Income Taxes

3 Months Ended

Apr. 03, 2022

Income Tax Disclosure [Abstract]

Income Taxes

INCOME TAXES

The worldwide effective income tax rates for the fiscal first quarters of 2022 and 2021 were 12.2% and 16.6%, respectively. This decrease in the consolidated tax rate is primarily due to lower income in higher tax jurisdictions, primarily in the U.S., compared to the same period in the prior year. This lower income in the first fiscal quarter of 2022 was caused by a mark to market adjustment to the Company’s investment portfolio and the impairment of the bermekimab AD IPR&D (for further information see Note 3 of the Consolidated Financial Statements), both at the U.S. statutory rate. The impact of the income mix was partially offset by incremental tax costs directly related to the planned separation of the Company’s Consumer Health business.

The Company also had tax benefits received from stock-based compensation that were either exercised or vested during each of the fiscal first quarters. Additionally, the Company’s effective tax rate benefited from the impact of certain provisions of the Tax Cuts and Jobs Act of 2017 that became effective in fiscal year 2022.

As of April 3, 2022, the Company had approximately $3.3 billion of liabilities from unrecognized tax benefits. The Company conducts business and files tax returns in numerous countries and currently has tax audits in progress in a number of jurisdictions. With respect to the United States, the IRS has completed its audit for the tax years through 2012 and is currently auditing tax years 2013 through 2016. In other major jurisdictions where the Company conducts business, the years that remain open to tax audit go back to the year 2008. The Company believes it is possible that tax audits may be completed over the next twelve months by taxing authorities in some jurisdictions outside of the United States. However, the Company is not able to provide a reasonably reliable estimate of the timing of any other future tax payments relating to uncertain tax positions.