Income Taxes	9 Months Ended
Sep. 30, 2020
Income Tax Disclosure [Abstract]
Income Taxes	13. Income Taxes On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted and signed into law and includes, among other things, refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. We do not expect the provisions of the CARES Act to have a material impact on our tax provision. We operate on a global basis and are subject to numerous and complex tax laws and regulations. Additionally, tax laws continue to undergo rapid changes in both application and interpretation by various countries, including state aid interpretations and initiatives led by the Organization for Economic Cooperation and Development. Our income tax filings are subject to examinations by taxing authorities throughout the world. Income tax audits may require an extended period of time to reach resolution and may result in significant income tax adjustments when interpretation of tax laws or allocation of company profits is disputed. Although ultimate timing is uncertain, the net amount of tax liability for unrecognized tax benefits may change within the next twelve months due to changes in audit status, expiration of statutes of limitations, settlements of tax assessments and other events. Management’s best estimate of such change is within the range of a $350 million decrease to a $20 million increase. We are under continuous audit by the Internal Revenue Service (“IRS”) and other taxing authorities. During the course of these audits, we receive proposed adjustments from taxing authorities that may be material. Therefore, there is a possibility that an adverse outcome in these audits could have a material effect on our results of operations and financial condition. Our U.S. Federal income tax returns have been audited through 2012 and are currently under audit for years 2013-2015. In October 2020, we reached an agreement with the IRS for tax years 2006-2012 related to the reallocation of profits between the U.S. and Puerto Rico as well as other miscellaneous adjustments. Due to this agreement, we anticipate recording a net tax benefit within a range of approximately $50.0 million to $80.0 million in the fourth quarter of 2020. The IRS has proposed adjustments for tax years 2010-2012, primarily related to reallocating profits between certain of our U.S. and foreign subsidiaries, which remain unsettled. We have disputed these adjustments and intend to continue to vigorously defend our positions as we pursue resolution through the administrative process with the IRS Independent Office of Appeals. While we have not yet received a complete and final Revenue Agents’ Report generally issued at the conclusion of an IRS examination, during the second quarter of 2020, we received a draft Notice of Proposed Adjustment (“NOPA”) from the IRS for the 2013 through 2015 calendar years relating to transfer pricing involving our cost sharing agreement between the U.S. and Switzerland affiliated companies and reallocating profits between certain of our U.S. and foreign subsidiaries. The draft NOPA related to the cost sharing agreement proposes an increase to our U.S. taxable income, which would result in additional tax expense related to 2013 of approximately $600 million, subject to interest and penalties. We strongly believe that the position of the IRS, with regard to this matter, is inconsistent with the applicable U.S. Treasury regulations governing our cost sharing agreement. This is a draft NOPA and the final adjustments asserted by the IRS may differ materially. We anticipate receiving a final NOPA prior to the end of the calendar year 2020 and do not expect changes to our reserves relative to these matters within the next twelve months. We intend to vigorously contest the draft NOPA and if we are not able to remediate the draft NOPA at the IRS examination level, we will pursue all available administrative and, if necessary, judicial remedies. If we pursue judicial remedies in the U.S. Tax Court for years 2013-2015, a number of years will likely elapse before such matters are finally resolved. No payment of any amount related to the draft NOPA is required to be made, if at all, until all applicable proceedings have been completed. We believe the tax liability we have previously accrued is correct, and accordingly, have not recognized any additional reserve for tax uncertainty based on the draft NOPA received. A public referendum held in Switzerland passed the Federal Act on Tax Reform and AHV Financing (“TRAF”), effective January 1, 2020, and includes the abolishment of various favorable federal and cantonal tax regimes. The TRAF provides transitional relief measures for companies that are losing the tax benefit of a ruling, including a "step-up" for amortizable goodwill, equal to the amount of future tax benefit they would have received under their existing ruling, subject to certain limitations. Certain provisions of the TRAF were enacted in the third quarter of 2019, resulting in us recognizing a provisional net tax benefit of $263.8 million. In the fourth quarter of 2019 and third quarter of 2020, we recognized an additional $51.2 million and $6.5 million, respectively, of tax benefit related to TRAF as well as the tax impact of certain restructuring transactions in Switzerland. We received notification from the Swiss authorities in October 2020 regarding our TRAF ruling and anticipate recording a net tax benefit of approximately $30 million in the fourth quarter of 2020 based on this notification. We anticipate that TRAF will have a minimal impact on our ongoing consolidated effective tax rate. In the three and nine-month periods ended September 30, 2020, our effective tax rate (“ETR”) was 3.8 percent and negative 0.3 percent, respectively. The 3.8 percent ETR in the three-month period ended September 30, 2020 was the result of the mix of some of our jurisdictions recognizing earnings while others had losses. The negative 0.3 percent ETR in the nine-month period ended September 30, 2020 was primarily due to the $612.0 million goodwill impairment charge, which resulted in a loss before taxes, but had no corresponding tax benefit, as well as the mix of earnings and losses among our jurisdictions. In the three and nine-month periods ended September 30, 2019, our ETR was negative 134.1 percent and negative 31.4 percent, respectively. We recognized net tax benefits in the three and nine-month periods ended September 30, 2019, primarily due to Switzerland tax reform that resulted in us recognizing a provisional net tax benefit of $263.8 million. Absent discrete tax events, we expect our future ETR will be lower than the U.S. corporate income tax rate of 21.0 percent due to our mix of earnings between U.S. and foreign locations, which have lower corporate income tax rates. Our ETR in future periods could also potentially be impacted by: changes in our mix of pre-tax earnings; changes in tax rates, tax laws or their interpretation, including the European Union rules on state aid; the outcome of various federal, state and foreign audits; and the expiration of certain statutes of limitations. Currently, we cannot reasonably estimate the impact of these items on our financial results.

Income Taxes

9 Months Ended

Sep. 30, 2020

13. Income Taxes

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was enacted and signed into law and includes, among other things, refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, and technical corrections to tax depreciation methods for qualified improvement property. We do not expect the provisions of the CARES Act to have a material impact on our tax provision.

We operate on a global basis and are subject to numerous and complex tax laws and regulations. Additionally, tax laws continue to undergo rapid changes in both application and interpretation by various countries, including state aid interpretations and initiatives led by the Organization for Economic Cooperation and Development. Our income tax filings are subject to examinations by taxing authorities throughout the world. Income tax audits may require an extended period of time to reach resolution and may result in significant income tax adjustments when interpretation of tax laws or allocation of company profits is disputed. Although ultimate timing is uncertain, the net amount of tax liability for unrecognized tax benefits may change within the next twelve months due to changes in audit status, expiration of statutes of limitations, settlements of tax assessments and other events. Management’s best estimate of such change is within the range of a $350 million decrease to a $20 million increase.

We are under continuous audit by the Internal Revenue Service (“IRS”) and other taxing authorities. During the course of these audits, we receive proposed adjustments from taxing authorities that may be material. Therefore, there is a possibility that an adverse outcome in these audits could have a material effect on our results of operations and financial condition. Our U.S. Federal income tax returns have been audited through 2012 and are currently under audit for years 2013-2015. In October 2020, we reached an agreement with the IRS for tax years 2006-2012 related to the reallocation of profits between the U.S. and Puerto Rico as well as other miscellaneous adjustments. Due to this agreement, we anticipate recording a net tax benefit within a range of approximately $50.0 million to $80.0 million in the fourth quarter of 2020. The IRS has proposed adjustments for tax years 2010-2012, primarily related to reallocating profits between certain of our U.S. and foreign subsidiaries, which remain unsettled. We have disputed these adjustments and intend to continue to vigorously defend our positions as we pursue resolution through the administrative process with the IRS Independent Office of Appeals.

While we have not yet received a complete and final Revenue Agents’ Report generally issued at the conclusion of an IRS examination, during the second quarter of 2020, we received a draft Notice of Proposed Adjustment (“NOPA”) from the IRS for the 2013 through 2015 calendar years relating to transfer pricing involving our cost sharing agreement between the U.S. and Switzerland affiliated companies and reallocating profits between certain of our U.S. and foreign subsidiaries.

The draft NOPA related to the cost sharing agreement proposes an increase to our U.S. taxable income, which would result in additional tax expense related to 2013 of approximately $600 million, subject to interest and penalties. We strongly believe that the position of the IRS, with regard to this matter, is inconsistent with the applicable U.S. Treasury regulations governing our cost sharing agreement. This is a draft NOPA and the final adjustments asserted by the IRS may differ materially. We anticipate receiving a final NOPA prior to the end of the calendar year 2020 and do not expect changes to our reserves relative to these matters within the next twelve months. We intend to vigorously contest the draft NOPA and if we are not able to remediate the draft NOPA at the IRS examination level, we will pursue all available administrative and, if necessary, judicial remedies. If we pursue judicial remedies in the U.S. Tax Court for years 2013-2015, a number of years will likely elapse before such matters are finally resolved. No payment of any amount related to the draft NOPA is required to be made, if at all, until all applicable proceedings have been completed. We believe the tax liability we have previously accrued is correct, and accordingly, have not recognized any additional reserve for tax uncertainty based on the draft NOPA received.

A public referendum held in Switzerland passed the Federal Act on Tax Reform and AHV Financing (“TRAF”), effective January 1, 2020, and includes the abolishment of various favorable federal and cantonal tax regimes. The TRAF provides transitional relief measures for companies that are losing the tax benefit of a ruling, including a "step-up" for amortizable goodwill, equal to the amount of future tax benefit they would have received under their existing ruling, subject to certain limitations. Certain provisions of the TRAF were enacted in the third quarter of 2019, resulting in us recognizing a provisional net tax benefit of $263.8 million. In the fourth quarter of 2019 and third quarter of 2020, we recognized an additional $51.2 million and $6.5 million, respectively, of tax benefit related to TRAF as well as the tax impact of certain restructuring transactions in Switzerland. We received notification from the Swiss authorities in October 2020 regarding our TRAF ruling and anticipate recording a net tax benefit of approximately $30 million in the fourth quarter of 2020 based on this notification. We anticipate that TRAF will have a minimal impact on our ongoing consolidated effective tax rate.

In the three and nine-month periods ended September 30, 2020, our effective tax rate (“ETR”) was 3.8 percent and negative 0.3 percent, respectively. The 3.8 percent ETR in the three-month period ended September 30, 2020 was the result of the mix of some of our jurisdictions recognizing earnings while others had losses. The negative 0.3 percent ETR in the nine-month period ended September 30, 2020 was primarily due to the $612.0 million goodwill impairment charge, which resulted in a loss before taxes, but had no corresponding tax benefit, as well as the mix of earnings and losses among our jurisdictions. In the three and nine-month periods ended September 30, 2019, our ETR was negative 134.1 percent and negative 31.4 percent, respectively. We recognized net tax benefits in the three and nine-month periods ended September 30, 2019, primarily due to Switzerland tax reform that resulted in us recognizing a provisional net tax benefit of $263.8 million. Absent discrete tax events, we expect our future ETR will be lower than the U.S. corporate income tax rate of 21.0 percent due to our mix of earnings between U.S. and foreign locations, which have lower corporate income tax rates. Our ETR in future periods could also potentially be impacted by: changes in our mix of pre-tax earnings; changes in tax rates, tax laws or their interpretation, including the European Union rules on state aid; the outcome of various federal, state and foreign audits; and the expiration of certain statutes of limitations. Currently, we cannot reasonably estimate the impact of these items on our financial results.

- 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 + Details