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Taxes on Income (Tables) | 12 Months Ended
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Dec. 31, 2020
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:
| 2020 |  | 2019 |  | 2018
| Amount |  | Tax Rate |  | Amount |  | Tax Rate |  | Amount |  | Tax Rate
U.S. statutory rate applied to income before taxes | $ | 1,846 |  |  | 21.0 | % |  | $ | 2,408 |  |  | 21.0 | % |  | $ | 1,827 |  |  | 21.0 | %
Differential arising from: |  |  |  |  |  |  |  |  |  |  |
Foreign earnings | (1,242) |  |  | (14.1) |  |  | (1,020) |  |  | (8.9) |  |  | (245) |  |  | (2.8) |
GILTI and the foreign-derived intangible income deduction | 364 |  |  | 4.1 |  |  | 336 |  |  | 2.9 |  |  | (25) |  |  | (0.3) |
R&D tax credit | (110) |  |  | (1.3) |  |  | (118) |  |  | (1.0) |  |  | (96) |  |  | (1.1) |
Tax settlements | (13) |  |  | (0.2) |  |  | (403) |  |  | (3.5) |  |  | (22) |  |  | (0.3) |
Acquisition of VelosBio | 559 |  |  | 6.3 |  |  | — |  |  | — |  |  | — |  |  | — |
Restructuring | 105 |  |  | 1.2 |  |  | 39 |  |  | 0.3 |  |  | 56 |  |  | 0.6 |
Acquisition of OncoImmune | 97 |  |  | 1.1 |  |  | — |  |  | — |  |  | — |  |  | — |
State taxes | 67 |  |  | 0.8 |  |  | (2) |  |  | — |  |  | 201 |  |  | 2.3 |
Acquisition-related costs, including amortization | 46 |  |  | 0.5 |  |  | 95 |  |  | 0.8 |  |  | 267 |  |  | 3.1 |
Valuation allowances | 42 |  |  | 0.5 |  |  | 113 |  |  | 1.0 |  |  | 269 |  |  | 3.1 |
Acquisition of Peloton | — |  |  | — |  |  | 209 |  |  | 1.8 |  |  | — |  |  | — |
Tax Cuts and Jobs Act of 2017 | — |  |  | — |  |  | 117 |  |  | 1.0 |  |  | 289 |  |  | 3.3 |
Other | (52) |  |  | (0.5) |  |  | (87) |  |  | (0.7) |  |  | (13) |  |  | (0.1) |
| $ | 1,709 |  |  | 19.4 | % |  | $ | 1,687 |  |  | 14.7 | % |  | $ | 2,508 |  |  | 28.8 | %
Income Before Taxes | Income before taxes consisted of:
Years Ended December 31 | 2020 |  | 2019 |  | 2018
Domestic | $ | (3,492) |  |  | $ | 439 |  |  | $ | 3,717 |
Foreign | 12,283 |  |  | 11,025 |  |  | 4,984 |
| $ | 8,791 |  |  | $ | 11,464 |  |  | $ | 8,701 |
Taxes on Income | Taxes on income consisted of:
Years Ended December 31 | 2020 |  | 2019 |  | 2018
Current provision |  |  |  |  |
Federal | $ | 962 |  |  | $ | 514 |  |  | $ | 536 |
Foreign | 1,362 |  |  | 1,806 |  |  | 2,281 |
State | 53 |  |  | (77) |  |  | 200 |
| 2,377 |  |  | 2,243 |  |  | 3,017 |
Deferred provision |  |  |  |  |
Federal | (605) |  |  | (330) |  |  | (402) |
Foreign | (40) |  |  | (240) |  |  | (64) |
State | (23) |  |  | 14 |  |  | (43) |
| (668) |  |  | (556) |  |  | (509) |
| $ | 1,709 |  |  | $ | 1,687 |  |  | $ | 2,508 |
Deferred Income Taxes | Deferred income taxes at December 31 consisted of:
| 2020 |  | 2019
| Assets |  | Liabilities |  | Assets |  | Liabilities
Product intangibles and licenses | $ | 141 |  |  | $ | 1,250 |  |  | $ | 442 |  |  | $ | 1,778 |
Inventory related | 43 |  |  | 335 |  |  | 32 |  |  | 354 |
Accelerated depreciation | — |  |  | 588 |  |  | — |  |  | 594 |
Equity investments | — |  |  | 175 |  |  | — |  |  | — |
Pensions and other postretirement benefits | 834 |  |  | 248 |  |  | 785 |  |  | 191 |
Compensation related | 252 |  |  | — |  |  | 322 |  |  | — |
Unrecognized tax benefits | 117 |  |  | — |  |  | 109 |  |  | — |
Net operating losses and other tax credit carryforwards | 794 |  |  | — |  |  | 897 |  |  | — |
Other | 808 |  |  | 81 |  |  | 764 |  |  | 84 |
Subtotal | 2,989 |  |  | 2,677 |  |  | 3,351 |  |  | 3,001 |
Valuation allowance | (433) |  |  |  |  | (1,100) |  |  |
Total deferred taxes | $ | 2,556 |  |  | $ | 2,677 |  |  | $ | 2,251 |  |  | $ | 3,001 |
Net deferred income taxes |  |  | $ | 121 |  |  |  |  | $ | 750 |
Recognized as: |  |  |  |  |  |  |
Other Assets | $ | 894 |  |  |  |  | $ | 719 |  |  |
Deferred Income Taxes |  |  | $ | 1,015 |  |  |  |  | $ | 1,470 |
Unrecognized Tax Benefits | A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| 2020 |  | 2019 |  | 2018
Balance January 1 | $ | 1,225 |  |  | $ | 1,893 |  |  | $ | 1,723 |
Additions related to current year positions | 298 |  |  | 199 |  |  | 221 |
Additions related to prior year positions | 110 |  |  | 46 |  |  | 142 |
Reductions for tax positions of prior years (1) | (4) |  |  | (454) |  |  | (73) |
Settlements (1) | (70) |  |  | (356) |  |  | (91) |
Lapse of statute of limitations (2) | (22) |  |  | (103) |  |  | (29) |
Balance December 31 | $ | 1,537 |  |  | $ | 1,225 |  |  | $ | 1,893 |
(1) Amounts in 2019 reflects the settlement with the IRS 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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