Income Taxes

9 Months Ended

Sep. 29, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Income taxes

The worldwide effective income tax rates for the fiscal nine months of 2024 and 2023 were 16.9% and 10.2%, respectively. The change in the consolidated tax rate as compared to the prior year is primarily due to charges of approximately $5.1 billion in the fiscal nine months of 2024 and approximately $7.0 billion in the fiscal nine months of 2023, both related to talc matters. Both charges were recorded at an effective U.S. federal and state tax rate of approximately 23% (for further information see Note 11 to the Consolidated Financial Statements). Further, the Company acquired Yellow Jersey Therapeutics AG (Yellow Jersey), a demerged subsidiary of Numab Therapeutics AG, to secure the global rights to NM26, a bispecific antibody compound and recorded a related $1.25 billion non-tax-deductible expense associated with the acquisition in the fiscal third quarter of 2024 (for further information see Note 10 to the Consolidated Financial Statement).

Additionally in the fiscal nine months of 2024, the effective tax rate was unfavorably impacted by legislative changes that went into effect for Pillar Two in some of the Company's foreign jurisdictions which were partially offset by an increase in available U.S. foreign tax credits. The Company incurred tax audit expenses in the fiscal second quarter of 2024 related to multi-year transfer pricing agreements with the IRS and certain other foreign jurisdictions.

As of September 29, 2024, the Company had approximately $2.4 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 Internal Revenue Service (IRS) has completed its audit for the tax years through 2016 and has commenced the audit for tax years 2017 through 2020.

The Company currently expects completion of multi-year transfer pricing agreements with the IRS and certain other foreign jurisdictions in the next 12 months. As a result, the Company has classified approximately $0.4 billion of unrecognized tax benefits and associated interest as a current liability on the “Accrued taxes on Income” line of the Consolidated Balance Sheet as of the end of the third fiscal quarter of 2024 in anticipation of final settlement.

In other major jurisdictions where the Company conducts business, the years that remain open to tax audit go back to the year 2013. 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.