Income Taxes

12 Months Ended

Dec. 31, 2025


	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)
US federal statutory tax rate	$	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.

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.

- Definition

The entire disclosure for income tax.

+ References

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+ Details

NORFOLK SOUTHERN CORP 10-K