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Income Taxes | 6 Months Ended
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Jun. 30, 2024
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Our effective income tax rates from continuing operations for the three and six months ended June 30, 2024 were 5,518.2 percent and negative 12,196.0 percent respectively. Our effective income tax rates from continuing operations for the three and six months ended June 30, 2023 were 14.6 percent and 16.1 percent respectively. The change in the effective tax rate for the three and six months ended June 30, 2024 was primarily driven by a $300 million tax benefit recorded during the second quarter of 2024, discussed further below, as well as the global mix of reduced earnings. In connection with our plans to establish a global technology and innovation center in Switzerland, we initiated changes to our corporate entity structure, including intra-entity transfers of certain intellectual property, during the second quarter of 2024. As a result, we recorded a total net tax benefit of approximately $300 million. This benefit, net of valuation allowance, was primarily a result of the recognition of a step-up in tax basis to the fair value of the transferred intellectual property by the Company’s Swiss subsidiary. The resulting gains on these intra-entity intellectual property transfers were eliminated for purposes of the consolidated financial statements. In addition, local tax impacts associated with the disposition of the transferred intellectual property were recorded as well as an increase in our valuation allowance associated with Swiss nonrefundable tax credits as a result of indirect effects of the transferred intellectual property. See Note 12 to the consolidated financial statements included within our 2023 Form 10-K for discussion on the Swiss nonrefundable tax credits awarded in 2023. We determine our interim tax provision using an Estimated Annual Effective Tax Rate methodology ("EAETR") in accordance with U.S. GAAP. The EAETR is applied to the year-to-date ordinary income, exclusive of discrete items. The tax effects of discrete items are then included to arrive at the total reported interim tax provision. The determination of the EAETR is based upon a number of estimates, including the estimated annual pretax ordinary income in each tax jurisdiction in which we operate. As our projections of ordinary income change throughout the year, the EAETR will change period-to-period. A significant amount of our earnings is generated by our foreign subsidiaries, which tax earnings at lower statutory rates than the United States federal statutory rate. Our future effective tax rates may be materially impacted by a future change in the composition of earnings from foreign and domestic tax jurisdictions. The tax effects of discrete items are recognized in the tax provision in the period they occur in accordance with U.S. GAAP. Depending on various factors, such as the item’s significance in relation to total income and the rate of tax applicable in the jurisdiction to which it relates, discrete items in any quarter can materially impact the reported effective tax rate. As a global enterprise, our tax expense can be impacted by changes in tax rates or laws, the finalization of tax audits and reviews, as well as other factors. As a result, there can be significant volatility in interim tax provisions.

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