
| Other | (5) | (4) | ||||||
| Effective tax rate | $ | 293 | 282 | % | ||||
(a)State and Local Taxes in California, Florida, Illinois, Texas, Minnesota and Toledo, OH made up the majority (greater than 50 percent) of the tax effect in this category.
The following table is a reconciliation of the United States federal statutory rate of 21% to the Company's effective rate for the years ended December 31, 2024 and December 31, 2023 in accordance with the guidance prior to the adoption of ASU 2023-09:
| Twelve Months Ended December 31, | ||||||||
| (In millions) | 2024 | 2023 | ||||||
| United States federal statutory rate | 21 | % | 21 | % | ||||
| State and local income taxes, net of federal tax benefit | 3 | 4 | ||||||
| Valuation allowance | 2 | — | ||||||
| UTP/Audit and Provision to Return | (2) | — | ||||||
| Other, net | 2 | 1 | ||||||
| Effective tax rate | 26 | % | 26 | % | ||||
The amount of income taxes paid (net of refunds received) by the Company for the year ended December 31, 2025 — including amounts related to discontinued operations—is summarized below. Income taxes paid (net of refunds) in each of the jurisdictions presented exceeded 5 percent of the Company’s total income taxes paid (net of refunds) for the year.
| Twelve Months Ended December 31, | |||||
| (In millions) | 2025 | ||||
| Federal | $ | 131 | |||
| State | 34 | ||||
| Foreign | |||||
| Canada | 18 | ||||
| Mexico | 38 | ||||
| Other | 43 | ||||
| Total foreign | 99 | ||||
| Total | $ | 264 | |||
The Company continues to assert indefinite reinvestment on the majority of its foreign subsidiaries and affiliates in accordance with ASC 740 based on the laws as of enactment of the Tax Act. During 2025, the Company removed the permanent reinvestment assertion related to the business operations that are subject to Held for Sale accounting. The Company has accrued deferred tax liabilities of $7 million as of December 31, 2025, resulting from current year changes. As of December 31, 2025, the Company has not provided for withholding or income taxes on approximately $1.1 billion of undistributed reserves of the foreign subsidiaries and affiliates that are considered by management to be permanently reinvested. Quantification of the deferred tax liability associated with these undistributed reserves is not practicable.
The cumulative temporary differences giving rise to the deferred tax assets and liabilities are as follows:
| Twelve Months Ended December 31, | ||||||||
| (In millions) | 2025 | 2024 | ||||||
| Deferred Tax Assets | ||||||||
| Other employee benefits | $ | 47 | $ | 48 | ||||
| Operating carryforwards | 95 | 77 | ||||||
| Capitalized R&D | 43 | 74 | ||||||
| Lease - liabilities | 153 | 134 | ||||||
| Tax credits | 56 | 57 | ||||||
| Interest limitation | 36 | 32 | ||||||
| Loss from discontinued operations | 42 | — | ||||||
| Other | 103 | 107 | ||||||
| Subtotal | 575 | 529 | ||||||
| Less: Valuation allowances | (127) | (117) | ||||||
| Total deferred tax assets | $ | 448 | $ | 412 | ||||
| Deferred Tax Liabilities | ||||||||
| Depreciation | $ | (538) | $ | (462) | ||||
| Leases - right of use assets | (147) | (134) | ||||||
| Amortization | (489) | (529) | ||||||
| Total deferred tax liabilities | (1,174) | (1,125) | ||||||
| Total Net Deferred Tax Liabilities | $ | (726) | $ | (713) | ||||
The following table summarizes the amount and expiration dates of our deferred tax assets related to operating loss and tax credit carryforwards and foreign tax credit carryforwards at December 31, 2025:
| (In millions) | Expiration Dates | Amounts | ||||||
| Domestic loss and tax credit carryforwards (a) | 2026 - 2043 | $ | 111 | |||||
| Foreign loss and tax credit carryforwards (b) | 2026 - Indefinite | 40 | ||||||
| Total loss and tax credit carryforwards | $ | 151 | ||||||
(a)The use of certain of the Company's domestic loss carryforwards is limited pursuant to Internal Revenue Code (IRC) Section 382. IRC Section 382 imposes an annual limitation on a corporation's ability to use loss carryforwards that arose before a change in control. A change in control is generally defined as a cumulative change of more than 50% in the ownership positions of certain stockholders during a rolling three-year period. The Company believes that these limitations will not result in the loss of any of the loss carryforwards.
(b)The foreign net operating losses ("NOLs") are related to various jurisdictions that provide for both indefinite carryforward periods and others with carryforward periods that range from the tax years 2026 to 2036.
The following is a rollforward of the valuation allowances for deferred taxes:
| December 31, | |||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||
| Balance at beginning of period | $ | 117 | $ | 102 | $ | 97 | |||||
| Additions charged to expense | 5 | 13 | 5 | ||||||||
| Additions charged to other | 5 | — | 2 | ||||||||
| Deductions | — | (1) | (2) | ||||||||
| Acquisitions and divestitures | — | 3 | — | ||||||||
| Balance at end of period | $ | 127 | $ | 117 | $ | 102 | |||||
Deferred income taxes are provided for temporary differences between amounts of assets and liabilities for financial reporting purposes and the basis of such assets and liabilities as measured under enacted tax laws and regulations, as well as NOLs, tax credits and other tax carryforwards. We have a variety of deferred tax assets in numerous tax jurisdictions. These deferred tax assets are subject to periodic assessment as to recoverability and if it is determined that it is more likely than not that the benefits will not be realized, valuation allowances are recognized. In evaluating whether it is more likely than not that we would recover these deferred tax assets, future taxable income, the reversal of existing temporary differences and tax planning strategies are considered.
We believe that our estimates for the valuation allowances recorded against deferred tax assets are appropriate based on current facts and circumstances. As of December 31, 2025 we had $127 million of valuation allowances on deferred tax assets, on a tax-effected basis, primarily related to U.S. federal foreign tax credit carryforwards and certain foreign deferred tax attributes as it is more likely than not that some portion or all of these tax attributes will not be realized.
We file a consolidated federal income tax return in the United States as well as tax returns in multiple state, local and foreign jurisdictions. In the normal course of business, the Company is subject to examination by the taxing authorities in each of the jurisdictions where we file tax returns. The Company is currently under audit by the U.S. Internal Revenue Service with respect to its federal consolidated income tax return for 2021 and pre-acquisition amended U.S. income tax filings of Masonite International Corporation. We also have on-going audits in various stages of completion in several state and foreign jurisdictions. The Company is no longer subject to U.S. federal tax examinations for years before 2021 or state and foreign examinations for years before 2015.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
| Twelve Months Ended December 31, | |||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||
| Balance at beginning of period | $ | 26 | $ | 66 | $ | 67 | |||||
| Tax positions related to the current year | |||||||||||
| Gross additions | 1 | — | — | ||||||||
| Tax positions related to prior years | |||||||||||
| Gross additions | 9 | — | — | ||||||||
| Additions from Acquisitions | — | 7 | — | ||||||||
| Expiration of statute of limitations | (7) | (47) | (1) | ||||||||
| Balance at end of period | $ | 29 | $ | 26 | $ | 66 | |||||
If the unrecognized tax benefits as of December 31, 2025 were to be recognized in the future, they would decrease the Company’s income tax expense by about $27 million.
The Company recognizes all interest and penalties related to unrecognized tax benefits as a component of income tax expense. Accrued interest and penalties, which are not presented in the rollforward table above, were $7 million, $4 million and $8 million as of December 31, 2025, 2024 and 2023, respectively. Related to interest and penalties, we recognized an income tax expense of $1 million in 2025 an income tax benefit of $6 million in 2024 and an income tax expense of $2 million in 2023.
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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.