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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of Income (loss) before income taxes for 2024, 2023 and 2022 consist of:
(in millions)202420232022
Domestic$(596)$(382)$64 
Foreign763 (8)(193)
$167 $(390)$(129)
The components of Provision for income taxes for 2024, 2023 and 2022 consist of:
(in millions)202420232022
Current:   
Domestic$(9)$(21)$(15)
Foreign(161)(194)(256)
(170)(215)(271)
Deferred: 
Domestic(4)(21)14 
Foreign(65)15 174 
(69)(6)188 
$(239)$(221)$(83)
The Provision for income taxes differs from the expected amount calculated by applying the Company’s Canadian statutory federal plus provincial rate of 26.9% to Income (loss) before income taxes for 2024, 2023 and 2022 as follows:
(in millions)202420232022
Income (loss) before income taxes$167 $(390)$(129)
Provision for income taxes
Expected (provision for) benefit from income taxes at Canadian statutory rate$(45)$105 $35 
Non-deductible amount of share-based compensation(19)(19)(19)
Adjustments to tax attributes(4)32 53 
Change in valuation allowance related to foreign tax credits and NOLs
(21)(6)100 
Change in valuation allowance on Canadian deferred tax assets and tax rate changes
(82)(158)24 
Change in uncertain tax positions(62)(28)(50)
Foreign tax rate differences(4)(42)(57)
Non-deductible portion of Goodwill impairments— (104)(175)
Other(2)(1)6 
$(239)$(221)$(83)
As a Canadian domiciled company, the Company’s applicable tax rate is the Canadian combined tax rate for its federal and provincial filings.
Other consists adjustments affecting the tax provision such as those related to the filing of tax returns which are not material.
Deferred tax assets and liabilities as of December 31, 2024 and 2023 consist of:
(in millions)20242023
Deferred tax assets:  
Tax loss carryforwards$3,243 $3,357 
Provisions633 653 
Debt discounts and deferred financing costs282 342 
Restricted interest and financing expenses148 — 
Research and development tax credits69 97 
Scientific Research and Experimental Development pool40 51 
Tax credit carryforwards12 17 
Deferred revenue5 — 
Prepaid expenses56 23 
Share-based compensation23 20 
Other9 16 
Total deferred tax assets4,520 4,576 
Less valuation allowance(2,284)(2,254)
Deferred tax assets net of valuation allowance2,236 2,322 
Deferred tax liabilities: 
Intangible assets201 173 
Plant, equipment and technology62 75 
Outside basis differences133 138 
Total deferred tax liabilities396 386 
Net deferred tax asset$1,840 $1,936 
The following table presents a reconciliation of the deferred tax asset valuation allowance:
(in millions)202420232022
Balance, beginning of year$2,254 $2,023 $2,222 
Charged to Benefit from income taxes103 164 (124)
Charged to other accounts(73)67 (75)
Balance, end of year$2,284 $2,254 $2,023 
The Company’s U.S. interest expense is subject to limitation rules which limit U.S. interest expense to 30% of adjusted taxable income, defined similar to EBIT. Disallowed interest can be carried forward indefinitely and any unused interest deduction assessed for recoverability.
The Company has provided for income taxes in accordance with guidance issued by accounting regulatory bodies, the U.S. Internal Revenue Service and state and local governments through the date of the issuance of these Consolidated Financial Statements. Additional guidance and interpretations can be expected and such guidance, if any, could impact future results. While management continues to monitor these matters, the ultimate impact, if any, as a result of the application of any guidance issued in the future cannot be determined at this time.
The realization of deferred tax assets is dependent on the Company generating sufficient domestic and foreign taxable income in the years that the temporary differences become deductible. A valuation allowance has been provided for the portion of the deferred tax assets that the Company determined is more likely than not to remain unrealized based on estimated future taxable income and tax planning strategies. In 2024, the valuation allowance increased $30 million primarily due to an increase for state tax losses expected to be unusable in the United States. In 2023, the valuation allowance increased $231 million primarily due to book taxable loss in Canada and an increase for state tax losses expected to be unusable in the United States.
As of December 31, 2024 and 2023, the Company had accumulated taxable losses available to offset future years’ federal and provincial taxable income in Canada of approximately $6,341 million and $6,579 million, respectively. As of December 31, 2024 and 2023, unclaimed ITCs available to offset future federal taxes in Canada were approximately $19 million and $28 million, respectively, which expire in the years 2025 through 2043. In addition, as of December 31, 2024 and 2023, pooled SR&ED expenditures available to offset against future taxable income in Canada were approximately $150 million and $192 million, respectively, which may be carried forward indefinitely. As of both the years December 31, 2024 and 2023, a full valuation allowance against the net Canadian deferred tax assets on the parent company (BHCI) and the Bausch + Lomb parent company (B+L Corporate Canada) has been provided of $2,045 million.
As of December 31, 2024 and 2023, the Company had accumulated taxable losses available to offset future years’ federal taxable income in the U.S. of approximately $427 million and $491 million, respectively, including acquired losses which expire in the years 2025 through 2033. While the remaining taxable losses are subject to multiple annual loss limitations as a result of previous ownership changes, the Company believes that the recoverability of the deferred tax assets associated with these taxable losses are more likely than not to be realized. As of December 31, 2024 and 2023, U.S. research and development credits available to offset future years’ federal income taxes in the U.S. were approximately $10 million and $31 million, respectively, which includes acquired research and development credits and which expire in the years 2025 through 2042.
As of December 31, 2024 and 2023, the Company had accumulated taxable losses available to offset future years’ taxable income in Ireland of approximately $12,437 million and $12,164 million, respectively.
The Company provides for income taxes on the unremitted earnings of its direct foreign affiliates except for its direct U.S. subsidiaries of its parent company. The Company continues to assert that the unremitted earnings of its U.S. subsidiaries will be permanently reinvested and not repatriated. As of December 31, 2024, the Company estimates that there will be no tax liability attributable to unremitted earnings of its BHC U.S. subsidiaries. However, future distributions could be subject to U.S. withholding tax. Income Taxes are accrued on the Solta U.S. subsidiaries in accordance with the US-Canada tax treaty.
As of December 31, 2024 and 2023, unrecognized tax benefits (including interest and penalties) were $924 million and $918 million, of which $405 million and $414 million would affect the effective income tax rate, respectively. In 2024 and 2023, the remaining unrecognized tax benefits would not impact the effective tax rate as the tax positions are offset against existing tax attributes or are timing in nature. In 2024 and 2023, the Company recognized net increases to unrecognized tax benefits for current year tax positions of $61 million and $6 million, respectively. The Company recognized a net decrease
of $55 million during 2024 and a net increase of $31 million during 2023 in the unrecognized tax benefits related to tax positions taken in the prior years.
The Company provides for interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of December 31, 2024 and 2023, accrued interest and penalties related to unrecognized tax benefits were approximately $68 million and $51 million, respectively. In 2024, the Company recognized a net increase of approximately $17 million and, in 2023, recognized an increase of $19 million of interest and penalties, respectively.
The Company and one or more of its subsidiaries file federal income tax returns in Canada, the U.S. and other foreign jurisdictions, as well as various provinces and states in Canada and the U.S. The Company and its subsidiaries have open tax years, primarily from 2012 to 2023, with significant taxing jurisdictions, respectively, including Canada and the U.S. These open years contain certain matters that could be subject to differing interpretations of applicable tax laws and regulations and tax treaties, as they relate to the amount, timing, or inclusion of revenues and expenses, or the sustainability of income tax positions of the Company and its subsidiaries. Certain of these tax years are expected to remain open indefinitely.
Jurisdiction:Open Years
United States - Federal
2015 - 2024
Canada
2012 - 2024
Germany
2014 - 2024
France
2013 - 2024
Ireland
2018 - 2024
Australia
2018 - 2024
Luxembourg
2018 - 2021
The Internal Revenue Service (the “IRS”) completed its examinations of the Company’s U.S. consolidated federal income tax returns for the years 2013 and 2014. There were no material adjustments to the Company’s taxable income as a result of these examinations. However, the 2014 tax year remains open to the extent of a 2017 capital loss carried back to that year. The Company’s annual tax filings for 2015 and 2016 and short period tax return for the period ended September 8, 2017, which was filed as a result of the Company’s internal restructuring efforts during 2017 is currently under IRS examination. As part of its examination, the Company received a notice of proposed adjustment from the IRS that would disallow the 2017 Capital Loss resulting from its internal restructuring. The Company has contested this proposed tax deficiency through the IRS administrative appeals process, and if necessary, will continue to contest any proposed tax deficiency through appropriate litigation. Accordingly, no income tax provision has been recorded as of December 31, 2024. If the Company were ultimately unsuccessful in defending its position, and all or a substantial portion of the 2017 capital loss deduction were disallowed, the Company estimates, in a worst-case scenario, that it could be liable for additional income taxes (excluding penalties and interest) of up to $2,100 million, which could have an adverse effect on the Company’s financial condition and results of operations.
In January 2023, as part of an alternative dispute resolution process with the IRS, the Company has reached a tentative settlement on the 2017 Capital Loss. In February 2025, the Company received notice from the IRS that the required approvals for the tentative settlement had been received, and that the administrative process of concluding the settlement and related audits had commenced. The Company expects any impact to the Company’s tax provision will be recorded in the period in which the administrative process concludes. While such settlement may be material to the Company’s results of operations in the quarter in which it is recorded, it will not be material to its results of operations for the year, and will not impact the Company’s cash flows.
The Company is currently under examination by the Canada Revenue Agency (“CRA”) for five separate cycles: (a) years 2012 through 2013 (b) years 2014 through 2015, (c) years 2016 through 2017, (d) years 2018 through 2019 and (e) years 2020 through 2021. The Company received an assessment for certain transfer pricing matters in 2012 and 2013 for CAD 85 million and CAD 90 million, respectively. The Company disagrees with the adjustments and has filed a Notice of Objection for 2012 and 2013. The Company settled certain transfer pricing matters relating the 2015 and 2016 tax years resulting in a reduction to its NOLs of approximately CAD 21 million for 2015 and CAD 23 million for 2016. The adjustments for 2015 and 2016 will reduce NOLs currently offset by a full valuation allowance. In December 2023, the Company settled certain transfer pricing matters related to 2017 and 2018 tax years resulting in a reduction of NOLs of approximately CAD 26 million for 2017 and CAD 15 million for 2018. During 2024, the Company received various assessments by the CRA for its 2011 through 2018 tax years totaling CAD 355 million which the company has filed or will file Notice of Objections against.
In the first quarter of 2024, the Company finalized a settlement with the CRA related to prior year withholding tax returns which was paid in the second quarter of 2024.
The Company’s subsidiaries in Germany are under audit for tax years 2014 through 2022. In June 2024, the Company reached a preliminary settlement with the German taxing authority related to certain transfer pricing adjustments. The preliminary settlement resulted in the accrual of an immaterial tax cost and will close out the 2014 to 2016 audit period.
On November 8, 2022, the Company’s affiliate in Netherlands received an assessment from the Luxembourg Tax Authorities as successor in interest to its affiliate in Luxembourg for tax years 2018 – 2019 for €271.7 million. The Company is vigorously defending its position and no reserves have been recorded.
On January 9, 2025, the Company’s affiliate in Switzerland received a decision by the Tax Chamber of the Administrative Court of the Canton of Zug denying the affiliate’s objection to certain transfer pricing adjustments proposed by the Swiss Tax Authorities for its 2018 tax year. The Company is preparing to pursue the resolution of this dispute through the mutual agreement procedure and is expecting the impact of the decision to be immaterial.
The Company’s U.S. affiliates remain under examination for various state tax audits in the U.S. for years 2015 through 2024.
Certain affiliates of the Company in regions outside of Canada, the U.S., Germany, Luxembourg and Australia are currently under examination by relevant taxing authorities, and all necessary accruals have been recorded, including uncertain tax benefits. At this time, the Company does not expect that proposed adjustments, if any, would be material to the Company’s Consolidated Financial Statements.
The following table presents a reconciliation of the unrecognized tax benefits:
(in millions)202420232022
Balance, beginning of year$918 $881 $927 
Additions based on tax positions related to the current year61 6 156 
Additions for tax positions of prior years36 50 10 
Reductions for tax positions of prior years(62)(15)(127)
Lapse of statute of limitations(29)(4)(85)
Balance, end of year$924 $918 $881 
The Company believes it is reasonably possible that the total amount of unrecognized tax benefits at December 31, 2024 could decrease by approximately $9 million in the next twelve months as a result of the resolution of certain tax and transfer pricing audits and other events.