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INCOME TAXES | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The Company's income from continuing operations before provision for income taxes was generated from operations in the United States and outside of the United States as follows (in millions):
| Years Ended December 31,
| 2024 |  | 2023 |  | 2022
United States | $ | 265.7 |  |  | $ | 290.1 |  |  | $ | 586.0 |
Outside of the United States, including Puerto Rico | 1,282.4 |  |  | 1,082.3 |  |  | 933.5 |
| $ | 1,548.1 |  |  | $ | 1,372.4 |  |  | $ | 1,519.5 |
The provision for income taxes consists of the following (in millions):
| Years Ended December 31,
| 2024 |  | 2023 |  | 2022
Current |  |  |  |  |
United States: |  |  |  |  |
Federal | $ | 248.4 |  |  | $ | 291.7 |  |  | $ | 365.8 |
State and local | 40.7 |  |  | 50.1 |  |  | 54.3 |
Outside of the United States, including Puerto Rico | 25.8 |  |  | 53.0 |  |  | 37.1 |
Current income tax expense | $ | 314.9 |  |  | $ | 394.8 |  |  | $ | 457.2 |
Deferred |  |  |  |  |
United States: |  |  |  |  |
Federal | $ | (117.8) |  |  | $ | (165.7) |  |  | $ | (197.8) |
State and local | (31.0) |  |  | (54.2) |  |  | (58.9) |
Outside of the United States, including Puerto Rico | (14.0) |  |  | (22.5) |  |  | (5.0) |
Deferred income tax benefit | (162.8) |  |  | (242.4) |  |  | (261.7) |
Total income tax provision | $ | 152.1 |  |  | $ | 152.4 |  |  | $ | 195.5 |
The components of deferred tax assets and liabilities are as follows (in millions):
| December 31,
| 2024 |  | 2023
Deferred tax assets |  |  |
Capitalized research and development expenses (a) | $ | 533.8 |  |  | $ | 371.1 |
Compensation and benefits | 123.7 |  |  | 117.9 |
Benefits from uncertain tax positions | 89.6 |  |  | 63.4 |
Net tax credit carryforwards | 289.1 |  |  | 144.2 |
Net operating loss carryforwards | 132.1 |  |  | 73.0 |
Accrued liabilities | 145.2 |  |  | 131.7 |
Inventories | 14.9 |  |  | 15.1 |
Cash flow and net investment hedges | — |  |  | 1.3 |
State income taxes | 3.2 |  |  | 0.2 |
Investments | 1.2 |  |  | 0.6 |
Lease liability obligations | 6.5 |  |  | 5.8 |
Other | 2.8 |  |  | 0.7 |
Total deferred tax assets | 1,342.1 |  |  | 925.0 |
Deferred tax liabilities |  |  |
Property, plant, and equipment | (76.4) |  |  | (78.2) |
Cash flow and net investment hedges | (11.8) |  |  | — |
Deferred tax on foreign earnings | (3.6) |  |  | (3.6) |
Right-of-use assets | (4.3) |  |  | (4.7) |
Other intangible assets | (230.3) |  |  | (46.1) |
Other | (4.8) |  |  | (2.4) |
Total deferred tax liabilities | (331.2) |  |  | (135.0) |
Valuation allowance | (87.8) |  |  | (62.1) |
Net deferred tax assets | $ | 923.1 |  |  | $ | 727.9 |
______________________________________ (a) As required by Public Law 115-97, commonly referred to as the Tax Cuts and Jobs Act (the "2017 Act"), effective January 1, 2022, the Company's research and development expenditures were capitalized and amortized which resulted in substantially higher cash paid for taxes in 2023 and 2022 with an equal amount of deferred tax benefits. During 2024, net deferred tax assets increased $195.2 million, including items that were recorded to stockholders' equity and which did not impact the Company's income tax provision. The valuation allowance of $87.8 million as of December 31, 2024 reduces certain deferred tax assets to amounts that are more likely than not to be realized. This allowance primarily relates to the net operating loss carryforwards of certain non-United States subsidiaries and certain United States foreign tax credit carryforwards. Net operating loss and capital loss carryforwards and the related carryforward periods at December 31, 2024 are summarized as follows (in millions):
| Carryforward Amount |  | Tax Benefit Amount |  | Valuation Allowance |  | Net Tax Benefit |  | Carryforward Period Ends
United States federal net operating losses | $ | 9.4 |  |  | $ | 2.0 |  |  | $ | — |  |  | $ | 2.0 |  |  | 2026-2037
United States federal net operating losses | 132.9 |  |  | 27.9 |  |  | — |  |  | 27.9 |  |  | Indefinite
United States state net operating losses | 180.7 |  |  | 12.6 |  |  | (3.7) |  |  | 8.9 |  |  | 2029-2044
United States state net operating losses | 0.4 |  |  | — |  |  | — |  |  | — |  |  | Indefinite
Non-United States net operating losses | 1.3 |  |  | 0.3 |  |  | — |  |  | 0.3 |  |  | 2028
Non-United States net operating losses | 517.8 |  |  | 89.3 |  |  | (63.2) |  |  | 26.1 |  |  | Indefinite
Total | $ | 842.5 |  |  | $ | 132.1 |  |  | $ | (66.9) |  |  | $ | 65.2 |  |  |
The gross tax credit carryforwards and the related carryforward periods at December 31, 2024 are summarized as follows (in millions):
| Carryforward Amount |  | Valuation Allowance |  | Net Tax Benefit |  | Carryforward Period Ends
California research expenditure tax credits | $ | 232.7 |  |  | $ | — |  |  | $ | 232.7 |  |  | Indefinite
Federal research expenditure tax credits | 1.9 |  |  | — |  |  | 1.9 |  |  | 2025-2034
United States foreign tax credits | 121.6 |  |  | (17.8) |  |  | 103.8 |  |  | 2025-2034
Non-United States tax credits | 6.0 |  |  | — |  |  | 6.0 |  |  | 2025-2028
Total | $ | 362.2 |  |  | $ | (17.8) |  |  | $ | 344.4 |  |  |
The Company has $232.7 million of gross California research expenditure tax credits it expects to use in future periods. The credits may be carried forward indefinitely. Based upon anticipated future taxable income, the Company expects that it is more likely than not that all California research expenditure tax credits will be utilized, although the utilization of the full benefit is expected to be realized over an extended period of time. Accordingly, no valuation allowance has been provided. The Company has $121.6 million of United States foreign tax credits of which $103.8 million are expected to be utilized before the end of the 10-year carryforward period. As a result, the Company recorded a valuation allowance of $17.8 million on the United States foreign tax credit carryforwards which have been determined to be unrealizable. On December 22, 2017, the 2017 Act was signed into law. The 2017 Act (a) reduced the United States federal corporate tax rate from 35 percent to 21 percent for tax years beginning after December 31, 2017, (b) required companies to pay a one-time mandatory deemed repatriation tax on the cumulative earnings of certain foreign subsidiaries that were previously tax deferred, and (c) created new taxes on certain foreign earnings in future years. The Company elected to pay the repatriation tax in installments over eight years. The final installment of $78.5 million is due in the second quarter of 2025. The Company asserts that $555.2 million of its foreign earnings continue to be indefinitely reinvested and it intends to repatriate $1.0 billion of its foreign earnings as of December 31, 2024. The estimated net tax liability on the indefinitely reinvested earnings if repatriated is $2.5 million. The Company has received tax incentives in certain non-United States tax jurisdictions, the primary benefit for which will expire in 2029. The tax reductions as compared to the local statutory rates were $271.9 million ($0.45 per diluted share), $333.2 million ($0.55 per diluted share), and $247.4 million ($0.40 per diluted share) for the years ended December 31, 2024, 2023, and 2022, respectively. A reconciliation of the United States federal statutory income tax rate to the Company's effective income tax rate is as follows (in millions):
| Years Ended December 31,
| 2024 |  | 2023 |  | 2022
Income tax expense at United States federal statutory rate | $ | 325.1 |  |  | $ | 288.1 |  |  | $ | 323.7 |
Foreign income taxed at different rates | (190.6) |  |  | (133.8) |  |  | (135.4) |
State and local taxes, net of federal tax benefit | 16.0 |  |  | 15.9 |  |  | 11.3 |
Tax credits, federal and state | (58.9) |  |  | (55.9) |  |  | (43.4) |
Build of reserve for prior years' uncertain tax positions | (31.3) |  |  | (2.9) |  |  | 11.6 |
Tax on global intangible low-taxed income | 90.2 |  |  | 82.3 |  |  | 68.4 |
Foreign-derived intangible income deduction | (16.5) |  |  | (20.9) |  |  | (14.3) |
Contingent consideration liabilities | — |  |  | (5.5) |  |  | (7.5) |
United States federal deductible employee share-based compensation | (8.3) |  |  | (11.9) |  |  | (28.5) |
Nondeductible employee share-based compensation | 6.2 |  |  | 5.7 |  |  | 4.9 |
Other | 20.2 |  |  | (8.7) |  |  | 4.7 |
Income tax provision | $ | 152.1 |  |  | $ | 152.4 |  |  | $ | 195.5 |
The Company's effective tax rate for 2024 decreased in comparison to 2023 primarily due to an increase in tax benefits from foreign earnings taxed at lower rates net of an increase in tax on global intangible low-taxed income and favorable global income tax audit settlements. The Company's effective tax rate for 2023 decreased in comparison to 2022 primarily due to the tax benefit from the Intellectual Property Agreement with Medtronic (see Note 3), partially offset by a reduced tax benefit from employee share-based compensation Uncertain Tax Positions As of December 31, 2024 and 2023, the gross uncertain tax positions were $678.8 million and $583.9 million, respectively. The Company estimates that these liabilities would be reduced by $319.9 million and $250.7 million, respectively, from offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, state income taxes, and timing adjustments. The net amounts of $358.9 million and $333.2 million, respectively, if not required, would favorably affect the Company's effective tax rate. A reconciliation of the beginning and ending amount of uncertain tax positions, excluding interest, penalties, and foreign exchange, is as follows (in millions):
| December 31,
| 2024 |  | 2023 |  | 2022
Uncertain gross tax positions, January 1 | $ | 583.9 |  |  | $ | 475.3 |  |  | $ | 358.4 |
Current year tax positions | 125.8 |  |  | 127.0 |  |  | 120.6 |
Increase in prior year tax positions | 3.2 |  |  | 0.8 |  |  | 3.8 |
Decrease in prior year tax positions | (34.1) |  |  | (16.2) |  |  | (0.6) |
Settlements | — |  |  | (3.0) |  |  | (0.4) |
Lapse of statutes of limitations | — |  |  | — |  |  | (6.5) |
Uncertain gross tax positions, December 31 | $ | 678.8 |  |  | $ | 583.9 |  |  | $ | 475.3 |
The table above summarizes the gross amounts of uncertain tax positions without regard to reductions in tax liabilities or additions to deferred tax assets and liabilities if such uncertain tax positions were settled. The Company recognizes interest and penalties, if any, related to uncertain tax positions in the provision for income taxes. As of December 31, 2024, the Company had accrued $55.4 million (net of $52.5 million tax benefit) of interest related to uncertain tax positions, and as of December 31, 2023, the Company had accrued $41.4 million (net of $29.9 million tax benefit) of interest related to uncertain tax positions. During 2024, 2023, and 2022, the Company recognized interest expense, net of tax benefit, of $14.0 million, $12.3 million, and $9.6 million, respectively, in Provision for Income Taxes on the consolidated statements of operations. In the normal course of business, the Internal Revenue Service ("IRS") and other taxing authorities are in different stages of examining various years of the Company's tax filings. During these audits the Company may receive proposed audit adjustments that could be material. Therefore, there is a possibility that an adverse outcome in these audits could have a material effect on the Company's results of operations and financial condition. The Company strives to resolve open matters with each tax authority at the examination level and could reach an agreement with a tax authority at any time. While the Company has accrued for matters it believes are more likely than not to require settlement, the final outcome with a tax authority may result in a tax liability that is materially different from that reflected in the consolidated financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal. The uncertain tax positions are reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations between tax authorities, identification of new issues, and issuance of new legislation, regulations, or case law. Management believes that adequate amounts of tax and related penalty and interest have been provided for any adjustments that may result from these uncertain tax positions. In the first quarter of 2022, the Company executed an Advance Pricing Agreement (“APA”) between Japan and Switzerland covering distribution transactions for tax years 2020 through 2024, and in 2023, executed an APA between Japan and the United States covering tax years 2020 through 2024. The Company also executed an APA in the fourth quarter of 2024 between Japan and Singapore covering tax years 2022 through 2026 with roll-back terms to cover the distribution of TAVR products beginning in 2020 and the distribution of Surgical products beginning in 2018. Also in the fourth quarter of 2024, the Company filed with the Japanese tax authorities an APA renewal application between Japan and the United States covering tax years 2025 through 2029. The Company intends to file the APA renewal application with the United States tax authorities in the first quarter of 2025. The audits of the Company’s United States federal income tax returns through 2014 have been closed. The IRS audit field work for the 2015 through 2017 tax years was completed during the second quarter of 2021, except for transfer pricing and related matters. The IRS is currently examining the 2018 through 2020 tax years. At December 31, 2024, all material state, local, and foreign income tax matters have been concluded for years through 2015. During 2021, the Company received a Notice of Proposed Adjustment (“NOPA”) from the IRS for the 2015 through 2017 tax years relating to transfer pricing involving Surgical/TAVR intercompany royalty transactions between the Company's United States and Switzerland subsidiaries. The NOPA proposed a substantial increase to the Company's United States taxable income, which could result in additional tax expense for the 2015 through 2017 period of approximately $240.0 million and reflects a departure from a transfer pricing method the Company had previously agreed upon with the IRS. The Company disagreed with the NOPA and pursued an administrative appeal with the IRS Independent Office of Appeals ("Appeals"). The Appeals process culminated in the third quarter of 2023 when the Company and Appeals concluded that a satisfactory resolution of the matter at the administrative level was not possible. During the fourth quarter of 2023, Appeals issued a notice of deficiency ("NOD") increasing the Company's 2015 through 2017 United States federal income tax in amounts resulting from the income adjustments previously reflected in the NOPA. The additional tax sought in excess of the Company's filing position is $269.3 million before consideration of interest and a repatriation tax offset. The Company plans to vigorously contest the additional tax claimed by the IRS through the judicial process. Final resolution of this matter is not likely within the next 12 months. The Company believes the amounts previously accrued related to this uncertain tax position are appropriate for a number of reasons, including the interpretation and application of relevant tax law and accounting standards to the Company's facts and, accordingly, has not accrued any additional amount based on the NOD and other proceedings to date.Nonetheless, the outcome of the judicial process cannot be predicted with certainty, and it is possible that the outcome of that process could have a material impact on the Company's consolidated financial statements. As noted below, similar material tax disputes may arise for the 2018 through 2024 tax years. The Company made deposits with the IRS of $75 million in November 2022 and $305.1 million in March 2024 to prevent the further accrual of interest on that portion of any additional tax and interest the Company may ultimately be found to owe while the Company prepares to contest through the judicial process the IRS's entitlement to any of the additional tax claimed by the IRS. The IRS converted those deposits to advance payments and, on December 20, 2024, the Company filed administrative claims for refunds of those payments with the IRS for the 2015 through 2017 tax years. The Company expects that the IRS will either deny or fail to act on those refund claims, thereby enabling the Company to sue for refunds in the appropriate judicial forum. Surgical/TAVR intercompany royalty transactions covering tax years 2018 through 2024 remain subject to IRS examination, and those transactions and related tax positions remain uncertain as of December 31, 2024. The Company has considered this information, as well as information regarding the NOD and other proceedings described above, in its evaluation of its uncertain tax positions. The impact of these unresolved transfer pricing matters, net of any correlative tax adjustments, may be significant to the Company’s consolidated financial statements. Based on the information currently available and numerous possible outcomes, the Company cannot reasonably estimate what, if any, changes in its existing uncertain tax positions may occur in the next 12 months and, therefore, has continued to record the uncertain tax positions as a long-term liability. During the first quarter of 2024, the Company received a notice of assessment from the Israel Tax Authority (the "ITA") wherein the ITA claimed that the Company owes approximately $110 million of tax excluding interest and penalties in connection with a claimed 2017 transfer of intellectual property. The Company maintains that it did not transfer intellectual property outside of Israel and intends to vigorously defend that position through administrative proceedings including with a formal appeal of the assessment that was filed during the third quarter of 2024. If necessary, the Company expects to defend that position through judicial proceedings. During the fourth quarter of 2024, the Company received a notice of assessment from the ITA claiming that the Company owes additional tax of approximately $16 million excluding interest and penalties for the 2018 through 2022 tax years based entirely on the collateral impacts of the 2017 assessment. The Company plans to file a formal appeal in the first quarter of 2025 and, if necessary, expects to defend its position through judicial proceedings. There can be no assurance that this matter will be resolved in the Company's favor and an adverse outcome could have a material effect on the Company's consolidated financial statements.

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