Income Taxes (Tables)

12 Months Ended

Dec. 31, 2019

Schedule of Components of Income Tax Expense

Following is the composition of income tax expense:



	2019			2018			2017
Current:
Federal⁽¹⁾	$	280.2		$	169.6		$	3,181.0
Foreign	299.8			106.8			47.5
State	(14.4		)	4.7			(5.4		)
Total current tax expense	565.6			281.1			3,223.1
Deferred:
Federal⁽²⁾	141.3			(3.7		)	(601.2		)
Foreign	(24.1		)	248.7			(230.9		)
State	(54.8		)	3.4			0.2
Total deferred tax (benefit) expense	62.4			248.4			(831.9		)
Income taxes	$	628.0		$	529.5		$	2,391.2

⁽¹⁾ The 2019 current tax expense includes $153.1 million of tax benefit from utilization of net operating loss carryforwards. The 2018 and 2017 current tax expense includes $201.5 million and $3.25 billion of tax expense, respectively, related to effects of the 2017 Tax Act.

⁽²⁾ The 2018 and 2017 deferred tax benefit includes $26.2 million and $1.33 billion of tax benefit, respectively, related to the effects of the 2017 Tax Act.

Schedule of Deferred Tax Assets and Liabilities

Significant components of our deferred tax assets and liabilities as of December 31 were as follows:



	2019			2018
Deferred tax assets:
Purchases of intangible assets	$	2,512.4		$	2,627.7
Compensation and benefits	934.3			781.6
Tax credit carryforwards and carrybacks	455.8			359.4
Tax loss carryforwards and carrybacks	318.8			248.2
Sales rebates and discounts	197.3			45.5
Operating lease liabilities	140.6			—
Product return reserves	98.1			95.3
Other comprehensive loss on hedging transactions	59.6			68.9
Debt	53.9			40.3
Other	835.7			646.3
Total gross deferred tax assets	5,606.5			4,913.2
Valuation allowances	(616.5		)	(574.8		)
Total deferred tax assets	4,990.0			4,338.4
Deferred tax liabilities:
Earnings of foreign subsidiaries	(1,776.4		)	(1,745.3		)
Intangibles	(1,298.0		)	(86.9		)
Inventories	(686.4		)	(681.3		)
Prepaid employee benefits	(305.9		)	(240.1		)
Property and equipment	(274.1		)	(260.9		)
Financial instruments	(139.4		)	(22.8		)
Operating lease assets	(124.7		)	—
Total deferred tax liabilities	(4,604.9		)	(3,037.3		)
Deferred tax assets - net	$	385.1		$	1,301.1

Schedule of Additional Income Tax Disclosures

Cash payments of U.S. federal, state, and foreign income taxes, net of refunds, were as follows:



	2019		2018		2017
Cash payments of income taxes	$	1,180.5	$	1,076.7	$	221.5

Schedule of Effective Income Tax Rate Reconciliation

Following is a reconciliation of the income tax expense applying the U.S. federal statutory rate to income before income taxes to reported income tax expense:



	2019			2018			2017
Income tax at the U.S. federal statutory tax rate	$	1,105.8		$	772.8		$	806.7
Add (deduct):
International operations, including Puerto Rico	(242.0		)	(627.1		)	(480.8		)
General business credits	(108.8		)	(87.4		)	(66.8		)
Non-deductible acquired IPR&D⁽¹⁾	—			309.9			300.1
2017 Tax Act	—			175.3			1,914.0
Other	(127.0		)	(14.0		)	(82.0		)
Income taxes	$	628.0		$	529.5		$	2,391.2

⁽¹⁾Non-deductible acquired IPR&D was related to ARMO in 2018 and CoLucid in 2017. See Note 3 for additional information related to acquisitions.

Summary of Income Tax Contingencies

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:



	2019			2018			2017
Beginning balance at January 1	$	2,034.6		$	1,000.8		$	843.3
Additions based on tax positions related to the current year	187.2			798.2			133.8
Additions for tax positions of prior years	425.3			410.9			93.8
Reductions for tax positions of prior years	(100.3		)	(115.4		)	(59.3		)
Settlements	(260.5		)	(33.2		)	(2.4		)
Lapses of statutes of limitation	(161.5		)	(20.5		)	(19.3		)
Changes related to the impact of foreign currency translation	(16.2		)	(6.2		)	10.9
Ending balance at December 31	$	2,108.6		$	2,034.6		$	1,000.8

We recognize both accrued interest and penalties related to unrecognized tax benefits in income tax expense. We recognized income tax (benefit) expense related to interest and penalties as follows:



	2019			2018		2017
Income tax (benefit) expense	$	(26.4	)	$	25.1	$	22.8