XML 44 R22.htm IDEA: XBRL DOCUMENT v3.24.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The income tax provision consisted of the following for the years ended December 31, 2023, 2022 and 2021:
In millions202320222021
Current:
Federal$2,819 $2,803 $2,285 
State662 735 665 
3,481 3,538 2,950 
Deferred:
Federal(537)(1,526)(282)
State(139)(503)(120)
(676)(2,029)(402)
Total$2,805 $1,509 $2,548 

The following table is a reconciliation of the statutory income tax rate to the Company’s effective income tax rate for the years ended December 31, 2023, 2022 and 2021:
202320222021
Statutory income tax rate21.0 %21.0 %21.0 %
State income taxes, net of federal tax benefit3.7 3.2 4.1 
Legal charges— 3.4 — 
Basis difference upon disposition of subsidiary— 1.6 — 
Prior year refunds and unrecognized tax benefits— (2.6)(1.2)
Other0.4 (0.7)0.3 
Effective income tax rate25.1 %25.9 %24.2 %
The following table is a summary of the components of the Company’s deferred income tax assets and liabilities as of December 31, 2023 and 2022:
In millions20232022
Deferred income tax assets:
Lease and rents$5,059 $5,242 
Legal charges1,205 1,260 
Inventory94 103 
Employee benefits168 153 
Bad debts and other allowances606 480 
Net operating loss and capital loss carryforwards409 266 
Deferred income62 66 
Insurance reserves356 319 
Investments56 293 
Other372 335 
Valuation allowance(385)(532)
Total deferred income tax assets (1)
8,002 7,985 
Deferred income tax liabilities:
Retirement benefits112 92 
Lease and rents4,469 4,639 
Depreciation and amortization7,732 7,139 
Total deferred income tax liabilities12,313 11,870 
Net deferred income tax liabilities$4,311 $3,885 
_____________________________________________
(1)Includes deferred income tax assets of $131 million which were accounted for as assets held for sale and were included in assets held for sale on the consolidated balance sheet at December 31, 2022. See Note 2 ‘‘Acquisitions, Divestitures and Asset Sales’’ for additional information.

When evaluating the realizability of deferred tax assets, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and the Company’s recent operating results. The Company established a valuation allowance of $385 million and $532 million as of December 31, 2023 and 2022, respectively, because it does not consider it more likely than not that certain deferred tax assets will be recovered.

As of December 31, 2023, the Company had net operating and capital loss carryovers of $409 million, a portion of which has an indefinite carryforward period, while the remainder expires between 2024 and 2043.

A reconciliation of the beginning and ending balance of unrecognized tax benefits in 2023, 2022 and 2021 is as follows:
In millions202320222021
Beginning balance$446 $782 $768 
Additions based on tax positions related to the current year2 5 3 
Additions based on tax positions related to prior years46 42 52 
Reductions for tax positions of prior years(24)(166)(33)
Expiration of statutes of limitation(34)(4)(1)
Settlements— (213)(7)
Ending balance$436 $446 $782 

CVS Health Corporation and most of its subsidiaries are subject to U.S. federal income tax as well as income tax of numerous state and local jurisdictions. The IRS has completed its examinations of the Company’s consolidated U.S. federal income tax returns for tax years through 2016, 2018 and 2019. The IRS has substantially completed its examination of the Company’s consolidated U.S. federal income tax return for tax year 2017.
CVS Health Corporation and its subsidiaries are also currently under income tax examinations by a number of state and local tax authorities. As of December 31, 2023, no examination has resulted in any proposed adjustments that would result in a material change to the Company’s operating results, financial condition or liquidity.

Substantially all material state and local income tax matters have been concluded for fiscal years through 2015. Certain state exams are likely to be concluded and certain state statutes of limitations will lapse in 2024, but the change in the balance of the Company’s uncertain tax positions is projected to be immaterial. In addition, it is reasonably possible that the Company’s unrecognized tax benefits could change within the next twelve months due to the anticipated conclusion of various examinations with the IRS for certain previous years. An estimate of the range of the possible change cannot be made at this time.

The Company records interest expense related to unrecognized tax benefits and penalties in the income tax provision. The Company accrued interest expense of approximately $31 million, $29 million and $40 million in 2023, 2022 and 2021, respectively. The Company had approximately $134 million and $112 million accrued for interest and penalties as of December 31, 2023 and 2022, respectively.

As of December 31, 2023, the total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective income tax rate is approximately $330 million, after considering the federal benefit of state income taxes.