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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Deferred taxes are recognized for the future tax effects of temporary differences between financial and income tax reporting based on enacted tax laws and rates. Deferred taxes related to global intangible low-taxed income (GILTI) are also recognized for the future tax effects of temporary differences.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position, based on its technical merits, will be sustained upon examination by the taxing authority. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution.
Following is the composition of income tax expense:
202420232022
Current:
Federal(1)
$3,312.0 $3,017.9 $2,153.6 
Foreign1,430.3 613.0 547.7 
State31.2 24.3 45.5 
Total current tax expense4,773.5 3,655.2 2,746.8 
Deferred:
Federal(2,178.7)(2,369.0)(1,992.4)
Foreign(473.1)34.2 (78.2)
State(31.3)(6.2)(114.6)
Total deferred tax benefit(2,683.1)(2,341.0)(2,185.2)
Income taxes$2,090.4 $1,314.2 $561.6 
(1) The 2024, 2023, and 2022 current tax expense includes $129.9 million, $69.3 million, and $189.5 million of tax benefit, respectively, from utilization of net operating loss and other tax carryforwards.
Significant components of our deferred tax assets and liabilities as of December 31 were as follows:
20242023
Deferred tax assets:
Capitalized research and development$4,598.7 $2,997.5 
Purchases of intangible assets1,781.4 1,981.9 
Sales rebates and discounts1,775.7 1,632.5 
Correlative tax adjustments1,604.3 1,031.3 
Tax loss and other tax carryforwards
586.9 527.2 
Tax credit carryforwards577.0 577.0 
Compensation and benefits565.2 521.4 
Foreign tax redeterminations334.8 323.7 
Operating lease liabilities240.5 253.3 
Other358.6 463.4 
Total gross deferred tax assets12,423.1 10,309.2 
Valuation allowances(963.7)(913.5)
Total deferred tax assets11,459.4 9,395.7 
Deferred tax liabilities:
Intangibles(1,176.4)(1,338.2)
Earnings of foreign subsidiaries(773.1)(796.6)
Prepaid employee benefits(611.0)(460.6)
Property and equipment(557.6)(495.2)
Operating lease assets(219.1)(237.1)
Financial instruments(137.3)(75.1)
Inventories(58.2)(619.5)
Total deferred tax liabilities(3,532.7)(4,022.3)
Deferred tax assets - net$7,926.7 $5,373.4 
The deferred tax asset and related valuation allowance amounts for U.S. federal, international, and state net operating losses and tax credits shown above have been reduced for differences between financial reporting and tax return filings.
At December 31, 2024, based on filed tax returns we have tax credit carryforwards and carrybacks of $1.13 billion available to reduce future income taxes; $148.8 million, if unused, will expire in 2026, and $53.6 million, if unused, will expire between 2030 and 2044. The remaining portion of the tax credit carryforwards is related to federal tax credits of $68.0 million, international tax credits of $109.4 million, and state tax credits of $754.8 million, all of which are fully reserved.
At December 31, 2024, based on filed tax returns we have net operating losses and other carryforwards for U.S. federal and international tax purposes of $1.74 billion available to reduce future income taxes: $5.8 million will expire by 2029, $355.7 million will expire between 2030 and 2044, and $861.5 million of the carryforwards will never expire. The remaining net operating losses and other carryforwards for U.S. federal and international tax purposes of $481.0 million and $32.4 million, respectively, are fully reserved. Deferred tax assets related to state net operating losses and other carryforwards of $282.6 million are fully reserved as of December 31, 2024.
At December 31, 2024 and 2023, prepaid expenses included prepaid taxes of $7.13 billion and $4.26 billion, respectively.
Domestic and Puerto Rican companies contributed approximately 20 percent, 14 percent, and 33 percent for the years ended December 31, 2024, 2023, and 2022, respectively, to consolidated income before income taxes.
Substantially all of the unremitted earnings of our foreign subsidiaries are considered not to be indefinitely reinvested for continued use in our foreign operations. At December 31, 2024 and 2023, we accrued an immaterial amount of foreign withholding taxes and state income taxes that would be owed upon future distributions of unremitted earnings of our foreign subsidiaries that are not indefinitely reinvested. For the amount considered to be indefinitely reinvested, it is not practicable to determine the amount of the related deferred income tax liability due to the complexities in the tax laws and assumptions we would have to make.
Cash payments of U.S. federal, state, and foreign income taxes, net of refunds, were as follows:
202420232022
Cash payments of income taxes$6,562.1 $5,558.8 $2,672.9 
As of December 31, 2024, we have noncurrent income tax payables of $490.7 million that we expect to pay in 2026 and $3.57 billion that we cannot reasonably estimate the timing of future cash outflows.
Following is a reconciliation of the consolidated income tax expense applying the U.S. federal statutory rate to income before income taxes to reported consolidated income tax expense:
202420232022
Income tax at the U.S. federal statutory tax rate$2,662.9 $1,376.5 $1,429.3 
Add (deduct):
Non-deductible acquired IPR&D(1)
566.0 677.2 68.3 
Foreign-derived intangible income deduction(307.0)(236.7)(287.5)
International operations, including Puerto Rico(2)
(302.1)(187.1)(299.5)
General business credits(290.6)(258.0)(155.0)
Stock-based compensation(3)
(184.7)(79.9)(48.9)
Valuation allowance release(23.9)(4.2)(116.4)
Other(30.2)26.4 (28.7)
Income taxes$2,090.4 $1,314.2 $561.6 
(1) Non-deductible acquired IPR&D was primarily related to the acquisitions of Morphic in 2024, and DICE, Versanis, and Emergence in 2023. See Note 3 for additional information related to acquisitions.
(2) Includes the impact of GILTI tax, Puerto Rico Excise Tax (for 2022), and other U.S. taxation of foreign income.
(3) Includes excess tax benefits from stock-based compensation and non-deductible stock-based compensation.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
202420232022
Beginning balance at January 1$3,395.0 $2,987.0 $2,798.3 
Additions based on tax positions related to the current year694.2 364.3 274.2 
Additions for tax positions of prior years41.7 78.2 34.6 
Reductions for tax positions of prior years(63.1)(39.0)(10.9)
Settlements(33.4)(4.7)(44.8)
Lapses of statutes of limitation(8.9)(21.5)(11.8)
Changes related to the impact of foreign currency translation(49.7)30.7 (52.6)
Ending balance at December 31$3,975.8 $3,395.0 $2,987.0 
The total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate was $2.62 billion at December 31, 2024.
We file U.S. federal, foreign, and various state and local income tax returns. We are no longer subject to U.S. federal income tax examination for years before 2016. In most major foreign and state jurisdictions, we are no longer subject to income tax examination for years before 2014.
The U.S. examination of tax years 2019-2021 began in 2023 and remains ongoing. For tax years 2016-2018, we are pursuing competent authority assistance through the Mutual Agreement Procedure (MAP) process for the pricing of certain intercompany transactions. The resolution of both audit periods will likely extend beyond the next 12 months.
Interest and penalties related to unrecognized tax benefits are recognized in income tax expense and were not material for the years ended December 31, 2024, 2023, and 2022. Our accrued interest and penalties related to unrecognized tax benefits were $594.2 million and $414.9 million at December 31, 2024 and 2023, respectively.