XML 63 R26.htm IDEA: XBRL DOCUMENT
v3.24.0.1

Taxes on Income | 12 Months Ended
--- | ---
Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Taxes on Income | Taxes on Income A reconciliation between the effective tax rate for income from continuing operations and the U.S. statutory rate is as follows:
| 2023 |  | 2022 |  | 2021
| Amount |  | Tax Rate |  | Amount |  | Tax Rate |  | Amount |  | Tax Rate
U.S. statutory rate applied to income from continuing operations before taxes | $ | 397 |  |  | 21.0 | % |  | $ | 3,453 |  |  | 21.0 | % |  | $ | 2,915 |  |  | 21.0 | %
Differential arising from: |  |  |  |  |  |  |  |  |  |  |
Acquisition of Prometheus | 2,139 |  |  | 113.3 |  |  | — |  |  | — |  |  | — |  |  | — |
Acquisition of Imago | 253 |  |  | 13.4 |  |  | — |  |  | — |  |  | — |  |  | — |
Valuation allowances | 70 |  |  | 3.7 |  |  | 108 |  |  | 0.7 |  |  | 102 |  |  | 0.7 |
Acquisition-related costs, including amortization | 42 |  |  | 2.2 |  |  | (3) |  |  | — |  |  | 8 |  |  | 0.1 |
Restructuring | 41 |  |  | 2.2 |  |  | 11 |  |  | 0.1 |  |  | 61 |  |  | 0.4 |
Foreign earnings | (941) |  |  | (49.8) |  |  | (1,821) |  |  | (11.1) |  |  | (1,456) |  |  | (10.5) |
GILTI and the foreign-derived intangible income deduction | (80) |  |  | (4.3) |  |  | 462 |  |  | 2.8 |  |  | (75) |  |  | (0.5) |
R&D tax credit | (214) |  |  | (11.3) |  |  | (117) |  |  | (0.7) |  |  | (113) |  |  | (0.8) |
State taxes | (117) |  |  | (6.2) |  |  | (110) |  |  | (0.7) |  |  | 2 |  |  | — |
Inventory donations | (65) |  |  | (3.5) |  |  | (52) |  |  | (0.3) |  |  | (41) |  |  | (0.3) |
Tax settlements | — |  |  | — |  |  | (10) |  |  | (0.1) |  |  | (275) |  |  | (2.0) |
Acquisition of Pandion | — |  |  | — |  |  | — |  |  | — |  |  | 356 |  |  | 2.6 |
Other | (13) |  |  | (0.7) |  |  | (3) |  |  | — |  |  | 37 |  |  | 0.3 |
| $ | 1,512 |  |  | 80.0 | % |  | $ | 1,918 |  |  | 11.7 | % |  | $ | 1,521 |  |  | 11.0 | %
Where applicable, the impact of changes in uncertain tax positions is reflected in the reconciling items above. The Company’s remaining transition tax liability under the Tax Cuts and Jobs Act (TCJA) of 2017, which has been reduced by payments and the expected utilization of foreign tax credits, was $1.5 billion at December 31, 2023, of which $976 million is included in Income taxes payable and the remainder of $518 million is included in Other Noncurrent Liabilities. As a result of the transition tax under the TCJA, the Company is no longer indefinitely reinvested with respect to its undistributed earnings from foreign subsidiaries and has provided a deferred tax liability for foreign withholding taxes that would apply. The Company remains indefinitely reinvested with respect to its financial statement basis in excess of tax basis of its foreign subsidiaries. A determination of the deferred tax liability with respect to this basis difference is not practicable. The foreign earnings tax rate differentials in the tax rate reconciliation above primarily reflect the impacts of operations in jurisdictions with different tax rates than the U.S., particularly Ireland and Switzerland, as well as Singapore and Puerto Rico which operate under tax incentive grants (which begin to expire in 2025), thereby yielding a favorable impact on the effective tax rate compared with the U.S. statutory rate of 21%. The Company has an additional Cantonal tax holiday in Switzerland that provides for a tax rate reduction and is effective through 2032. Income from continuing operations before taxes consisted of:
Years Ended December 31 | 2023 |  | 2022 |  | 2021
Domestic | $ | (15,622) |  |  | $ | 1,011 |  |  | $ | 1,854 |
Foreign | 17,511 |  |  | 15,433 |  |  | 12,025 |
| $ | 1,889 |  |  | $ | 16,444 |  |  | $ | 13,879 |
Taxes on income from continuing operations consisted of:
Years Ended December 31 | 2023 |  | 2022 |  | 2021
Current provision |  |  |  |  |
Federal | $ | 928 |  |  | $ | 2,265 |  |  | $ | 74 |
Foreign | 2,435 |  |  | 1,164 |  |  | 1,273 |
State | 48 |  |  | 57 |  |  | (13) |
| 3,411 |  |  | 3,486 |  |  | 1,334 |
Deferred provision |  |  |  |  |
Federal | (1,559) |  |  | (1,510) |  |  | 240 |
Foreign | (233) |  |  | 71 |  |  | (77) |
State | (107) |  |  | (129) |  |  | 24 |
| (1,899) |  |  | (1,568) |  |  | 187 |
| $ | 1,512 |  |  | $ | 1,918 |  |  | $ | 1,521 |
Deferred income taxes at December 31 consisted of:
| 2023 |  | 2022
| Assets |  | Liabilities |  | Assets |  | Liabilities
Product intangibles and licenses | $ | — |  |  | $ | 1,308 |  |  | $ | — |  |  | $ | 2,575 |
R&D capitalization | 2,099 |  |  | — |  |  | 1,341 |  |  | — |
Inventory related | 86 |  |  | 370 |  |  | 43 |  |  | 423 |
Accelerated depreciation | — |  |  | 626 |  |  | — |  |  | 666 |
Equity investments | — |  |  | 73 |  |  | — |  |  | 92 |
Pensions and other postretirement benefits | 323 |  |  | 249 |  |  | 372 |  |  | 284 |
Compensation related | 357 |  |  | — |  |  | 335 |  |  | — |
Unrecognized tax benefits | 147 |  |  | — |  |  | 91 |  |  | — |
Net operating losses and other tax credit carryforwards | 868 |  |  | — |  |  | 912 |  |  | — |
Other | 713 |  |  | 214 |  |  | 520 |  |  | 267 |
Subtotal | 4,593 |  |  | 2,840 |  |  | 3,614 |  |  | 4,307 |
Valuation allowance | (656) |  |  |  |  | (599) |  |  |
Total deferred taxes | $ | 3,937 |  |  | $ | 2,840 |  |  | $ | 3,015 |  |  | $ | 4,307 |
Net deferred income taxes | $ | 1,097 |  |  |  |  |  |  | $ | 1,292 |
Recognized as: |  |  |  |  |  |  |
Other Assets | $ | 1,968 |  |  |  |  | $ | 503 |  |  |
Deferred Income Taxes |  |  | $ | 871 |  |  |  |  | $ | 1,795 |
The Company has net operating loss (NOL) carryforwards in several jurisdictions. As of December 31, 2023, $292 million of deferred tax assets on NOL carryforwards relate to foreign jurisdictions. Valuation allowances of $266 million have been established on these foreign NOL carryforwards and other foreign deferred tax assets. In addition, the Company has $575 million of deferred tax assets relating to various U.S. tax credit carryforwards and NOL carryforwards. Valuation allowances of $379 million have been established on these U.S. tax credit carryforwards and NOL carryforwards. Income taxes paid in 2023, 2022 and 2021 (including amounts attributable to discontinued operations in 2021) consisted of:
Years Ended December 31 | 2023 |  | 2022 |  | 2021
Domestic (1) | $ | 2,258 |  |  | $ | 1,891 |  |  | $ | 1,211 |
Foreign | 2,080 |  |  | 1,348 |  |  | 1,201 |
| $ | 4,338 |  |  | $ | 3,239 |  |  | $ | 2,412 |
(1) Includes TCJA transition tax payments. Tax benefits relating to stock option exercises were $12 million in 2023, $45 million in 2022 and $21 million in 2021. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
| 2023 |  | 2022 |  | 2021
Balance January 1 | $ | 1,835 |  |  | $ | 1,529 |  |  | $ | 1,537 |
Additions related to current year positions | 553 |  |  | 344 |  |  | 306 |
Additions related to prior year positions | 91 |  |  | 48 |  |  | 63 |
Reductions for tax positions of prior years (1) | (20) |  |  | (40) |  |  | (230) |
Settlements (1) | (23) |  |  | (6) |  |  | (46) |
Lapse of statute of limitations | (52) |  |  | (40) |  |  | (58) |
Spin-off of Organon | — |  |  | — |  |  | (43) |
Balance December 31 | $ | 2,384 |  |  | $ | 1,835 |  |  | $ | 1,529 |
(1) Amount in 2021 reflects a settlement with the IRS discussed below. If the Company were to recognize the unrecognized tax benefits of $2.4 billion at December 31, 2023, the income tax provision would reflect a favorable net impact of $2.3 billion. The Company is under examination by numerous tax authorities in various jurisdictions globally. The Company believes that it is reasonably possible that the total amount of unrecognized tax benefits as of December 31, 2023 could decrease by up to approximately $25 million in the next 12 months as a result of various audit closures, settlements or the expiration of the statute of limitations. The ultimate finalization of the Company’s examinations with relevant taxing authorities can include formal administrative and legal proceedings, which could have a significant impact on the timing of the reversal of unrecognized tax benefits. The Company believes that its reserves for uncertain tax positions are adequate to cover existing risks or exposures. Interest and penalties associated with uncertain tax positions amounted to an expense (benefit) of $131 million in 2023, $54 million in 2022 and $(37) million in 2021. These amounts reflect the beneficial impacts of various tax settlements, including the settlement discussed below. Liabilities for accrued interest and penalties were $388 million and $256 million as of December 31, 2023 and 2022, respectively. In 2021, the Internal Revenue Service (IRS) concluded its examinations of Merck’s 2015-2016 U.S. federal income tax returns. As a result, the Company was required to make a payment of $190 million (of which $172 million related to continuing operations and $18 million related to discontinued operations). The Company’s reserves for unrecognized tax benefits for the years under examination exceeded the adjustments relating to this examination period and therefore the Company recorded a $236 million net tax benefit in 2021 (of which $207 million related to continuing operations and $29 million related to discontinued operations). This net benefit reflects reductions in reserves for unrecognized tax benefits and other related liabilities for tax positions relating to the years that were under examination. The IRS is currently conducting examinations of the Company’s tax returns for the years 2017 and 2018, including the one-time transition tax enacted under the TCJA. If the IRS disagrees with the Company’s transition tax position, it may result in a significant tax liability. In addition, various state and foreign tax examinations are in progress and for these jurisdictions, the Company’s income tax returns are open for examination for the period 2003 through 2023.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 946 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 13 -Publisher FASB -URI https://asc.fasb.org//1943274/2147480990/946-20-50-13 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//740/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 14 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-14 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 21 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-21 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 270 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Publisher FASB -URI https://asc.fasb.org//1943274/2147482526/740-270-50-1 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 17 -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482685/740-10-50-17 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 740 -SubTopic 30 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482603/740-30-50-2 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration