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Income Taxes (Tables)

12 Months Ended

Jan. 01, 2023

Income Tax Disclosure [Abstract]

Provision for Income Taxes

The provision for taxes on income consists of:

(Dollars in Millions)			2022						2021						2020
Currently payable:
U.S. taxes			$	2,378					1,525						1,026
International taxes			3,069						2,452						1,898
Total currently payable			5,447						3,977						2,924
Deferred:
U.S. taxes			(2,081)						583						(76)
International taxes			418						(2,662)						(1,065)
Total deferred			(1,663)						(2,079)						(1,141)
Provision for taxes on income			$	3,784					1,898						1,783

Comparison of Income Taxes at Statutory Rate and Company's Effective Tax Rate

A comparison of income tax expense at the U.S. statutory rate of 21% in fiscal years 2022, 2021 and 2020, to the Company’s effective tax rate is as follows:

(Dollars in Millions)						2022						2021						2020
U.S.						$	5,369					6,110						4,312
International						16,356						16,666						12,185
Earnings before taxes on income:						$	21,725					22,776						16,497
Tax rates:
U.S. statutory rate						21.0		%				21.0						21.0
International operations (1)						(4.5)						(16.4)						(9.9)
Consumer health separation						2.2						—						—
U.S. taxes on international income (2)						(1.9)						6.7						2.7
Tax benefits from loss on capital assets						—						(1.3)						(1.2)
Tax benefits on share-based compensation						(1.3)						(1.0)						(1.5)
All other (3)						1.9						(0.7)						(0.3)
Effective Rate						17.4		%				8.3						10.8

(1) For all periods presented the Company has subsidiaries operating in Puerto Rico under various tax incentives. International operations reflect the impacts of operations in jurisdictions with statutory tax rates different than the U.S., particularly Ireland, Switzerland and Puerto Rico, which is a favorable impact on the effective tax rate as compared with the U.S. statutory rate. The 2021 amounts include the reorganization of international subsidiaries; the 2020 amounts include the impact of the new tax legislation enactment in Switzerland, both of which are further described below.

(2) Includes the impact of the GILTI tax, the Foreign-Derived Intangible Income deduction and other foreign income that is taxable under the U.S. tax code. The 2022 amount includes the impact of certain provisions of the 2017 TCJA that became effective in fiscal 2022. The 2021 amounts include the reorganization of international subsidiaries; the 2020 amounts include the impact of the new tax legislation enactment in Switzerland, both of which are further described below.

(3) Certain prior year amounts have been reclassified to conform to current year presentation.

Temporary Differences and Carryforwards

Temporary differences and carryforwards at the end of fiscal years 2022 and 2021 were as follows:

						2022 Deferred Tax												2021 Deferred Tax(1)
(Dollars in Millions)						Asset						Liability						Asset						Liability
Employee related obligations						$	725											1,244
Stock based compensation						687												679
Depreciation of property, plant and equipment												(858)												(876)
Goodwill and intangibles												(4,271)			(3)									(2,659)			(2)
R&D capitalized for tax						2,611												1,664
Reserves & liabilities						2,761												2,882
Income reported for tax purposes						2,045												2,566
Net realizable operating loss carryforwards(4)						1,260												1,720
Undistributed foreign earnings						1,565						(1,693)						1,015						(1,461)
Global intangible low-taxed income												(3,547)												(4,853)
Miscellaneous international						1,053						(65)						870						(39)
Miscellaneous U.S.						476																		(16)
Total deferred income taxes						$	13,183					(10,434)						12,640						(9,904)

(1) Certain prior year amounts have been reclassified to conform to current year presentation.

(2) Amount is inclusive of the $2.3 billion deferred tax asset established as part of the reorganized ownership structure of certain wholly-owned international subsidiaries, as previously described.

(3) Amount is inclusive of the $1.8 billion deferred tax liability due to the acquisition of Abiomed.

(4) Net of valuation allowances of $0.9 billion in both 2022 and 2021.

Summary of Activity Related to Unrecognized Tax Benefits

The following table summarizes the activity related to unrecognized tax benefits:

(Dollars in Millions)						2022						2021						2020
Beginning of year						$	3,323					3,373						3,853
Increases related to current year tax positions						523						242						265
Increases related to prior period tax positions						143						23						668
Decreases related to prior period tax positions						(148)						(128)						(551)
Settlements						(1)						(187)						(839)
Lapse of statute of limitations						(11)						—						(23)
End of year						$	3,829					3,323						3,373

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Tabular disclosure of the components of income tax expense attributable to continuing operations for each year presented including, but not limited to: current tax expense (benefit), deferred tax expense (benefit), investment tax credits, government grants, the benefits of operating loss carryforwards, tax expense that results from allocating certain tax benefits either directly to contributed capital or to reduce goodwill or other noncurrent intangible assets of an acquired entity, adjustments of a deferred tax liability or asset for enacted changes in tax laws or rates or a change in the tax status of the entity, and adjustments of the beginning-of-the-year balances of a valuation allowance because of a change in circumstances that causes a change in judgment about the realizability of the related deferred tax asset in future years.

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Tabular disclosure of the components of net deferred tax asset or liability recognized in an entity's statement of financial position, including the following: the total of all deferred tax liabilities, the total of all deferred tax assets, the total valuation allowance recognized for deferred tax assets.

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Tabular disclosure of the reconciliation using percentage or dollar amounts of the reported amount of income tax expense attributable to continuing operations for the year to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income from continuing operations.

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Tabular disclosure for tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities and other income tax contingencies. Includes, but is not limited to, interest and penalties, reconciliation of unrecognized tax benefits, unrecognized tax benefits that would affect the effective tax rate, tax years that remain subject to examination by tax jurisdictions, and information about positions for which it is reasonably possible that amounts unrecognized will significantly change within 12 months.

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