Income Taxes

12 Months Ended

Dec. 25, 2020

Income Tax Disclosure [Abstract]

Income Taxes

8. Income Taxes

The domestic and international components(1) of loss from continuing operations before income taxes were as follows:

	Fiscal Year
	2021		2020		2019
Domestic	$	(512.2)	$	(656.9)	$	(75.3)
International	(317.6)		(303.9)		(1,516.2)
Total	$	(829.8)	$	(960.8)	$	(1,591.5)

(1) Domestic reflects Ireland in fiscal 2021 and 2020, and U.K. in fiscal 2019.

Significant components(1) of income taxes related to continuing operations are as follows:

	Fiscal Year
	2021		2020		2019
Current:
Domestic	$	(33.7)	$	0.1	$	0.1
International	(12.7)		(375.4)		21.7
Current income tax (benefit) provision	(46.4)		(375.3)		21.8
Deferred:
Domestic	(59.5)		102.2		(1.1)
International	(0.4)		282.0		(605.0)
Deferred income tax (benefit) provision	(59.9)		384.2		(606.1)
Total	$	(106.3)	$	8.9	$	(584.3)

(1) Domestic reflects Ireland in fiscal 2021 and 2020, and the U.K. in fiscal 2019.

The domestic current income tax provision reflects a tax benefit of $2.2 million, $0.2 million and $1.2 million from using net operating loss ("NOL") carryforwards for fiscal 2021, 2020 and 2019, respectively. For fiscal 2021 and 2020, domestic reflects Ireland; and for fiscal 2019, domestic reflects the U.K. The international current income tax provision reflects a tax benefit of $1.2 million, $33.4 million and $0.9 million from using NOL carryforwards for fiscal 2021, 2020 and 2019, respectively. The fiscal 2020 international current income tax provision also included a tax benefit of $1.0 million related to refundable credits and a tax benefit of $281.5 million related to carryback claims. The international credit utilization is comprised of credit carryforwards.

During fiscal 2021, net cash refunds for income taxes were $160.0 million, and during fiscal 2020 and 2019, net cash payments for income taxes were $39.9 million and $30.7 million, respectively. Included within the net cash refunds of $160.0 million were refunds of $178.8 million received as a result of the provisions in the Coronavirus Aid, Relief and Economic Security ("CARES") Act and net payments of $18.8 million related to operational activity.

The reconciliation between domestic income taxes at the statutory rate and the Company's provision for income taxes on continuing operations is as follows:

	Fiscal Year
	2021		2020		2019
Benefit for income taxes at domestic statutory income tax rate (1)	$	(103.7)	$	(120.1)	$	(302.4)
Adjustments to reconcile to income tax provision:
Rate difference between domestic and international jurisdictions (2)	(224.9)		(315.3)		(206.3)
Adjustments to accrued income tax liabilities and uncertain tax positions (3)	(9.7)		16.7		(18.7)
Credits, principally research and orphan drug	(4.7)		(11.2)		(13.5)
Permanently nondeductible and nontaxable items (4)	9.8		2.8		98.1
Divestitures (5)	—		—		9.6
U.S. Tax Reform (6)	—		(281.5)		—
Legal entity reorganization (6)	—		82.0		(212.8)
Separation costs	—		8.4		—
Reorganization items, net	36.9		8.8		—
Other	0.3		0.1		—
Valuation allowances (4)	189.7		618.2		61.7
(Benefit) provision for income taxes	$	(106.3)	$	8.9	$	(584.3)

(1)The statutory tax rate reflects the Irish statutory tax rate of 12.5% for fiscal 2021 and 2020, and the U.K. statutory tax rate of 19.0% for fiscal 2019.

(2)For fiscal 2019, includes the impact of certain recurring valuation allowances for domestic and international jurisdictions.

(3)Includes interest and penalties on accrued income tax liabilities and uncertain tax positions.

(4)For fiscal 2021, the permanently nondeductible and nontaxable items were primarily driven by the opioid-related litigation settlement loss that is partially permanently nondeductible. For fiscal 2020, an expense of $204.9 million was included as a discrete valuation allowance on certain net deferred tax assets that were no longer more likely than not realizable due to the Company's substantial doubt about its ability to continue as a going concern, further explained within Note 1. For fiscal 2019, the valuation allowances and permanently nondeductible and nontaxable item were primarily driven by the impact from the opioid-related litigation settlement charge that is partially permanently nondeductible, further explained within Note 19. Additional valuation allowance impacts are netted within other line items, as referenced in the associated footnotes to this table.

(5)The Company completed the sale of its wholly-owned subsidiary BioVectra in November 2019.

(6)Associated unrecognized tax benefit and valuation allowance are netted within this line.

The rate difference between domestic and international jurisdictions changed to $224.9 million of tax benefit for fiscal 2021 from $315.3 million of tax benefit for fiscal 2020. Of the $90.4 million decrease in the tax benefit, $48.9 million of the decrease is attributable to the Medicaid lawsuit and $92.9 million of decrease is predominately attributable to changes in the jurisdictional mix of operating loss resulting from the fiscal 2020 reorganization of the Company's intercompany financing and associated asset and legal entity ownership, partially offset by $27.6 million of an increase attributable to reorganization items, $13.2 million of an increase attributable to non-restructuring impairment charges and $10.6 million of an increase attributable to the opioid-related litigation settlement loss.

The Company's valuation allowance tax expense was $189.7 million for fiscal 2021, compared to $618.2 million for fiscal 2020. Of the $428.5 million decrease in tax expense, $288.9 million of decrease was attributable to operational activity in applicable tax jurisdictions that are fully offset by a valuation allowance and $204.9 million of decrease was attributable to the discrete valuation allowance recorded in fiscal 2020 on certain beginning-of-the-year net deferred tax assets, partially offset by a $65.3 million increase attributable to deferred remeasurement as a result of tax rate changes. The valuation allowance tax expense mainly offsets impacts included within the benefit for income taxes at the domestic statutory income tax rate and the rate difference between domestic and international jurisdictions.

The rate difference between domestic and international jurisdictions was $315.3 million of tax benefit for fiscal 2020, compared to $206.3 million of tax benefit for fiscal 2019. Of the $109.0 million increase in the tax benefit, $92.7 million of the increase resulted from presenting the impact of recurring valuation allowances within the rate difference between domestic and international jurisdictions in fiscal 2019 and within valuation allowances in fiscal 2020 and an increase of $48.9 million was attributable to the Medicaid lawsuit; partially offset by a $79.0 million decrease attributable to the fiscal 2019 gain on debt extinguishment, a $60.9 million decrease attributable to the fiscal 2019 opioid-related settlement loss and a $30.0 million decrease attributable to changes in operating loss. The remaining $137.3 million increase was predominately attributable to the change in the referenced rate from the U.K. statutory rate of 19.0% to the Irish statutory rate of 12.5%.

The following table summarizes the activity related to the Company's unrecognized tax benefits, excluding interest:

	Fiscal Year
	2021		2020		2019
Balance at beginning of period	$	349.0	$	398.6	$	287.7
Additions related to current year tax positions	—		71.1		123.5
Additions related to prior period tax positions	9.3		9.8		19.2
Reductions related to prior period tax positions	(2.8)		(14.2)		(5.7)
Settlements	(0.2)		(80.3)		(1.0)
Lapse of statutes of limitations	(21.8)		(36.0)		(25.1)
Balance at end of period	$	333.5	$	349.0	$	398.6

Unrecognized tax benefits, excluding interest, were reported in the following consolidated balance sheet captions in the amounts shown:

	December 31, 2021		December 25, 2020
Other assets (1)	$	255.7	$	256.4
Other income tax liabilities	64.1		83.2
Deferred income taxes	13.7		9.4
	$	333.5	$	349.0

(1)Included as a reduction to deferred tax assets.

Included within total unrecognized tax benefits as of December 31, 2021, December 25, 2020 and December 27, 2019 were $77.0 million, $85.9 million and $395.9 million, respectively, of unrecognized tax benefits, which if favorably settled would benefit the effective tax rate, of which approximately $20.0 million related to discontinued operations in fiscal 2019. The remaining unrecognized tax benefits are reflected as a write-off of related other tax assets. If these unrecognized tax benefits were recognized, they would be offset by a valuation allowance in fiscal 2021 and 2020. During fiscal 2021 and 2020, due to a lapse of statutes of limitations, $5.1 million and $18.1 million of tax and interest on unrecognized tax benefits related to the Nuclear Imaging business were eliminated, and a benefit of $5.1 million and $18.1 million was recorded in discontinued operations within the consolidated statement of operations, respectively. During fiscal 2021, the Company recorded $6.4 million of additional interest and penalties through tax provision and decreased accrued interest and penalties by $4.2 million related to prior period reductions, settlements and lapse of statutes of limitations. During fiscal 2020 and 2019, the Company had a net decrease of interest and penalties activity of $16.2 million and $4.2 million, respectively. The total amount of accrued interest and penalties related to uncertain tax positions was $18.9 million, $16.7 million and $32.9 million, respectively.

It is reasonably possible that within the next twelve months the unrecognized tax benefits could decrease by up to $139.2 million and the amount of related interest and penalties could decrease by up to $17.2 million as a result of payments or releases due to the resolution of examinations, appeals and litigation, successful emergence from Chapter 11 and the expiration of various statutes of limitation.

Certain of the Company's subsidiaries continue to be subject to examination by taxing authorities. The earliest open years subject to examination for various jurisdictions, including Ireland, the U.S., Japan, Luxembourg, Switzerland and the U.K. are from 2013 to present and the earliest open year for the U.S. state tax jurisdictions is 2009.

Income taxes payable, including uncertain tax positions and related interest accruals, was reported in the following consolidated balance sheet captions in the amounts shown:

	December 31, 2021		December 25, 2020
Accrued and other current liabilities	$	1.7	$	26.5
Other income tax liabilities	83.2		100.1
	$	84.9	$	126.6

Tax receivables were included in the following consolidated balance sheet captions in the amounts shown:

	December 31, 2021		December 25, 2020
Other assets	$	141.3	$	139.4
Prepaid expenses and other current assets	36.5		188.7
	$	177.8	$	328.1

Deferred income taxes result from temporary differences between the amount of assets and liabilities recognized for financial reporting and tax purposes. The components of the net deferred tax asset (liability) at the end of each fiscal year were as follows:

	December 31, 2021		December 25, 2020
Deferred tax assets:
Tax loss and credit carryforward	$	4,147.5	$	4,026.0
Capital tax loss carryforward and related assets	1,605.0		1,600.1
Opioid-related litigation settlement liability	294.7		269.3
Excess interest	159.5		150.7
Other	292.2		294.9
	6,498.9		6,341.0
Deferred tax liabilities:
Intangible assets	(108.5)		(191.2)
Investment in partnership	(67.1)		(74.8)
Other	—		(44.8)
	(175.6)		(310.8)
Net deferred tax asset before valuation allowances	6,323.3		6,030.2
Valuation allowances	(6,344.2)		(6,110.8)
Net deferred tax liability	$	(20.9)	$	(80.6)

The net deferred tax asset before valuation allowances was $6,323.3 million as of December 31, 2021, compared to $6,030.2 million as of December 25, 2020. This increase was due to a $178.8 million increase predominately related to tax loss and credit carryforward additions and current and prior years' operational activity, a $21.4 million increase associated with the opioid-related litigation settlement liability and a $92.9 million increase associated with intangible assets.

The deferred tax asset valuation allowances of $6,344.2 million and $6,110.8 million as of December 31, 2021 and December 25, 2020, respectively, relate both to the Company's substantial doubt about its ability to continue as a going concern, as well as the uncertainty of the utilization of certain deferred tax assets, driven by domestic and international net operating and capital losses, credits, intangible assets and the opioid-related litigation settlement liability.

Net deferred tax liabilities of $20.9 million and $80.6 million were included in deferred income taxes on the consolidated balance sheets as of December 31, 2021 and December 25, 2020, respectively.

As of December 31, 2021, the Company had approximately $4,024.0 million of NOL carryforwards in certain international jurisdictions measured at the applicable statutory rates, of which $1,851.3 million have no expiration and the remaining $2,172.7 million will expire in future years through 2042. As of December 31, 2021, the Company had $39.5 million of domestic NOL carryforwards measured at the applicable statutory rates, which have no expiration date.

As of December 31, 2021, the Company had $184.7 million of capital loss carryforwards in certain international jurisdictions measured at the applicable statutory rates, which will expire in future years through 2026. As of December 31, 2021, the Company had approximately $969.5 million of domestic capital loss carryforwards measured at the applicable statutory rates, which have no expiration date.

As of December 31, 2021, the Company also had $83.9 million of tax credits available to reduce future income taxes payable, in international jurisdictions, of which $2.3 million have no expiration and the remainder will expire in future years through 2042.

As of December 31, 2021, the Company's financial reporting basis in subsidiaries that may be subject to tax was in excess of its corresponding tax basis by $12.1 million. Such excess amount is considered to be indefinitely reinvested and it is not practicable to determine the cumulative amount of tax liability that would arise if this indefinitely reinvested amount were realized due to a variety of factors including the complexity of the Company's legal entity structure as well as the timing, extent, and nature of any hypothetical realization.