XML 78 R23.htm IDEA: XBRL DOCUMENT
v3.6.0.2

Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2016
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Income Tax Expense Income before income tax provision and the income tax expense consist of the following:
| For the Years Ended December 31,
(In millions) | 2016 |  | 2015 |  | 2014
Income before income taxes (benefit): |  |  |  |  |
Domestic | $ | 3,655.4 |  |  | $ | 3,386.7 |  |  | $ | 2,557.4 |
Foreign | 1,277.6 |  |  | 1,380.6 |  |  | 1,389.2 |
Total | $ | 4,933.0 |  |  | $ | 4,767.3 |  |  | $ | 3,946.6 |
Income tax expense (benefit): |  |  |  |  |
Current: |  |  |  |  |
Federal | $ | 1,304.3 |  |  | $ | 1,214.1 |  |  | $ | 1,159.5 |
State | 55.1 |  |  | 38.6 |  |  | 65.2 |
Foreign | 52.9 |  |  | 54.5 |  |  | 73.4 |
Total | 1,412.3 |  |  | 1,307.2 |  |  | 1,298.1 |
Deferred: |  |  |  |  |
Federal | $ | (125.6 | ) |  | $ | (129.6 | ) |  | $ | (280.9 | )
State | (3.8 | ) |  | (1.9 | ) |  | (21.0 | )
Foreign | (45.6 | ) |  | (14.1 | ) |  | (6.3 | )
Total | (175.0 | ) |  | (145.6 | ) |  | (308.2 | )
Total income tax expense | $ | 1,237.3 |  |  | $ | 1,161.6 |  |  | $ | 989.9 |
Deferred Tax Assets and Liabilities Significant components of our deferred tax assets and liabilities are summarized as follows:
| As of December 31,
(In millions) | 2016 |  | 2015
Deferred tax assets: |  |  |
Tax credits | $ | 201.1 |  |  | $ | 189.3 |
Inventory, other reserves and accruals | 250.6 |  |  | 243.9 |
Intangibles, net | 459.8 |  |  | 328.3 |
Net operating loss | 65.9 |  |  | 24.7 |
Share-based compensation | 61.5 |  |  | 63.8 |
Other | 49.0 |  |  | 35.8 |
Valuation allowance | (16.1 | ) |  | (14.1 | )
Total deferred tax assets | $ | 1,071.8 |  |  | $ | 871.7 |
Deferred tax liabilities: |  |  |
Purchased intangible assets | $ | (376.6 | ) |  | $ | (440.1 | )
Depreciation, amortization and other | (113.5 | ) |  | (102.7 | )
Total deferred tax liabilities | $ | (490.1 | ) |  | $ | (542.8 | )
In addition to deferred tax assets and liabilities, we have recorded prepaid tax and deferred charges related to intercompany transactions. As of December 31, 2016 and 2015, the total deferred charges and prepaid taxes were $989.8 million and $697.9 million, respectively. Tax Rate A reconciliation between the U.S. federal statutory tax rate and our effective tax rate is summarized as follows:
| For the Years Ended December 31,
| 2016 |  | 2015 |  | 2014
Statutory rate | 35.0 | % |  | 35.0 | % |  | 35.0 | %
State taxes | 0.9 |  |  | 0.5 |  |  | 1.2 |
Taxes on foreign earnings | (9.6 | ) |  | (10.0 | ) |  | (9.5 | )
Credits and net operating loss utilization | (1.4 | ) |  | (1.3 | ) |  | (1.1 | )
Purchased intangible assets | 1.2 |  |  | 1.0 |  |  | 1.2 |
Manufacturing deduction | (1.9 | ) |  | (1.8 | ) |  | (1.8 | )
Other permanent items | 0.5 |  |  | 0.7 |  |  | 0.5 |
Other | 0.4 |  |  | 0.3 |  |  | (0.4 | )
Effective tax rate | 25.1 | % |  | 24.4 | % |  | 25.1 | %
Our effective tax rate for 2016 compared to 2015 increased primarily due to a net state tax benefit in 2015 resulting from the remeasurement of one of our uncertain tax positions, described below, and a higher relative percentage of our earnings being attributed to the U.S., a higher tax jurisdiction. Our effective tax rate for 2015 compared to 2014 benefited from lower taxes on foreign earnings and reflects a $27.0 million benefit from the 2015 remeasurement of one of our uncertain tax positions. As of December 31, 2016, we had net operating losses and general business credit carry forwards for federal income tax purposes of approximately $22.5 million and $140.0 million, respectively, which begin to expire in 2020. Additionally, for state income tax purposes, we had net operating loss carry forwards of approximately $86.4 million, which begin to expire in 2017. For state income tax purposes, we also had research and investment credit carry forwards of approximately $126.6 million, which begin to expire in 2017. For foreign income tax purposes, we had $489.4 million of net operating loss carryforwards, which begin to expire in 2021. In assessing the realizability of our deferred tax assets, we have considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In making this determination, under the applicable financial reporting standards, we are allowed to consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Our estimates of future taxable income take into consideration, among other items, our estimates of future income tax deductions related to the exercise of stock options. Based upon the level of historical taxable income and income tax liability and projections for future taxable income over the periods in which the deferred tax assets are utilizable, we believe it is more likely than not that we will realize the net benefits of the deferred tax assets of our wholly owned subsidiaries. In the event that actual results differ from our estimates or we adjust our estimates in future periods, we may need to establish a valuation allowance, which could materially impact our financial position and results of operations. As of December 31, 2016, undistributed foreign earnings of non-U.S. subsidiaries included in consolidated retained earnings and other basis differences aggregated approximately $7.6 billion. We intend to reinvest these earnings indefinitely in operations outside the U.S. The residual U.S. tax liability, if cumulative amounts were repatriated, would be between $1.8 billion to $2.3 billion as of December 31, 2016. Accounting for Uncertainty in Income Taxes A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows:
(In millions) | 2016 |  | 2015 |  | 2014
Balance at January 1, | $ | 67.9 |  |  | $ | 131.5 |  |  | $ | 110.1 |
Additions based on tax positions related to the current period | 7.2 |  |  | 10.5 |  |  | 20.8 |
Additions for tax positions of prior periods | 36.3 |  |  | 19.5 |  |  | 86.1 |
Reductions for tax positions of prior periods | (13.3 | ) |  | (49.9 | ) |  | (23.4 | )
Statute expirations | (1.4 | ) |  | (1.2 | ) |  | (1.6 | )
Settlements | (64.3 | ) |  | (42.5 | ) |  | (60.5 | )
Balance at December 31, | $ | 32.4 |  |  | $ | 67.9 |  |  | $ | 131.5 |
We and our subsidiaries are routinely examined by various taxing authorities. We file income tax returns in the U.S. federal jurisdiction, various U.S. states, and foreign jurisdictions. With few exceptions, including the proposed disallowance we discuss below, we are no longer subject to U.S. federal tax examination for years before 2013 or state, local, or non-U.S. income tax examinations for years before 2005. Included in the balance of unrecognized tax benefits as of December 31, 2016, 2015 and 2014 are $26.9 million, $15.7 million and $53.6 million (net of the federal benefit on state issues), respectively, of unrecognized tax benefits that, if recognized, would affect the effective income tax rate in future periods. We recognize potential interest and penalties accrued related to unrecognized tax benefits in income tax expense. In 2016 we recognized a net interest expense of $9.1 million. In 2015 we recognized net interest expense of $3.1 million. In 2014 we recognized a net interest expense of approximately $4.1 million. We have accrued approximately $25.2 million and $12.5 million for the payment of interest as of December 31, 2016 and 2015, respectively. In March 2015 we received a final assessment from the Danish Tax Authority (SKAT) for fiscal 2009 regarding withholding taxes and the treatment of certain intercompany transactions involving a Danish affiliate and another of our affiliates. In April 2016 we received final assessments from the SKAT for 2011 and 2013 regarding withholding taxes for similar intercompany transactions. The total amount assessed for 2009, 2011 and 2013 is estimated to be $58.3 million, including interest. For the assessments related to 2011 and 2013 we have made payments to SKAT totaling $12.2 million. We continue to dispute the assessments for all of these periods and believe that the positions taken in our historical filings are valid. Federal Uncertain Tax Positions During the year ended December 31, 2015, the net effect of adjustments to one of our uncertain tax positions was a net benefit of approximately $27.0 million, primarily related to the state impact of a federal uncertain tax item. It is reasonably possible that we will adjust the value of our uncertain tax positions related to our revenues from anti-CD20 therapeutic programs and certain transfer pricing issues as we receive additional information from various taxing authorities, including reaching settlements with the authorities. In addition, the IRS and other national tax authorities routinely examine our intercompany transfer pricing with respect to intellectual property related transactions and it is possible that they may disagree with one or more positions we have taken with respect to such valuations.

X
- References No definition available. + Details
Name: | us-gaap_IncomeTaxDisclosureAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32559-109319 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32718-109319 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=65882285&loc=d3e32537-109319 + Details
Name: | us-gaap_IncomeTaxDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration