Tax Matters

A. Taxes on Income from Continuing Operations

Our effective tax rate for continuing operations was 29.6% for the first quarter of 2013, compared to 29.2% for the first quarter of 2012. The effective tax rate for the first quarter of 2013 was unfavorably impacted by the non-deductibility of the goodwill derecognized and the jurisdictional mix of the other intangible assets divested as part of the transfer of certain product rights to our equity-method investment in China, largely offset by the change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business, as well as the extension of the U.S. R&D tax credit which was signed into law in January 2013, resulting in the full-year benefit of the 2012 R&D tax credit and a portion of the 2013 R&D tax credit being recorded in the first quarter of 2013. For additional information about the transfer of certain product rights, see Note 2D. Acquisitions, Divestitures, Collaborative Arrangement and Equity-Method Investment: Equity-Method Investment.

B. Tax Contingencies

We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire. We treat these events as discrete items in the period of resolution.

The United States is one of our major tax jurisdictions, and we are regularly audited by the U.S. Internal Revenue Service (IRS):


•	With respect to Pfizer Inc., tax years 2009 and 2010 are currently under audit. Tax years 2011-2013 are not under audit. All other tax years are closed.


•	With respect to Wyeth, tax years 2006 through the Wyeth acquisition date (October 15, 2009) are currently under audit. All other tax years are closed.


•	With respect to King, tax years 2009 and 2010 are currently under audit. Tax year January 1, 2011 through the date of acquisition (January 31, 2011) is open, but not under audit. All other tax years are closed. The open tax years and audits for King and its subsidiaries are not material to Pfizer Inc.

In addition to the open audit years in the U.S., we have open audit years in other major tax jurisdictions, such as Canada (2001-2013), Japan (2007-2013), Europe (2007-2013, primarily reflecting Ireland, the United Kingdom, France, Italy, Spain and Germany), Latin America (1998-2013, primarily reflecting Brazil and Mexico) and Puerto Rico (2007-2013).

C. Taxes on Items of Other Comprehensive Income/(Loss)

The following table provides the components of tax provision on Other comprehensive income/(loss):



	Three Months Ended
(MILLIONS OF DOLLARS)	March 31, 2013			April 1, 2012

Foreign currency translation adjustments^(a)	$	71		$	67
Unrealized holding gains/(losses) on derivative financial instruments	(157		)	159
Reclassification adjustments for realized (gains)/losses	144			(115		)
	(13		)	44
Unrealized holding gains/(losses) on available-for-sale securities	13			14
Reclassification adjustments for realized (gains)/losses	(2		)	7
	11			21
Benefit plans: Actuarial gains	6			20
Reclassification adjustments related to amortization	54			44
Reclassification adjustments related to curtailments and settlements, net	20			23
Other	37			(1		)
	117			86
Benefit plans: Prior service (costs)/credits and other	(1		)	—
Reclassification adjustments related to amortization	(6		)	(8		)
Reclassification adjustments related to curtailments and settlements, net	(3		)	(4		)
Other	—			(2		)
	(10		)	(14		)
Tax provision on other comprehensive income/(loss)	$	176		$	204


^(a)	Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely.