XML 41 R14.htm IDEA: XBRL DOCUMENT v3.22.4
INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes INCOME TAXES
The provision/(benefit) for income taxes consisted of:
Year Ended December 31,
Dollars in Millions202220212020
Current:
U.S.$3,017 $1,879 $1,245 
Non-U.S.1,089 598 (104)
Total current4,106 2,477 1,141 
Deferred:
U.S.(2,889)(1,255)229 
Non-U.S.151 (138)754 
Total deferred(2,738)(1,393)983 
Total Provision for Income Taxes$1,368 $1,084 $2,124 

Effective Tax Rate

The reconciliation of the effective tax rate to the U.S. statutory Federal income tax rate was as follows:
% of Earnings Before Income Taxes
Dollars in Millions202220212020
Earnings/(Loss) before income taxes:
U.S.$(140)$1,593 $(10,106)
Non-U.S.7,853 6,505 3,235 
Total7,713 8,098 (6,871)
U.S. statutory rate1,620 21.0 %1,701 21.0 %(1,443)21.0 %
GILTI, net of foreign derived intangible income deduction 634 8.2 %645 8.0 %685 (10.0)%
Foreign tax effect of certain operations in Ireland, Puerto Rico and Switzerland(416)(5.4)%(143)(1.8)%(86)1.3 %
Internal transfers of intangible and other assets(93)(1.2)%(983)(12.1)%853 (12.4)%
U.S. Federal, state and foreign contingent tax matters(297)(3.9)%154 1.9 %136 (2.0)%
U.S. Federal research-based credits(142)(1.8)%(165)(2.0)%(165)2.4 %
Charitable contributions of inventory(94)(1.2)%(42)(0.5)%(36)0.5 %
Contingent value rights— — (108)(1.3)%(363)5.3 %
Non-deductible R&D charges— — — — 2,461 (35.8)%
Puerto Rico excise tax credit(144)(1.9)%(152)(1.9)%(147)2.1 %
State and local taxes (net of valuation allowance)103 1.3 %33 0.4 %103 (1.5)%
Foreign and other197 2.6 %144 1.7 %126 (1.8)%
Total$1,368 17.7 %$1,084 13.4 %$2,124 (30.9)%

Internal transfers of intangible and other assets to streamline our legal entity structure subsequent to the Celgene acquisition resulted in a tax benefit in 2022 and 2021 and in a tax charge in 2020 upon adjusting deferred taxes for the book and revalued tax basis differences of the related assets.

The 2022 U.S. Federal, state and foreign contingent tax matters include a $522 million tax benefit with respect to lapse of statutes and effectively settled contingent tax matters.

Fair value adjustments for contingent value rights are not taxable or tax deductible.

Non-deductible R&D charges primarily resulted from the $11.4 billion MyoKardia IPRD charge in 2020.

Puerto Rico imposes an excise tax on the gross company purchase price of goods sold from BMS’s manufacturer in Puerto Rico. The excise tax is recognized in Cost of products sold when the intra-entity sale occurs. For U.S. income tax purposes, the excise tax is not deductible but results in foreign tax credits that are generally recognized in BMS’s provision for income taxes when the excise tax is incurred. As of December 31, 2022, BMS has amended its existing Puerto Rico decree, eliminating the excise tax and increasing its Puerto Rico tax rate to 10.5% effective for the tax year beginning January 1, 2023, and extending BMS’s tax grants an additional 15 years to 2038.
Deferred Taxes and Valuation Allowance

The components of deferred income tax assets/(liabilities) were as follows:
 December 31,
Dollars in Millions20222021
Deferred tax assets
Foreign net operating loss and other carryforwards$566 $945 
State net operating loss and credit carryforwards329 304 
U.S. Federal net operating loss and credit carryforwards236 226 
Milestone payments and license fees1,030 887 
Capitalized research expenditures1,573 — 
Other1,284 1,390 
Total deferred tax assets5,018 3,752 
Valuation allowance(873)(1,056)
Deferred tax assets net of valuation allowance$4,145 $2,696 
Deferred tax liabilities
Acquired intangible assets$(4,362)$(4,867)
Goodwill and other(605)(891)
Total deferred tax liabilities$(4,967)$(5,758)
Deferred tax liabilities, net$(822)$(3,062)
Recognized as:
Deferred income taxes assets – non-current$1,344 $1,439 
Deferred income taxes liabilities – non-current(2,166)(4,501)
Total$(822)$(3,062)

BMS is not indefinitely reinvested with respect to its undistributed earnings from foreign subsidiaries and has provided a deferred tax liability for foreign and state income and withholding tax that would apply. BMS remains indefinitely reinvested with respect to its financial statement basis in excess of tax basis of its foreign subsidiaries. A determination of the deferred tax liability with respect to this basis difference is not practicable.

The U.S. Federal net operating loss carryforwards were $709 million at December 31, 2022. These carryforwards were acquired as a result of certain acquisitions and are subject to limitations under Section 382 of the Internal Revenue Code. The net operating loss carryforwards expire in varying amounts beginning in 2023. The foreign and state net operating loss carryforwards expire in varying amounts beginning in 2023 (certain amounts have unlimited lives).

At December 31, 2022, a valuation allowance of $873 million exists for the following items: $295 million primarily for foreign net operating loss and tax credit carryforwards, $261 million for state deferred tax assets including net operating loss and tax credit carryforwards and $317 million for U.S. Federal deferred tax assets including equity investment fair value adjustments and U.S. Federal net operating loss carryforwards.

Changes in the valuation allowance were as follows:
 Year Ended December 31,
Dollars in Millions202220212020
Balance at beginning of year$1,056 $2,809 $2,844 
Provision213 201 62 
Utilization(68)(1,087)(488)
Foreign currency translation(59)(157)212 
Acquisitions/(dispositions)/(liquidations), net(271)(720)179 
Non U.S. rate change2 10 — 
Balance at end of year$873 $1,056 $2,809 

In 2022 and 2021, certain foreign net operating losses and related valuation allowances were utilized or eliminated as a result of internal legal entity restructurings.
Income tax payments were $5.4 billion in 2022, $3.5 billion in 2021 and $3.4 billion in 2020.

In connection with the enactment of the TCJA, we were required to pay a one-time transition tax and elected to pay over a period of eight years as permitted under the TCJA. The remaining amounts payable are as follows: $567 million in 2023; $799 million in 2024; $1.0 billion in 2025; and $244 million in 2026.

Business is conducted in various countries throughout the world and is subject to tax in numerous jurisdictions. A significant number of tax returns that are filed are subject to examination by various federal, state and local tax authorities. Tax examinations are often complex, as tax authorities may disagree with the treatment of items reported requiring several years to resolve. Liabilities are established for possible assessments by tax authorities resulting from known tax exposures including, but not limited to, transfer pricing matters, tax credit deductibility of certain expenses, and deemed repatriation transition tax. Such liabilities represent a reasonable provision for taxes ultimately expected to be paid and may need to be adjusted over time as more information becomes known. The effect of changes in estimates related to contingent tax liabilities is included in the effective tax rate reconciliation above.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (excluding interest and penalties):
 Year Ended December 31,
Dollars in Millions202220212020
Balance at beginning of year$2,042 $2,003 $1,905 
Gross additions to tax positions related to current year53 66 76 
Gross additions to tax positions related to prior years137 75 325 
Gross additions to tax positions assumed in acquisitions15 — 51 
Gross reductions to tax positions related to prior years(381)(22)(352)
Settlements(8)(70)(7)
Reductions to tax positions related to lapse of statute(83)(5)(5)
Cumulative translation adjustment(9)(5)10 
Balance at end of year$1,766 $2,042 $2,003 

Additional information regarding unrecognized tax benefits is as follows:
 Year Ended December 31,
Dollars in Millions202220212020
Unrecognized tax benefits that if recognized would impact the effective tax rate$1,736 $1,957 $1,900 
Accrued interest332 424 366 
Accrued penalties25 26 20 

Accrued interest and penalties payable for unrecognized tax benefits are included in either current or non-current income taxes payable. Interest and penalties related to unrecognized tax benefits are included in income tax expense.

BMS is currently under examination by a number of tax authorities that proposed or are considering proposing material adjustments to tax positions for issues such as transfer pricing, certain tax credits and the deductibility of certain expenses. As previously disclosed, BMS received several notices of proposed adjustments from the IRS related to transfer pricing and other tax issues for the 2008 to 2012 tax years. BMS disagrees with the IRS’s positions and continues to work cooperatively with the IRS to resolve these issues. In December 2022, BMS entered the IRS administrative appeals process to resolve these matters. Timing of the final resolution of these complex matters is uncertain and could have a material impact on BMS’s financial statements. Tax positions for these years unrelated to matters that entered the administrative appeals process are considered effectively settled.

It is reasonably possible that new issues will be raised by tax authorities that may increase unrecognized tax benefits; however, an estimate of such increases cannot reasonably be made at this time. BMS believes that it has adequately provided for all open tax years by tax jurisdiction.

It is also reasonably possible that the total amount of unrecognized tax benefits at December 31, 2022 could decrease in the range of approximately $120 million to $170 million in the next twelve months as a result of the settlement of certain tax audits and other events. The expected change in unrecognized tax benefits may result in the payment of additional taxes, adjustment of certain deferred taxes and/or recognition of tax benefits. The following is a summary of major tax jurisdictions for which tax authorities may assert additional taxes based upon tax years currently under audit and subsequent years that will likely be audited:
U.S.2008 to 2012, 2016 to 2022
Canada2012 to 2022
France2020 to 2022
Germany2015 to 2022
Italy2019 to 2022
Japan2018 to 2022
UK2012 to 2022