VISTEON CORPVC
VISTEON CORP Income Taxes Disclosure
Income Taxes
Income Tax Provision
The Company is subject to income taxation in the United States and various state and foreign jurisdictions. Income tax includes current and deferred taxes.
Effective for the year ended December 31, 2025, the Company adopted ASU 2023‑09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires enhanced disaggregation of the rate reconciliation and income taxes paid.
Details of the Company's income tax provision for (benefit from) continuing operations are provided in the table below:
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2025 | 2024 | 2023 | ||||||||||||||
Income (Loss) Before Income Taxes: 1 | |||||||||||||||||
| U.S. | $ | 32 | $ | 32 | $ | 8 | |||||||||||
| Non-U.S. | 298 | 269 | 259 | ||||||||||||||
| Total income (loss) before income taxes | $ | 330 | $ | 301 | $ | 267 | |||||||||||
Current Tax Provision (Benefit): | |||||||||||||||||
U.S. federal | $ | 1 | $ | — | $ | — | |||||||||||
Non-U.S. | 99 | 77 | 73 | ||||||||||||||
U.S. state and local | — | 1 | — | ||||||||||||||
Total current tax provision (benefit) | 100 | 78 | 73 | ||||||||||||||
Deferred Tax Provision (Benefit): | |||||||||||||||||
U.S. Federal | $ | 61 | $ | (62) | $ | (382) | |||||||||||
Non-U.S | (28) | (15) | (8) | ||||||||||||||
U.S. state and local | (8) | (9) | (13) | ||||||||||||||
Total deferred tax provision (benefit) | 25 | (86) | (403) | ||||||||||||||
Provision for (benefit from) income taxes | $ | 125 | $ | (8) | $ | (330) | |||||||||||
1 Income (loss) before income taxes excludes equity in net income from non-consolidated affiliates. | |||||||||||||||||
| Amounts shown reflect the change in accounting principle related to the method for assessing the realizability of U.S. deferred tax assets described in Note 1, "Summary of Significant Accounting Policies" | |||||||||||||||||
The provision for (benefit from) income taxes resulted in an effective tax rate of approximately 38%, -3%, and -124% for the years ended December 31, 2025, 2024 and 2023, respectively.
The table below provides a reconciliation of income tax based on the U.S. statutory tax rate of 21% to the final provision for (benefit from) income taxes.
| Year Ended December 31, | ||||||||
| (In millions) | 2025 | Effective rate | ||||||
Tax provision (benefit) at U.S. statutory rate of 21% | $ | 69 | 21 | % | ||||
State and local income tax, net of federal income tax effect1 | 1 | 0.3 | % | |||||
| Foreign tax effects | ||||||||
| Brazil | ||||||||
| Tax rate differential | 6 | 1.8 | % | |||||
| Impact of local tax regimes and incentives | (9) | (2.7) | % | |||||
| Changes in valuation allowances | (13) | (3.9) | % | |||||
| Other | 1 | 0.3 | % | |||||
| Germany | ||||||||
| Changes in valuation allowances | (7) | (2.1) | % | |||||
| India | ||||||||
| Tax rate differential | 2 | 0.6 | % | |||||
| Withholding taxes | 8 | 2.4 | % | |||||
| Tunisia | ||||||||
| Withholding taxes | 4 | 1.2 | % | |||||
| Other | 2 | 0.6 | % | |||||
| Other foreign jurisdictions | 8 | 2.4 | % | |||||
| Effect of cross-border tax laws | ||||||||
| U.S. tax on foreign earnings | (14) | (4.2) | % | |||||
| Foreign derived intangible income deduction | (7) | (2.1) | % | |||||
| Tax credits | ||||||||
| U.S. research credits | (1) | (0.3) | % | |||||
| Changes in valuation allowances | (123) | (37.3) | % | |||||
| Nontaxable or nondeductible items | ||||||||
| Impact of U.S. tax amendments | 184 | 55.8 | % | |||||
| Equity Compensation | 4 | 1.2 | % | |||||
| Other | 5 | 1.5 | % | |||||
| Changes in unrecognized tax benefits | 5 | 1.5 | % | |||||
Provision for (benefit from) income taxes | $ | 125 | 37.9 | % | ||||
1 State taxes in Michigan, Illinois, and Kentucky made up the majority (greater than 50%) of the tax effect in this category | ||||||||
| Amounts shown reflect the change in accounting principle related to the method for assessing the realizability of U.S. deferred tax assets described in Note 1, "Summary of Significant Accounting Policies" | ||||||||
| Year Ended December 31, | |||||||||||||||||
| (In millions) | 2024 | Effective rate | 2023 1 | Effective rate | |||||||||||||
Tax provision (benefit) at U.S. statutory rate of 21% | $ | 63 | 21 | % | $ | 56 | 21 | % | |||||||||
| Foreign rate differential | 18 | 6 | % | 20 | 7 | % | |||||||||||
| U.S. Tax on Foreign Earnings | (24) | (8) | % | 24 | 9 | % | |||||||||||
| Non-U.S withholding taxes | 15 | 5 | % | 17 | 6 | % | |||||||||||
| Tax holidays and incentives in foreign operations | (15) | (5) | % | (22) | (8) | % | |||||||||||
| Foreign derived intangible income deduction | (14) | (5) | % | (4) | (1) | % | |||||||||||
| State and local income taxes | (4) | (1) | % | (3) | (1) | % | |||||||||||
| Tax reserve adjustments | 1 | — | % | 3 | 1 | % | |||||||||||
| Change in valuation allowance | (47) | (16) | % | (459) | (172) | % | |||||||||||
| Impact of U.S. tax amendments | — | — | % | 39 | 15 | % | |||||||||||
| Research credits | (3) | (1) | % | (3) | (1) | % | |||||||||||
Other | 2 | 1 | % | 2 | — | % | |||||||||||
Provision for (benefit from) income taxes | $ | (8) | (3) | % | $ | (330) | (124) | % | |||||||||
1 2023 amounts updated for consistency with 2024 presentation. | |||||||||||||||||
| Amounts shown reflect the change in accounting principle related to the method for assessing the realizability of U.S. deferred tax assets described in Note 1, "Summary of Significant Accounting Policies" | |||||||||||||||||
The Company's tax rate is affected by the tax laws and rates in the U.S. and other countries where it operates. It also depends on the amount of income earned in each jurisdiction and the extent of losses or income for which no tax benefit or expense was recognized due to a valuation allowance.
The U.S. tax on earnings includes the impact of income taxes on foreign source income, such as foreign branch earnings, net of applicable foreign tax credits in various categories (general, foreign branch, global intangible low-tax income (GILTI) and passive). It also considers the estimated impact of unrecognized currency gains and losses in branch operations under final regulations of Internal Revenue Code Section 987. The Company's benefit from foreign derived intangible income (FDII) depends on its annual U.S. taxable income, which is influenced by U.S. tax regulations requiring the capitalization of research and development costs in the current period which also impacts the GILTI calculation. U.S. tax amendments primarily involve adjusting prior year tax returns to deduct foreign taxes before expiration, while the foreign rate differential reflects tax expense on foreign earnings taxed at rates higher than the U.S. statutory rate.
The Company’s effective tax rate is also impacted by net changes to valuation allowances, where the Company has determined that it is more-likely-than-not that certain deferred tax assets would not be realized. For the years ended December 31, 2025, 2024, and 2023, the Company recorded net benefits related to valuation allowances of $142 million, $47 million, and $459 million, respectively (discussed in further detail below).
Deferred income taxes represent temporary differences in the recognition of certain items for financial reporting and income tax purposes. A summary of the components of deferred income tax assets and liabilities are as follows:
| December 31, | |||||||||||
| (In millions) | 2025 | 2024 | |||||||||
Deferred Tax Assets: | |||||||||||
Net operating losses and credit carryforwards | $ | 689 | $ | 884 | |||||||
Employee benefit plans | 12 | 26 | |||||||||
| Lease liability | 40 | 36 | |||||||||
Fixed assets and intangibles | 16 | 15 | |||||||||
Warranty | 22 | 16 | |||||||||
Inventory | 16 | 12 | |||||||||
Restructuring | 5 | 5 | |||||||||
Capitalized expenditures | 169 | 152 | |||||||||
Deferred income | 15 | 8 | |||||||||
Other | 108 | 84 | |||||||||
| Gross deferred tax assets | 1,092 | 1,238 | |||||||||
Valuation allowance | (473) | (598) | |||||||||
Total deferred tax assets | $ | 619 | $ | 640 | |||||||
Deferred Tax Liabilities: | |||||||||||
Outside basis investment differences, including withholding tax | $ | 66 | $ | 62 | |||||||
Right-of-use assets | 39 | 34 | |||||||||
Fixed assets and intangibles | 36 | 23 | |||||||||
All other | 18 | 19 | |||||||||
Total deferred tax liabilities | 159 | 138 | |||||||||
Net deferred tax assets | $ | 460 | $ | 502 | |||||||
Consolidated Balance Sheet Classification: | |||||||||||
Other non-current assets | $ | 511 | $ | 545 | |||||||
Deferred tax liabilities non-current | 51 | 43 | |||||||||
Net deferred tax assets | $ | 460 | $ | 502 | |||||||
| Amounts shown reflect the change in accounting principle related to the method for assessing the realizability of U.S. deferred tax assets described in Note 1, "Summary of Significant Accounting Policies" | |||||||||||
As of December 31, 2025, the Company had available pretax non-U.S. net operating loss carryforwards and capital loss carryforwards of $1.4 billion and $17 million, respectively, $72 million of which expire at various dates from 2026 through 2046, and $1.3 billion of which have an indefinite life.
The Company had available pretax U.S. federal net operating loss carryforwards of $880 million at December 31, 2025, which have remaining carryforward periods ranging from 4 years to 9 years. U.S. foreign tax credit carryforwards are $115 million at December 31, 2025, which have remaining carryforward periods ranging from 2 to 10 years. U.S. research tax credit carryforwards are $31 million at December 31, 2025. These credits will begin to expire in 2031. The Company had available post-apportionment tax-effected U.S. state operating loss carryforwards of $28 million at December 31, 2025, $26 million which will expire at various dates between 2026 and 2044, and $2 million of which have an indefinite life.
In connection with the Company's emergence from bankruptcy and resulting change in ownership on the Effective Date, an annual limitation was imposed on the utilization of U.S. net operating losses, U.S. credit carryforwards and certain U.S. built-in losses (collectively referred to as “tax attributes”) under Internal Revenue Code (“IRC”) Sections 382 and 383. The collective limitation is approximately $121 million per year on tax attributes in existence at the date of change in ownership.
Valuation Allowances
As of December 31, 2025 and 2024, the valuation allowance with respect to the Company's deferred tax assets was $473 million and $598 million, respectively, a net decrease of $125 million.
The Company provides a valuation allowance for its deferred tax assets when it is more likely than not that some portion, or all, of its deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income of the appropriate character in the respective jurisdiction. The Company considers all available positive and negative evidence and makes certain assumptions in evaluating the realizability of its deferred tax assets.
The Company historically provided a valuation allowance against its U.S. net deferred tax assets prior to 2023. However, as the Company continued to improve its earnings, the Company concluded that the positive evidence, which included its forecast of future taxable income using its objective and verifiable earnings history, outweighed the negative evidence (the Company’s history of losses) indicating that it was more likely than not that the Company would be able to realize a benefit for a substantial portion of its U.S. deferred tax assets, resulting in a $395 million partial release of its valuation allowance related to its U.S. deferred tax assets as of December 31, 2023 as estimated under the tax-law-ordering approach following change in accounting principle described in Note 1, "Summary of Significant Accounting Policies."
As of December 31, 2024, after considering all positive and negative evidence, including improvement in the Company’s U.S. profitability beyond the projections utilized in estimating the realizability of its U.S. deferred tax assets in 2023, the Company concluded that additional U.S. deferred income tax assets were more likely than not to be realized resulting in a $71 million non-cash benefit to income tax expense in 2024 as estimated under the tax-law-ordering approach following the change in accounting principle described in Note 1, "Summary of Significant Accounting Policies." The deferred tax assets not expected to be realized based on the Company’s projections primarily relate to: (i) existing foreign tax credit carryforwards, as the Company has been and is expected to continue to generate excess credits in the near term, resulting in an inability to use all of its existing carryforwards prior to expiration; (ii) certain U.S. research credit carryforwards expected to expire prior to utilization; and (iii) certain State operating loss carryforwards that are expected to expire prior to utilization.
During the fourth quarter of 2025, the Company updated its forward-looking profitability projections and reassessed the expected utilization of its deferred tax carryforward attributes using the tax law ordering approach, consistent with the change in accounting principle described in Note 1, "Summary of Significant Accounting Policies." This assessment incorporated the estimated effects of the One Big Beautiful Bill Act (the “Act”) as well as refinements to state level valuation allowance estimates. As a result of this analysis, the Company recognized discrete income tax expense of $55 million in 2025.
The Company’s change in accounting methodology for assessing the realizability of its deferred tax assets and resulting valuation allowance from an incremental cash-tax-savings approach to the tax-law-ordering approach resulted in a cumulative $77 million income tax benefit over the three‑year period ended December 31, 2025. The Company recognized $104 million of the benefit in 2023 and 2024, which was offset by a $27 million income tax expense recorded in 2025.
As of December 31, 2025, deferred tax assets not expected to be realized relate primarily to remaining foreign tax credit carryforwards after a $184 million reduction to reflect amendments to prior year tax returns to deduct foreign taxes prior to expiration, with such reduction fully offset by a corresponding income tax benefit arising from a decrease in the U.S. valuation allowance, as well as certain U.S. research credits and select state net operating loss carryforwards. The Company continues to maintain a U.S. valuation allowance of $159 million as of December 31, 2025.
During the third quarter of 2024 and fourth quarter of 2025, the Company reassessed the realizability of its deferred tax assets in Germany. These reassessments were driven primarily by the Company’s German Acquisition completed in 2024 and the UX Acquisition in 2025, each of which will be combined with the Company’s existing German consolidated tax group. The resulting increase in projected future taxable income led the Company to recognize income tax benefits of $7 million in both 2024 and 2025, respectively.
During the fourth quarter of 2025, the Company reassessed the realizability of its deferred tax assets related to its Brazil affiliate, Visteon Amazonas (“Amazonas”). Based primarily on sustained profitability and updated projections of future taxable income, management concluded that the deferred tax assets associated with Amazonas are now more likely than not to be realized. Accordingly, the Company released its valuation allowance in full and recorded a discrete income tax benefit of $13 million for the year ended December 31, 2025.
As of December 31, 2025, valuation allowances totaling $314 million relate to deferred tax assets in certain foreign jurisdictions, primarily Germany and France.
The Company will continue to evaluate the available positive and negative evidence in subsequent periods and adjust its remaining valuation allowances to the amount it determines to be more likely than not to be realized. If operating results improve or deteriorate on a sustained basis, the Company’s conclusions regarding the need for a valuation allowance could change, resulting in either the reversal or initial recognition of a valuation allowance in the future, which could have a significant impact on income tax expense in the period recognized and subsequent periods.
The Company has recorded the taxes associated with the foreign earnings it intends to repatriate in the future. The amount the Company expects to repatriate is based upon a variety of factors including current year earnings of the foreign affiliates, foreign investment needs, and the cash flow needs of the Company. As of December 31, 2025 and 2024, the Company has recorded withholding tax liabilities of $25 million and $27 million, respectively related to these earnings. These earnings are expected to be non-taxable upon repatriation to the U.S., as they will largely be considered previously taxed income under the one-time transition tax or GILTI, or they will be offset by a 100% dividend received deduction. The Company has not provided for deferred tax liabilities for foreign withholding or other taxes on the remainder of undistributed earnings because such earnings are considered to be permanently reinvested. It is not practicable to determine the amount of deferred tax liability on such earnings as the actual tax liability, if any, is dependent on circumstances existing when remittance occurs.
The Company is subject to a wide variety of U.S. federal, state, and foreign tax laws, regulations, and governmental policies. Future changes to these tax regimes may materially affect the Company’s tax obligations, investment returns, and overall business operations.
On July 4, 2025, the reconciliation legislation commonly referred to as the One Big Beautiful Bill Act (the “Act”) was enacted in the United States. The Act contains significant tax reform measures, including modifications to the international tax framework. Beginning in 2025, the Act introduces an elective deduction for domestic research and development expenditures. Additional provisions become effective in 2026 and subsequent periods, including reduced tax rates applicable to Foreign‑Derived Deduction Eligible Income (FDDEI) and Net CFC Tested Income (NCTI), which replaced the former GILTI regime, as well as enhanced foreign tax credit utilization rules associated with NCTI‑related income.
As a result of these statutory changes, the Company expects reduced utilization of its existing general foreign tax credit carryforwards in favor of future NCTI foreign tax credits. Accordingly, during the third quarter of 2025, the Company recognized tax expense to increase the valuation allowance associated with these foreign tax credit carryforwards, consistent with the tax‑law‑ordering approach following the change in accounting principle described in Note 1, "Summary of Significant Accounting Policies" as discussed above. The Company continues to monitor developments related to the Act and will evaluate the impact of these legislative changes as additional regulatory guidance becomes available.
The Company is subject to the OECD Pillar Two global minimum tax rules, which establish a 15% minimum effective tax rate on global income. While it remains uncertain whether the United States will adopt Pillar Two, several jurisdictions in which the Company operates have enacted these rules, and others are progressing toward implementation. As global adoption continues, the Company is assessing the potential effects on its future tax profile, cash tax obligations, and operational structure. As part of this evaluation, the Company is considering the availability of transitional and permanent safe harbors, including the Country‑by‑Country Reporting safe harbor, and the application of local Qualified Domestic Minimum Top‑Up Taxes, such as in Brazil, where foregoing certain tax incentives facilitated a tax‑efficient repatriation of earnings from its Brazil affiliate under the 15% minimum tax framework during 2025. On January 5, 2026, the OECD issued additional guidance introducing a “side‑by‑side arrangement,” which, once adopted, would prevent foreign jurisdictions from imposing top‑up tax on U.S. profits of U.S. companies. The Company is monitoring ongoing U.S. and international legislative developments and will assess any impacts as further guidance becomes available.
Unrecognized Tax Benefits
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| Year Ended December 31, | |||||||||||
| (In millions) | 2025 | 2024 | |||||||||
| Beginning balance | $ | 20 | $ | 25 | |||||||
| Tax positions related to current period | |||||||||||
Additions | 2 | 2 | |||||||||
| Tax positions related to prior periods | |||||||||||
| Additions | 3 | — | |||||||||
| Reductions | — | (7) | |||||||||
| Ending balance | $ | 25 | $ | 20 | |||||||
Gross unrecognized tax benefits at December 31, 2025 and 2024 were $25 million and $20 million, respectively. Of these amounts, approximately $18 million and $13 million respectively, represent the amount of unrecognized benefits that, if recognized, would impact the effective tax rate. The Company records interest and penalties related to uncertain tax positions as a component of income tax expense and related amounts accrued as of December 31, 2025 and 2024 were $5 million and $3 million, respectively.
With few exceptions, the Company is no longer subject to U.S. federal tax examinations for years before 2016, or state, local or non-U.S. income tax examinations for periods outside the relevant statutes of limitation, unless those years remain under audit or litigation. U.S. net operating losses carried forward into open tax years remain subject to adjustment. Although it is not possible to predict the timing of the resolution of all ongoing tax audits with accuracy, the Company expects that it is reasonably possible that the total amount of unrecognized tax benefits will decrease within the next twelve months due to the anticipated settlement of an ongoing bilateral Advance Pricing Agreement with the U.S. Internal Revenue Service and the India Tax Authority (“ITA”) which could result in payment to the ITA in the range of $10 to $15 million (including interest) by the end of 2026. Given the number of years, jurisdictions and positions subject to examination, the Company is unable to estimate the full range of other possible adjustments to the balance of unrecognized tax benefits. The long-term portion of uncertain income tax positions (including interest) in the amount of $9 million is included in Other non-current liabilities on the consolidated balance sheet, while the short-term portion in the amount of $14 million is included in Other current liabilities, and $7 million is reflected as a reduction of deferred tax assets included in Other non-current assets. Outstanding income tax refund claims related primarily to India and Brazil jurisdictions total $4 million as of December 31, 2025, and are included in other non-current assets on the balance sheets.
Income Taxes Paid (Net of Refunds)
For the year ended December 31, 2025, the Company paid a total of $98 million in income taxes across U.S. federal, state, and foreign jurisdictions. Consistent with ASU 2023-09, the Company discloses income taxes paid to each jurisdiction where the amount paid (net of refunds received) is equal to or greater than 5% of total income taxes paid. All other individual jurisdictions, including the U.S. federal and states, did not exceed the 5% disclosure threshold and are presented in the aggregate.
Significant jurisdictions for the period include:
| Year Ended December 31, | |||||
| (In millions) | 2025 | ||||
| India | $ | 31 | |||
| Tunisia | 15 | ||||
| Japan | 14 | ||||
| Mexico | 11 | ||||
| China | 10 | ||||
| Thailand | 6 | ||||
| Brazil | 4 | ||||
| Other | 7 | ||||
Cash paid for income taxes | $ | 98 | |||
Other Tax Matters
In January 2023, the Company received a decision by the Indian Tax Authority (“ITA”) that tax applies to certain IT-related services fees paid to the U.S. which spans several years. Until this matter is resolved, the Company will likely need to remit taxes on the services in question for which payments could be significant in the aggregate. The Company believes the ITA’s decision is without merit, and intends to defend its position vigorously, and expects to recoup any taxes paid. If this matter is adversely resolved, the Company would record additional tax expense, which would include any taxes ultimately paid.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 19, 2026 | Showing above |
| 2024 | Feb 18, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 16, 2023 | |
| 2021 | Feb 17, 2022 | |
| 2020 | Feb 18, 2021 | |
| 2019 | Feb 20, 2020 | |
| 2018 | Feb 21, 2019 | |
| 2017 | Feb 22, 2018 | |
| 2016 | Feb 23, 2017 | |
| 2015 | Feb 25, 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.