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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
Income before provision for income taxes for the years ended December 31, 2024, 2023, and 2022, consisted of the following (in millions):
Years Ended December 31,
202420232022
U.S.$1,754.8 $1,251.1 $956.7 
Foreign919.0 707.8 650.1 
Total income before provision for income taxes$2,673.8 $1,958.9 $1,606.8 
The provision for income taxes for the years ended December 31, 2024, 2023, and 2022, consisted of the following (in millions):
Years Ended December 31,
202420232022
Current
Federal$321.9 $315.2 $350.4 
State47.9 32.8 49.2 
Foreign101.8 74.4 48.1 
Total current income tax expense
471.6 422.4 447.7 
Deferred
Federal(157.7)(122.4)(188.8)
State(23.9)(25.1)(16.4)
Foreign46.3 (133.3)19.9 
Total deferred income tax expense (benefit)
(135.3)(280.8)(185.3)
Total income tax expense$336.3 $141.6 $262.4 
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.
In August 2022, the Inflation Reduction Act of 2022 (the “IRA”) was enacted in the United States. The IRA introduced 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, 2024, and 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, 2024, 2023, and 2022, as a result of the following (in millions):
Years Ended December 31,
202420232022
Federal tax at statutory rate$561.5 $411.4 $337.4 
Increase (reduction) in tax resulting from:
State taxes, net of federal benefits41.7 35.0 34.9 
Foreign rate differential(59.3)(64.4)(64.2)
U.S. tax on foreign earnings73.1 70.9 75.4 
Research and development credit
(75.1)(48.6)(41.7)
Excess tax benefits related to share-based compensation (223.3)(107.9)(98.7)
Share-based compensation not benefited32.4 29.5 24.1 
Unrecognized tax benefits related to share-based compensation
5.3 4.4 3.3 
Reversal of unrecognized tax benefits(29.5)(20.9)(11.1)
Swiss tax benefits, net of valuation allowance
— (92.3)— 
Deferred tax re-measurement— (67.1)— 
Other9.5 (8.4)3.0 
Total income tax expense$336.3 $141.6 $262.4 
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,
20242023
Deferred tax assets:
Intangible assets$377.5 $420.9 
Capitalized research and development expenditures
468.6 306.4 
Research and development credits240.3 193.2 
Share-based compensation expense155.3 135.1 
Swiss tax credits
107.4 122.4 
Expenses deducted in later years for tax purposes67.4 55.9 
Lease liabilities23.0 16.5 
Net operating losses4.5 2.8 
Net unrealized losses on available-for-sale securities and other
11.3 9.2 
Gross deferred tax assets1,455.3 1,262.4 
Valuation allowance(314.8)(269.8)
Deferred tax assets1,140.5 992.6 
Deferred tax liabilities:
Property, plant, and equipment(65.7)(60.3)
Right-of-use assets(18.9)(11.8)
Intangible assets(8.5)(9.8)
Other(2.3)(0.2)
Deferred tax liabilities(95.4)(82.1)
Net deferred tax assets$1,045.1 $910.5 
As of December 31, 2024, the Company had $103.1 million of federal, state, and foreign net operating loss carryforwards, certain of which will expire starting in 2026 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, 2024, the Company had $107.4 million of Swiss tax credit carryforwards, which will expire in 2028. As of December 31, 2024, the Company had $329.2 million of California research and development credit carryforwards, which do not expire, and $3.7 million of other state research and development credit carryforwards, which begin to expire in 2030.
As of December 31, 2024, the Company had a valuation allowance of $314.8 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, 2023, the Company had a valuation allowance of $269.8 million, primarily related to California deferred tax assets and Swiss 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 2024 is primarily related to 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 and Dutch subsidiaries 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, 2024, 2023, and 2022, are as follows (in millions):
Years Ended December 31,
202420232022
Beginning balance$260.4 $252.6 $222.5 
Increases related to tax positions taken during the current year67.8 48.5 49.5 
Increases related to tax positions taken during a prior year13.9 — 4.9 
Decreases related to tax positions taken during a prior year— (18.9)(16.5)
Decreases related to settlements with tax authorities(3.7)(1.0)(1.2)
Decreases related to expiration of statute of limitations(28.4)(20.8)(6.6)
Ending balance$310.0 $260.4 $252.6 
As of December 31, 2024, 2023, and 2022, gross interest related to unrecognized tax benefits accrued was $37.0 million, $31.2 million, and $21.0 million, respectively. Total gross unrecognized tax benefits as of December 31, 2024, were $310.0 million, of which $217.4 million, if recognized, would have an impact on the Company’s effective tax rate.
The Company files federal, state, and foreign income tax returns in many jurisdictions in the U.S. and OUS. Years before 2017 are considered closed for 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. It is reasonably possible that our existing unrecognized tax benefits may decrease by up to $65 million as a result of expirations of the statute of limitations and audit conclusions in various jurisdictions within 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.