HUNTINGTON INGALLS INDUSTRIES, INC.

9. INCOME TAXES

The Company's earnings are primarily domestic, and its effective income tax rates on earnings from operations for the three months ended September 30, 2025 and 2024, were 28.9% and 9.8%, respectively. For the nine months ended September 30, 2025 and 2024, the Company's effective income tax rates on earnings from operations were 23.0% and 16.6%, respectively. The higher effective tax rates for thethree and nine months ended September 30, 2025, were primarily attributable to a reduction in the estimated research and development tax credits for the prior period recorded in the current period.

For thethree and nine months ended September 30, 2025, the Company’s effective tax rates differed from the federal statutory corporate income tax rate of 21% primarily due to a reduction in the estimated research and development tax credits for the prior period recorded in the current period.

The Company's unrecognized tax benefits decreased by $6 million during the three months ended September 30, 2025, and increased by less than $1 million during the nine months ended September 30, 2025. As of September 30, 2025, the estimated amounts of the Company's unrecognized tax benefits, excluding interest and penalties, were liabilities of $110 million. Assuming a sustainment of these tax positions, a reversal of $86 million of the accrued amounts would favorably affect the Company's effective federal income tax rate in future periods.

The Company recognizes interest and penalties related to unrecognized tax benefits as income tax expense. For the three and nine months ended September 30, 2025, interest and penalties resulting from the unrecognized tax benefits noted above increased income tax expense by $2 million and $5 million, respectively.

Non-current state income taxes include deferred state income taxes, which reflect the change in deferred state tax assets and liabilities and the tax expense or benefit associated with changes in state unrecognized tax benefits in the relevant period. These amounts are recorded within operating income. Current period state income tax expense is charged to contract costs and included in cost of sales and service revenues in segment operating income.

IRS Audits - The Company has reached an agreement in principle with the IRS on the research and development tax credits for the 2016-2021 tax years. The agreement is going through IRS administrative review processes and is subject to review by the Joint Committee on Taxation. The Company believes that its unrecognized tax benefits are adequate and will cover the expected impact of the agreement with the IRS.

On July 4, 2025, Public Law 119-21 (the “Act”) was signed into law. The Act provides for significant changes to the U.S. Internal Revenue Code of 1986, as amended, that impact corporations, including making certain business deductions permanent, such as bonus depreciation and immediate expensing of domestic research and development expenditures. In addition, the Act allows an acceleration of the deduction for the remaining unamortized domestic research and development expenditures capitalized during the 2022 through 2024 tax years. These unamortized expenditures can be deducted overone ortwo years. The Company recorded the impact of the following significant items as of September 30, 2025:

Domestic research and development expenditures: The Company recorded a current tax benefit of $109 million based on its intent to expense all current year domestic research and development expenditures and to accelerate the deduction for the remaining unamortized domestic research and development expenditures capitalized during the 2022 through 2024 tax years over a two year period. This resulted in an increase of approximately $109 million to the Company’s current income taxes receivable and a corresponding increase in its net deferred tax liability.

Bonus Depreciation: While the Company has not completed its analysis of all capital expenditures that may qualify for immediate expensing, the Company recorded an estimated current tax benefit of $33 million based on its intent to fully expense all qualified property acquired and placed into service after January 19, 2025. This resulted in an increase of approximately $33 million to the Company’s current income taxes receivable and a corresponding increase in its net deferred tax liability.