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INCOME TAXES | 9 Months Ended
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Sep. 30, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES
| Three Months Ended September 30, |  | Nine Months Ended September 30,
Dollars in millions | 2024 |  | 2023 |  | 2024 |  | 2023
Earnings/(Loss) before income taxes | $ | 1,676 |  |  | $ | 2,137 |  |  | $ | (8,554) |  |  | $ | 6,766 |
Income tax provision | 461 |  |  | 203 |  |  | 455 |  |  | 488 |
Effective tax rate | 27.5 | % |  | 9.5 | % |  | (5.3) | % |  | 7.2 | %
Provision for income taxes in interim periods is determined based on the estimated annual effective tax rates and the tax impact of discrete items that are reflected immediately. The effective tax rate for the three months ended September 30, 2024 was primarily impacted by changes in previously estimated annual effective tax rates resulting from jurisdictional earnings mix. The effective tax rate for the nine months ended September 30, 2024 was impacted by a $12.1 billion one-time, non-tax deductible charge for the acquisition of Karuna, as well as the release of income tax reserves of $644 million related to the resolution of Celgene's 2017-2019 IRS audit and jurisdictional earnings mix resulting from amortization of acquired intangible assets. The effective tax rate during the three months ended September 30, 2023 was primarily impacted by the Section 174 guidance regarding deductibility of certain non-U.S. research and development expenses. The revised guidance resulted in a reduction of previously estimated income taxes for 2022, which was reflected in the third quarter of 2023, as well as a reduction in the estimated annual effective rates for 2023. Previously estimated income taxes for 2022 were reduced by approximately $240 million upon finalization of the U.S. Federal tax return primarily due to the aforementioned revised Section 174 guidance that was issued in the third quarter of 2023. In addition to the above mentioned impact of the Section 174 guidance, the effective tax rate during the nine months ended September 30, 2023 was impacted by a $656 million deferred income tax benefit following the receipt of a non-U.S. tax ruling regarding the deductibility of a statutory impairment of subsidiary investment, jurisdictional earnings mix resulting from amortization of acquired intangible assets, equity investment losses, litigation and other settlements, as well as releases of income tax reserves of $89 million related to the resolution of Celgene's 2009-2011 IRS audit. Additional changes to the effective tax rate may occur in future periods due to various reasons, including changes to the estimated pretax earnings mix and tax reserves and revised interpretations or changes to the tax legislation code. During the nine months ended September 30, 2024 and 2023, income tax payments were $3.1 billion and $4.1 billion, including $799 million and $567 million, respectively, for the transition tax following the TCJA enactment. BMS is currently under examination by a number of tax authorities that proposed or are considering proposing material adjustments to tax positions for issues such as transfer pricing, certain tax credits and the deductibility of certain expenses. As previously disclosed, BMS received several notices of proposed adjustments from the IRS related to transfer pricing and other tax issues for the 2008 to 2012 tax years. BMS disagrees with the IRS's positions and continues to work cooperatively with the IRS to resolve these issues. In the fourth quarter of 2022, BMS entered the IRS administrative appeals process to resolve these matters. Timing of the final resolution of these complex matters is uncertain and could have a material impact on BMS's consolidated financial statements. It is reasonably possible that the amount of unrecognized tax benefits as of September 30, 2024 could decrease in the range of approximately $90 million to $130 million in the next twelve months as a result of the settlement of certain tax audits and other events. The expected change in unrecognized tax benefits may result in the payment of additional taxes, adjustment of certain deferred taxes and/or recognition of tax benefits. It is reasonably possible that new issues will be raised by tax authorities that may increase unrecognized tax benefits, however, an estimate of such increases cannot reasonably be made at this time. BMS believes that it has adequately provided for all open tax years by jurisdiction.

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