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Taxes on Income (Tables)

12 Months Ended

Dec. 31, 2019

Income Tax Disclosure [Abstract]

Reconciliation Between Effective Tax Rate and U.S. Statutory Rate

A reconciliation between the effective tax rate and the U.S. statutory rate is as follows:

	2019							2018							2017
	Amount				Tax Rate			Amount				Tax Rate			Amount				Tax Rate
U.S. statutory rate applied to income before taxes	$	2,408			21.0	%		$	1,827			21.0	%		$	2,282			35.0	%
Differential arising from:
Foreign earnings	(1,020		)		(8.9	)		(245		)		(2.8	)		(1,654		)		(25.4	)
GILTI and the foreign-derived intangible income deduction	336				2.9			(25		)		(0.3	)		—				—
Tax settlements	(403		)		(3.5	)		(22		)		(0.3	)		(356		)		(5.5	)
R&D tax credit	(118		)		(1.0	)		(96		)		(1.1	)		(71		)		(1.1	)
State taxes	(2		)		—			201				2.3			77				1.2
Acquisition of Peloton	209				1.8			—				—			—				—
TCJA	117				1.0			289				3.3			2,625				40.3
Valuation allowances	113				1.0			269				3.1			632				9.7
Acquisition-related costs, including amortization	95				0.8			267				3.1			713				10.9
Restructuring	39				0.3			56				0.6			142				2.2
Other (1)	(87		)		(0.7	)		(13		)		(0.1	)		(287		)		(4.4	)
	$	1,687			14.7	%		$	2,508			28.8	%		$	4,103			62.9	%

⁽¹⁾ 

Other includes the tax effects of losses on foreign subsidiaries and miscellaneous items.

Income Before Taxes

Income before taxes consisted of:

Years Ended December 31	2019				2018				2017
Domestic	$	439			$	3,717			$	3,483
Foreign	11,025				4,984				3,038
	$	11,464			$	8,701			$	6,521

Taxes on Income

Taxes on income consisted of:

Years Ended December 31	2019				2018				2017
Current provision
Federal	$	514			$	536			$	5,585
Foreign	1,806				2,281				1,229
State	(77		)		200				(90		)
	2,243				3,017				6,724
Deferred provision
Federal	(330		)		(402		)		(2,958		)
Foreign	(240		)		(64		)		75
State	14				(43		)		262
	(556		)		(509		)		(2,621		)
	$	1,687			$	2,508			$	4,103

Deferred Income Taxes

Deferred income taxes at December 31 consisted of:

	2019								2018
	Assets				Liabilities				Assets				Liabilities
Product intangibles and licenses	$	442			$	1,778			$	720			$	1,640
Inventory related	32				354				32				377
Accelerated depreciation	—				594				—				582
Pensions and other postretirement benefits	785				191				565				151
Compensation related	322				—				291				—
Unrecognized tax benefits	109				—				174				—
Net operating losses and other tax credit carryforwards	897				—				715				—
Other	764				84				621				66
Subtotal	3,351				3,001				3,118				2,816
Valuation allowance	(1,100		)						(1,348		)
Total deferred taxes	$	2,251			$	3,001			$	1,770			$	2,816
Net deferred income taxes					$	750							$	1,046
Recognized as:
Other Assets	$	719							$	656
Deferred Income Taxes					$	1,470							$	1,702

Unrecognized Tax Benefits

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	2019				2018				2017
Balance January 1	$	1,893			$	1,723			$	3,494
Additions related to current year positions	199				221				146
Additions related to prior year positions	46				142				520
Reductions for tax positions of prior years (1)	(454		)		(73		)		(1,038		)
Settlements (1)	(356		)		(91		)		(1,388		)
Lapse of statute of limitations (2)	(103		)		(29		)		(11		)
Balance December 31	$	1,225			$	1,893			$	1,723

⁽¹⁾  Amounts reflect the settlements with the IRS as discussed below.

⁽²⁾ Amount in 2019 includes $78 million related to the divestiture of Merck’s Consumer Care business in 2014.

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