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Tax Matters
 6 Months Ended
Jun. 30, 2019
Income Tax Disclosure [Abstract]  
Tax Matters Tax Matters

A. Taxes on Income from Continuing Operations

During the second quarter of 2019, Pfizer reached settlement of disputed issues at the IRS Office of Appeals, thereby settling all issues related to U.S. tax returns of Pfizer for the years 2009-2010. As a result of settling these years, in the second quarter of 2019 we recorded a benefit of approximately $1.4 billion, representing tax and interest.

Our effective tax rate for continuing operations was (22.1)% for the second quarter of 2019, compared to 14.3% for the second quarter of 2018 and was (5.7)% for the first six months of 2019, compared to 13.9% for the first six months of 2018.
The lower effective tax rate for the second quarter and first six months of 2019 in comparison with the same periods in 2018 was primarily due to:
•
an increase in tax benefits associated with the resolution of certain tax positions pertaining to prior years, primarily resulting from the aforementioned favorable settlement with the IRS;
•
the tax benefit recorded as a result of additional guidance issued by the U.S. Department of Treasury related to the enactment of the TCJA, as well as
•
the favorable change in the jurisdictional mix of earnings as a result of operating fluctuations in the normal course of business.
Our estimated $15 billion repatriation tax liability on accumulated post-1986 foreign earnings for which we plan to elect, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, payment over eight years through 2026 is reported in Income taxes payable (approximately $750 million) and the remaining liability is reported in Other taxes payable in our consolidated balance sheet as of June 30, 2019. The first installment of $750 million was paid in April 2019. Our obligations may vary as a result of changes in our uncertain tax positions and/or availability of attributes such as foreign tax and other credit carryforwards.
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, as we treat these events as discrete items in the period of resolution.
The U.S. is one of our major tax jurisdictions, and we are regularly audited by the IRS:
•
During the second quarter of 2019, Pfizer reached settlement of disputed issues at the IRS Office of Appeals, thereby settling all issues related to U.S. tax returns of Pfizer for the years 2009-2010. As a result of settling these years, in the second quarter of 2019 we recorded a benefit of approximately $1.4 billion, representing tax and interest.
•
With respect to Pfizer, tax years 2011-2015 are currently under audit. Tax years 2016-2019 are open, but not under audit. All other tax years are closed.
In addition to the open audit years in the U.S., we have open audit years in other major tax jurisdictions, such as Canada (2013-2019), Japan (2017-2019), Europe (2011-2019, primarily reflecting Ireland, the United Kingdom, France, Italy, Spain and Germany), Latin America (1998-2019, primarily reflecting Brazil) and Puerto Rico (2014-2019).
C. Tax Provision/(Benefit) on Other Comprehensive Loss
The following table provides the components of Tax provision/(benefit) on other comprehensive loss:
 
 
Three Months Ended
 
Six Months Ended
(MILLIONS OF DOLLARS)
 
June 30,
2019

 
July 1,
2018

 
June 30,
2019

 
July 1,
2018

Foreign currency translation adjustments, net(a)
 
$
(17
)
 
$
101

 
$
10

 
$
67

Unrealized holding gains/(losses) on derivative financial instruments, net
 
(53
)
 
8

 
6

 
4

Reclassification adjustments for (gains)/losses included in net income
 
(4
)
 
72

 
(59
)
 
65

Reclassification adjustments of certain tax effects from AOCI to Retained earnings(b)
 
—

 
—

 
—

 
1

 
 
(57
)
 
79

 
(53
)
 
70

Unrealized holding gains/(losses) on available-for-sale securities, net
 
(1
)
 
(48
)
 
4

 
(28
)
Reclassification adjustments for (gains)/losses included in net income
 
3

 
20

 
5

 
(2
)
Reclassification adjustments for tax on unrealized gains from AOCI to Retained earnings(c)
 
—

 
—

 
—

 
(45
)
 
 
2

 
(29
)
 
9

 
(76
)
Benefit plans: actuarial gains/(losses), net
 
(1
)
 
(13
)
 
(1
)
 
25

Reclassification adjustments related to amortization
 
15

 
14

 
18

 
28

Reclassification adjustments related to settlements, net
 
—

 
7

 
1

 
15

Reclassification adjustments of certain tax effects from AOCI to Retained earnings(b)
 
—

 
—

 
—

 
637

Other
 
8

 
27

 
3

 
6

 
 
23

 
34

 
21

 
712

Benefit plans: prior service costs and other, net
 
—

 
—

 
—

 
—

Reclassification adjustments related to amortization of prior service costs and other, net
 
(11
)
 
(11
)
 
(22
)
 
(22
)
Reclassification adjustments related to curtailments of prior service costs and other, net
 
—

 
4

 
—

 
(3
)
Reclassification adjustments of certain tax effects from AOCI to Retained earnings(b)
 
—

 
—

 
—

 
(144
)
Other
 
—

 
(6
)
 
—

 
—

 
 
(11
)
 
(13
)
 
(22
)
 
(168
)
Tax provision/(benefit) on other comprehensive loss
 
$
(59
)
 
$
173

 
$
(34
)
 
$
605


(a) 
Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that will be held indefinitely.
(b) 
For additional information on the adoption of a new accounting standard related to reclassification of certain tax effects from AOCI, see Notes to Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2018 in our 2018 Financial Report.
(c) 
For additional information on the adoption of a new accounting standard related to financial assets and liabilities, see Notes to Consolidated Financial Statements––Note 1B. Basis of Presentation and Significant Accounting Policies: Adoption of New Accounting Standards in 2018 in our 2018 Financial Report.