HII · 10-Q · 2026Q3 · Full report

Income Tax Rate Changes

HUNTINGTON INGALLS INDUSTRIES, INC. · 2026-10-29 · Importance 35 · Surprise 48

HII’s effective tax rate on earnings from operations fell to 21.1% in the third quarter of 2026 from 28.9% in the third quarter of 2025. For the first nine months, the rate declined to 19.9% from 23.0%. The lower rates reflected reduced estimated research and development tax credits recorded in the prior period; the nine-month comparison also benefited from tax benefits on stock-award settlement activity recorded in 2026.

Key facts

• HII expects the Pillar Two side-by-side system or other transitional safe harbors to broadly apply to its international operations and does not expect Pillar Two to materially affect its effective tax rate, consolidated results, financial position, or cash flows. source
• Non-current state income tax expense was $4 million for the three months ended September 30, 2026, versus $9 million in 2025; the favorable change was driven by decreased deferred state income tax expense, primarily attributable to a change in net capitalized research and development expenditures. source
• Non-current state income tax expense was $18 million for the nine months ended September 30, 2026, versus $12 million in 2025; the unfavorable change was driven by higher deferred state tax expense, primarily attributable to prior-period state unrecognized tax benefits and deferred taxes associated with pension accounting. source
• Effective income tax rates on earnings from operations were 21.1% and 28.9% for the three months ended September 30, 2026 and 2025, and 19.9% and 23.0% for the nine months ended September 30, 2026 and 2025. source
• The lower effective tax rate for the three months ended September 30, 2026, was primarily attributable to a reduction in estimated research and development tax credits recorded in the prior period. source
• The lower effective tax rate for the nine months ended September 30, 2026, was primarily attributable to a reduction in prior-period estimated research and development tax credits and current-period income tax benefits from stock award settlement activity. source