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Income Taxes | 6 Months Ended
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Jul. 02, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES The worldwide effective income tax rates for the fiscal six months of 2023 and 2022 were 15.8% and 14.9%, respectively. The increase in the consolidated tax rate is primarily due to the planned separation of the Company’s Consumer Health business. The Company has recognized approximately $0.6 billion in incremental international tax costs due to the reorganization of certain international subsidiaries which was recorded in the fiscal second quarter. The Company also had more income in lower tax jurisdictions relative to higher tax jurisdictions versus the prior year, due primarily to the approximately $7 billion charge related to the talc settlement proposal in the United States at an effective tax rate of 23.5% in the fiscal six months of 2023 (for further information see Note 11 to the Consolidated Financial Statements). Additionally, the prior year’s effective tax rate benefited from the impact of certain provisions of the Tax Cuts and Jobs Act of 2017 that became effective in 2022, which were partially offset by one-time tax costs in the fiscal six months of 2022. On July 21, 2023, the IRS issued Notice 2023-55 which provides guidance to taxpayers in determining whether a foreign tax is eligible for a U.S. foreign tax credit for tax years 2022 and 2023, specifically delaying until 2024 the application of unfavorable foreign tax credit regulations that were originally issued late last year. As a result of this new guidance, the Company has concluded that it is applicable to certain of its tax positions and therefore will record a tax benefit of approximately $0.5 billion in the fiscal third quarter of 2023. The Company also received tax benefits from stock-based compensation that were either exercised or vested during each of the fiscal six months ended. As of July 2, 2023, the Company had approximately $3.0 billion of liabilities from unrecognized tax benefits. The Company conducts business and files tax returns in numerous countries and currently has tax audits in progress in a number of jurisdictions. With respect to the United States, the IRS has completed its audit for the tax years through 2012 and is currently auditing tax years 2013 through 2016. The Company currently expects completion of this audit and settlement of the related tax liabilities in the next 12 months. As a result, the Company has classified approximately $0.5 billion of unrecognized tax benefits and associated interest as a current liability on the “Accrued taxes on Income” line of the Consolidated Balance Sheet as of the end of the second fiscal quarter of 2023 in anticipation of final settlement. The Company made a payment in the fiscal second quarter for approximately $1.4 billion to the U.S. Treasury for the previously reserved estimated liability of the 2013-2016 IRS Audit. The completion of this tax audit may result in additional adjustments to the Company’s unrecognized tax benefit liability. In other major jurisdictions where the Company conducts business, the years that remain open to tax audit go back to the year 2008. The Company believes it is possible that some tax audits may be completed over the next twelve months by taxing authorities in some jurisdictions. However, the Company is not able to provide a reasonably reliable estimate of the timing of any other future tax payments relating to uncertain tax positions.

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