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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES Income before provision for income taxes for the years ended December 31, 2023, 2022, and 2021, consisted of the following (in millions):
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
U.S. | $ | 1,251.1 |  |  | $ | 956.7 |  |  | $ | 1,298.7 |
Foreign | 707.8 |  |  | 650.1 |  |  | 591.6 |
Total income before provision for income taxes | $ | 1,958.9 |  |  | $ | 1,606.8 |  |  | $ | 1,890.3 |
The provision for income taxes for the years ended December 31, 2023, 2022, and 2021, consisted of the following (in millions):
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Current |  |  |  |  |
Federal | $ | 315.2 |  |  | $ | 350.4 |  |  | $ | 158.8 |
State | 32.8 |  |  | 49.2 |  |  | 17.3 |
Foreign | 74.4 |  |  | 48.1 |  |  | 50.1 |
Total current income tax expense | 422.4 |  |  | 447.7 |  |  | 226.2 |
Deferred |  |  |  |  |
Federal | (122.4) |  |  | (188.8) |  |  | (21.4) |
State | (25.1) |  |  | (16.4) |  |  | 0.5 |
Foreign | (133.3) |  |  | 19.9 |  |  | (43.1) |
Total deferred income tax expense | (280.8) |  |  | (185.3) |  |  | (64.0) |
Total income tax expense | $ | 141.6 |  |  | $ | 262.4 |  |  | $ | 162.2 |
The provision for income taxes for the years ended December 31, 2023, and 2022, reflected the impact of a change in U.S. tax law effective January 1, 2022, which requires the capitalization and amortization of research and development expenditures incurred after December 31, 2021. The Company’s provision for income taxes for 2023 reflected Swiss tax benefits of $92.3 million, net of a $67.3 million valuation allowance, related to certain tax assets recorded by our Swiss entity. In addition, a one-time net benefit of $67.1 million was recorded from the re-measurement of the Company’s Swiss deferred tax assets resulting from the Swiss cantonal tax rate increase enacted in December 2023 for years after 2024 as well as a Swiss cantonal tax rate increase from the discontinuation of the Company’s 2017 Swiss tax ruling, which was deemed effective as of January 1, 2023. The Company’s provision for income taxes for 2021 also included a one-time benefit of $66.4 million from the re-measurement of its Swiss deferred tax assets resulting from the extension of the economic useful life of certain intangible assets. In August 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted in the United States. The IRA introduces a 15% alternative minimum tax based on the financial statement income of certain large corporations, effective for tax years beginning after December 31, 2022. The Company considered the applicable tax law changes, and there is no impact to the Company’s tax provision for the twelve months ended December 31, 2023. Income tax expense differs from amounts computed by applying the statutory federal income rate of 21% for the years ended December 31, 2023, 2022, and 2021, as a result of the following (in millions):
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Federal tax at statutory rate | $ | 411.4 |  |  | $ | 337.4 |  |  | $ | 397.0 |
Increase (reduction) in tax resulting from: |  |  |  |  |
State taxes, net of federal benefits | 35.0 |  |  | 34.9 |  |  | 33.1 |
Foreign rate differential | (64.4) |  |  | (64.2) |  |  | (54.3) |
U.S. tax on foreign earnings | 70.9 |  |  | 75.4 |  |  | 40.1 |
Research and development credit | (48.6) |  |  | (41.7) |  |  | (30.7) |
Excess tax benefits related to share-based compensation | (107.9) |  |  | (98.7) |  |  | (185.8) |
Share-based compensation not benefited | 29.5 |  |  | 24.1 |  |  | 17.8 |
Unrecognized tax benefits related to share-based compensation | 4.4 |  |  | 3.3 |  |  | 13.6 |
Reversal of unrecognized tax benefits | (20.9) |  |  | (11.1) |  |  | (3.0) |
Swiss tax benefits, net of valuation allowance | (92.3) |  |  | — |  |  | — |
Deferred tax re-measurement | (67.1) |  |  | — |  |  | (66.4) |
Other | (8.4) |  |  | 3.0 |  |  | 0.8 |
Total income tax expense | $ | 141.6 |  |  | $ | 262.4 |  |  | $ | 162.2 |
Deferred income taxes reflect tax carryforwards and the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in millions):
| December 31,
| 2023 |  | 2022
Deferred tax assets: |  |  |
Intangible assets | $ | 420.9 |  |  | $ | 342.8 |
Capitalized research and development expenditures | 306.4 |  |  | 172.5 |
Research and development credits | 193.2 |  |  | 156.7 |
Share-based compensation expense | 135.1 |  |  | 121.3 |
Swiss tax credits | 122.4 |  |  | — |
Expenses deducted in later years for tax purposes | 55.9 |  |  | 57.5 |
Lease liabilities | 16.5 |  |  | 16.6 |
Net operating losses | 2.8 |  |  | 6.4 |
Net unrealized losses on available-for-sale securities and other | 9.2 |  |  | 45.5 |
Gross deferred tax assets | 1,262.4 |  |  | 919.3 |
Valuation allowance | (269.8) |  |  | (168.6) |
Deferred tax assets | 992.6 |  |  | 750.7 |
Deferred tax liabilities: |  |  |
Property, plant, and equipment | (60.3) |  |  | (64.1) |
Right-of-use assets | (11.8) |  |  | (11.8) |
Intangible assets | (9.8) |  |  | (9.3) |
Other | (0.2) |  |  | (1.0) |
Deferred tax liabilities | (82.1) |  |  | (86.2) |
Net deferred tax assets | $ | 910.5 |  |  | $ | 664.5 |
As of December 31, 2023, the Company had $38.2 million of federal, state, and foreign net operating loss carryforwards, certain of which will expire starting in 2025 if not utilized. Utilization of these net operating loss carryforwards may be subject to certain limitations. The Company does not expect the limitations to result in any permanent loss of these tax benefits. As of December 31, 2023, the Company had $122.4 million of Swiss tax credit carryforwards, which will expire in 2028. As of December 31, 2023, the Company had $267.7 million of California research and development credit carryforwards, which do not expire, and $5.2 million of other state research and development credit carryforwards, which begin to expire in 2029. As of December 31, 2023, the Company had a valuation allowance of $269.8 million, primarily related to California deferred tax assets and certain Swiss deferred tax assets, for which the Company does not believe a tax benefit is more likely than not to be realized. As of December 31, 2022, the Company had a valuation allowance of $168.6 million, primarily related to California deferred tax assets, for which the Company does not believe a tax benefit is more likely than not to be realized. The increase in the valuation allowance during 2023 is primarily related to certain Swiss tax assets and California research and development credits. These valuation allowances would result in a reduction to the income tax provision in the consolidated statements of income if they are ultimately not necessary. The Company intends to repatriate earnings from its Swiss subsidiary and joint venture in Hong Kong, as needed, and the U.S. and foreign tax implications of such repatriations are not expected to be significant. The Company will continue to indefinitely reinvest earnings from the rest of its foreign subsidiaries and does not expect the tax implications of repatriating these earnings to be significant. A reconciliation of the beginning and ending amounts of gross unrecognized income tax benefits for the years ended December 31, 2023, 2022, and 2021, are as follows (in millions):
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Beginning balance | $ | 252.6 |  |  | $ | 222.5 |  |  | $ | 176.3 |
Increases related to tax positions taken during the current year | 48.5 |  |  | 49.5 |  |  | 40.6 |
Increases related to tax positions taken during a prior year | — |  |  | 4.9 |  |  | 11.2 |
Decreases related to tax positions taken during a prior year | (18.9) |  |  | (16.5) |  |  | (1.3) |
Decreases related to settlements with tax authorities | (1.0) |  |  | (1.2) |  |  | (0.2) |
Decreases related to expiration of statute of limitations | (20.8) |  |  | (6.6) |  |  | (4.1) |
Ending balance | $ | 260.4 |  |  | $ | 252.6 |  |  | $ | 222.5 |
As of December 31, 2023, 2022, and 2021, gross interest related to unrecognized tax benefits accrued was $31.2 million, $21.0 million, and $14.9 million, respectively. The Company’s net unrecognized tax benefits and related interest are presented in other long-term liabilities and long-term deferred tax assets on the Consolidated Balance Sheets. Total gross unrecognized tax benefits as of December 31, 2023, were $260.4 million, of which $181.8 million, if recognized, would have an impact on the Company’s effective tax rate. A charge of $13.6 million was recorded to income tax expense in 2021, after additional IRS guidance was issued in July 2021 related to a Ninth Circuit Court of Appeals opinion involving an independent third party related to charging foreign subsidiaries for share-based compensation. The Company will continue to monitor future IRS actions or other developments regarding this matter and will assess the impact of any such developments on its income tax provision in the quarter that they occur. The Company files federal, state, and foreign income tax returns in many U.S. and OUS jurisdictions. Years before 2016 are closed for the significant jurisdictions. Certain of the Company’s unrecognized tax benefits could change due to activities of various tax authorities, including evolving interpretations of existing tax laws in the jurisdictions in which the Company operates, potential assessment of additional tax, possible settlement of audits, or through normal expiration of various statutes of limitations, which could affect the Company’s effective tax rate in the period in which they change. Due to the uncertainty related to the timing and potential outcome of audits, the Company cannot estimate the range of reasonably possible changes in unrecognized tax benefits that may occur in the next 12 months. The Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities. The outcome of these audits cannot be predicted with certainty. The Company’s management regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of the Company’s provision for income taxes. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.

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