XML 35 R20.htm IDEA: XBRL DOCUMENT v3.25.0.1
INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Company is subject to income taxes in the U.S. (both federal and state) and in numerous foreign jurisdictions. Changes in the tax laws or regulations in these jurisdictions, or in positions by the relevant authorities regarding their application, administration, or interpretation, may affect our tax liability, return on investments, and business operations.

The Tax Cuts and Jobs Act imposes tax on the Company for global intangible low-taxed income (“GILTI”) earned by certain non-U.S. subsidiaries. We have elected to account for GILTI as a period cost.

Income Before Income Taxes
For the years ended December 31
202420232022
U.S. income
$593 $816 $1,090 
Non-U.S. income
1,988 1,545 1,422 
Total
$2,581 $2,361 $2,512 

Provision for Income Taxes
For the years ended December 31
202420232022
Current
U.S. Federal$62 $171 $396 
Non-U.S.
412 345 324 
U.S. State
8 42 97 
Deferred
U.S. Federal3 — (213)
Non-U.S.
(12)103 7 
U.S. State58 82 (48)
Total$531 $743 $563 

Reconciliation of U.S. Federal Statutory Income Tax Rate to Actual Income Tax Rate
For the years ended December 31
202420232022
Income before taxes
$2,581 $2,361 $2,512 
Tax expected at 21%
542 496 528 
Foreign operations
38 63 43 
Withholding taxes
34 28 4 
U.S. tax on foreign operations
(43)(35)(36)
Uncertain tax positions
170 11 6 
R&D benefits
(51)(33)(33)
State taxes, net of federal benefit
49 24 39 
Valuation allowance
(281)19 8 
Spin-Off and separation costs
72 184 — 
Other
— (14)4 
Provision for income taxes
$531 $743 $563 
Effective income tax rate
20.6%31.5%22.4%
For the year ended December 31, 2024, included in State taxes, net of federal benefit is $35 million of expense related to revaluation of deferred tax assets as a result of changes in estimates of future apportionment and state tax rates based on the 2023 as-filed tax returns. For the year ended December 31, 2023, the Spin-Off and separation costs line includes $59 million of expense related to revaluation of state deferred tax assets associated with the Spin-Off.

UNRECOGNIZED TAX BENEFITS.

The Company is subject to periodic tax audits by tax authorities in the U.S. (both federal and state) and the numerous countries in which we operate. While the Company currently is being audited, or remains subject to audit, in a number of jurisdictions for tax years 2004-2023, including China, France, Germany, India, Japan, Norway, the United Kingdom, and the United States, we believe that there are no jurisdictions in which the ultimate outcome of unresolved issues or claims is likely to be material to the results of operations, financial position, or cash flows. We believe that we have made adequate provisions for all unrecognized tax benefits.

The balance of unrecognized tax benefits, the amount of related interest and penalties, and what we believe to be the range of reasonably possible changes in the next 12 months are as follows.

202420232022
Balance at beginning of period
$409 $465 $365 
Additions for tax positions of the current year
4 — 9 
Additions for tax positions of prior years
181 156 137 
Reductions for tax positions of prior years
(33)(203)(41)
Settlements with tax authorities
(4)(6)(1)
Expiration of the statute of limitations
(6)(3)(4)
Balance at end of period
$551 $409 $465 

For the year ended December 31, 2024, the Additions for tax positions of prior years line includes $172 million of reserves established due to ongoing audits, of which $142 million was established against a net operating loss deferred tax asset. Also for the year ended December 31, 2024, the Reductions for tax positions of prior years includes currency translation adjustments (“CTA”) of $14 million and a reversal of $19 million related to various tax audits that were closed during the year.

During the years ended December 31, 2023 and 2022, the Additions for tax positions of prior years line in the table above includes $134 million and $132 million, respectively, related to the Spin-Off. Also during the year ended December 31, 2023, a matter was closed with local tax authorities which resulted in the reversal of a net operating loss deferred tax asset and the related $183 million unrecognized tax benefit, which is included in the Reductions for tax positions of prior years line above.

Unrecognized Tax Benefits
For the years ended December 31
202420232022
Unrecognized tax benefits
$551 $409 $465 
Accrued interest on unrecognized tax benefits
81 72 56 
Reasonably possible reduction to the balance of unrecognized tax benefits in succeeding 12 months
175 29 45 
Portion that, if recognized, would reduce tax expense and effective tax rate
182 157 153 

In the first quarter of 2023, the Company changed its accounting policy for presentation of interest expense on uncertain tax positions from within Interest and other financial charges – net to within Benefit (provision) for income taxes. See Note 2, “Summary of Significant Accounting Policies” for further information. For the years ended December 31, 2024 and 2023, $13 million and $12 million, respectively, of interest expense on uncertain tax positions was recorded in Benefit (provision) for income taxes in the Consolidated Statements of Income. For the year ended December 31, 2022, $12 million of interest expense on uncertain tax positions was recorded in Interest and other financial charges – net in the Combined Statement of Income. For the years ended December 31, 2024 and 2023, $4 million and $6 million, respectively, of income tax penalties were recorded in Benefit (provision) for income taxes in the Consolidated Statements of Income. No accrual for penalties was made in the year ended December 31, 2022.

DEFERRED INCOME TAXES.

We regularly evaluate the recoverability of our deferred tax assets and establish a valuation allowance, if necessary, to reduce the deferred tax assets to an amount that is more likely than not to be realized (a likelihood of more than 50%). Significant judgment is required in determining whether a valuation allowance is necessary and the amount of such valuation allowance. In assessing the recoverability of our deferred tax assets at December 31, 2024, we considered all available evidence, including the nature of financial statement losses, reversing taxable temporary differences, estimated future operating profits, and tax planning actions and strategies.
As of
December 31, 2024December 31, 2023
Total assets
$4,474 $4,474 
Total liabilities
(56)(68)
Net deferred income tax asset (liability)
$4,418 $4,406 

Components of the Net Deferred Income Tax Asset (Liability)As of
December 31, 2024December 31, 2023
Deferred tax assets:
Employee benefits
$1,340 $1,418 
Reserves and accruals413 458 
Operating loss carryforwards
447 648 
Lease liabilities
57 75 
Tax credit carryforwards
80 59 
U.S. interest restriction carryforwards156 61 
Goodwill and other intangible assets1,355 1,461 
Property, plant, and equipment
223 261 
Capitalized R&D
689 547 
Other deferred tax assets55 111 
Total deferred income tax asset
4,817 5,099 
Valuation allowances
(231)(540)
Total deferred income tax asset after valuation allowance
4,586 4,559 
Deferred tax liabilities:
ROU assets
(42)(50)
Other deferred tax liabilities
(126)(102)
Total deferred income tax liability
(168)(152)
Net deferred income tax asset (liability)
$4,418 $4,406 

The deferred tax asset associated with capitalized R&D is related to U.S. tax law that requires capitalization and amortization over five or fifteen years. In the event the capitalization of research costs is adjusted through retroactive legislation effective for 2022, the Company expects to record a reduction to the 2022 deferred tax asset resulting in a charge to tax expense under the Tax Matters Agreement with GE in the amount of $228 million.

In connection with the Spin-Off, our net deferred income tax assets increased in 2023 by $3,099 million primarily due to transfers from GE, including $964 million related to pension and postretirement benefits, with the remainder primarily attributable to tax attributes that were not part of the Company’s stand-alone operations, and changes to valuation on a GE HealthCare basis.

Valuation allowances primarily relate to non-U.S. deferred taxes where there were historical losses and U.S. federal and state credit carryforwards. Activity in the valuation allowance consists of the following:

Valuation Allowances
For the years ended December 31
202420232022
Balance at beginning of period$540 $272 $279 
Provision for income taxes(279)(12)(5)
Foreign currency exchange and other(31)280 (2)
Balance at end of period $231 $540 $272 

As a result of the Spin-Off, there was an increase in the valuation allowance of $269 million in 2023, which is included in the Foreign currency exchange and other line of the table above. For the year ended December 31, 2024, our valuation allowance decreased by $310 million, which included a release of a valuation allowance in France of $295 million reflected in the Provision for income taxes line. Based on our analysis of all positive and negative evidence during the year ended December 31, 2024, we concluded that it is more likely than not that France deferred tax assets will be realizable based on our profitability in France as a stand-alone company post Spin-Off and our expectation for the continued generation of prospective positive income in the jurisdiction. In making these judgments, we considered various business and structural factors as a stand-alone company, which support our conclusion of the realization of the deferred tax assets.
NET OPERATING LOSSES.
As of December 31, 2024, the Company had net operating loss carryforwards of $5,978 million primarily related to France, Ireland, Brazil, Germany, and the Netherlands, which can be carried forward indefinitely. The gross net operating loss carryforwards resulted in a deferred tax asset of $1,133 million as of December 31, 2024. This amount excludes accruals of $266 million for unrecognized tax benefits the Company has recorded related to the underlying tax positions which generated the net operating losses and expected impacts to U.S. foreign tax credits of $420 million.

UNDISTRIBUTED EARNINGS.
Post Spin-Off, the Company’s previously undistributed earnings of certain of our foreign subsidiaries are no longer indefinitely reinvested in non-U.S. businesses due to current U.S. funding needs. Therefore, in 2023, an incremental deferred tax liability of $21 million was recorded for withholding and other foreign taxes due upon future distribution of earnings. In addition, the Company is providing for withholding and other foreign taxes due upon future distribution of current period earnings. However, the Company generally considers instances of outside basis differences in foreign subsidiaries that would incur additional U.S. tax upon an unforeseen future reversal (e.g., capital gain distribution or disposition to an unrelated third party) of approximately $8 billion to be permanent in duration. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested basis differences is not practicable.