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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The income tax provision consisted of the following for the years ended December 31, 2023, 2022 and 2021:
In millions | 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |
Federal | $ | 2,819 |  |  | $ | 2,803 |  |  | $ | 2,285 |
State | 662 |  |  | 735 |  |  | 665 |
| 3,481 |  |  | 3,538 |  |  | 2,950 |
Deferred: |  |  |  |  |
Federal | (537) |  |  | (1,526) |  |  | (282) |
State | (139) |  |  | (503) |  |  | (120) |
| (676) |  |  | (2,029) |  |  | (402) |
Total | $ | 2,805 |  |  | $ | 1,509 |  |  | $ | 2,548 |
The following table is a reconciliation of the statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2023, 2022 and 2021:
| 2023 |  | 2022 |  | 2021
Statutory income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of federal tax benefit | 3.7 |  |  | 3.2 |  |  | 4.1 |
Legal charges | — |  |  | 3.4 |  |  | — |
Basis difference upon disposition of subsidiary | — |  |  | 1.6 |  |  | — |
Prior year refunds and unrecognized tax benefits | — |  |  | (2.6) |  |  | (1.2) |
Other | 0.4 |  |  | (0.7) |  |  | 0.3 |
Effective income tax rate | 25.1 | % |  | 25.9 | % |  | 24.2 | %
The following table is a summary of the components of the Company’s deferred income tax assets and liabilities as of December 31, 2023 and 2022:
In millions | 2023 |  | 2022
Deferred income tax assets: |  |  |
Lease and rents | $ | 5,059 |  |  | $ | 5,242 |
Legal charges | 1,205 |  |  | 1,260 |
Inventory | 94 |  |  | 103 |
Employee benefits | 168 |  |  | 153 |
Bad debts and other allowances | 606 |  |  | 480 |
Net operating loss and capital loss carryforwards | 409 |  |  | 266 |
Deferred income | 62 |  |  | 66 |
Insurance reserves | 356 |  |  | 319 |
Investments | 56 |  |  | 293 |
Other | 372 |  |  | 335 |
Valuation allowance | (385) |  |  | (532) |
Total deferred income tax assets (1) | 8,002 |  |  | 7,985 |
Deferred income tax liabilities: |  |  |
Retirement benefits | 112 |  |  | 92 |
Lease and rents | 4,469 |  |  | 4,639 |
Depreciation and amortization | 7,732 |  |  | 7,139 |
Total deferred income tax liabilities | 12,313 |  |  | 11,870 |
Net deferred income tax liabilities | $ | 4,311 |  |  | $ | 3,885 |
_____________________________________________ (1)Includes deferred income tax assets of $131 million which were accounted for as assets held for sale and were included in assets held for sale on the consolidated balance sheet at December 31, 2022. See Note 2 ‘‘Acquisitions, Divestitures and Asset Sales’’ for additional information. When evaluating the realizability of deferred tax assets, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and the Company’s recent operating results. The Company established a valuation allowance of $385 million and $532 million as of December 31, 2023 and 2022, respectively, because it does not consider it more likely than not that certain deferred tax assets will be recovered. As of December 31, 2023, the Company had net operating and capital loss carryovers of $409 million, a portion of which has an indefinite carryforward period, while the remainder expires between 2024 and 2043. A reconciliation of the beginning and ending balance of unrecognized tax benefits in 2023, 2022 and 2021 is as follows:
In millions | 2023 |  | 2022 |  | 2021
Beginning balance | $ | 446 |  |  | $ | 782 |  |  | $ | 768 |
Additions based on tax positions related to the current year | 2 |  |  | 5 |  |  | 3 |
Additions based on tax positions related to prior years | 46 |  |  | 42 |  |  | 52 |
Reductions for tax positions of prior years | (24) |  |  | (166) |  |  | (33) |
Expiration of statutes of limitation | (34) |  |  | (4) |  |  | (1) |
Settlements | — |  |  | (213) |  |  | (7) |
Ending balance | $ | 436 |  |  | $ | 446 |  |  | $ | 782 |
CVS Health Corporation and most of its subsidiaries are subject to U.S. federal income tax as well as income tax of numerous state and local jurisdictions. The IRS has completed its examinations of the Company’s consolidated U.S. federal income tax returns for tax years through 2016, 2018 and 2019. The IRS has substantially completed its examination of the Company’s consolidated U.S. federal income tax return for tax year 2017. CVS Health Corporation and its subsidiaries are also currently under income tax examinations by a number of state and local tax authorities. As of December 31, 2023, no examination has resulted in any proposed adjustments that would result in a material change to the Company’s operating results, financial condition or liquidity. Substantially all material state and local income tax matters have been concluded for fiscal years through 2015. Certain state exams are likely to be concluded and certain state statutes of limitations will lapse in 2024, but the change in the balance of the Company’s uncertain tax positions is projected to be immaterial. In addition, it is reasonably possible that the Company’s unrecognized tax benefits could change within the next twelve months due to the anticipated conclusion of various examinations with the IRS for certain previous years. An estimate of the range of the possible change cannot be made at this time. The Company records interest expense related to unrecognized tax benefits and penalties in the income tax provision. The Company accrued interest expense of approximately $31 million, $29 million and $40 million in 2023, 2022 and 2021, respectively. The Company had approximately $134 million and $112 million accrued for interest and penalties as of December 31, 2023 and 2022, respectively. As of December 31, 2023, the total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective income tax rate is approximately $330 million, after considering the federal benefit of state income taxes.

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