Tax Matters

9 Months Ended

Oct. 01, 2023

Income Tax Disclosure [Abstract]

Tax Matters

Tax Matters

A. Taxes on Income/(Loss) from Continuing Operations

Our effective tax rate for continuing operations was 28.8% for the third quarter of 2023, compared to 4.0% for the third quarter of 2022, and was (6.2)% for the first nine months of 2023, compared to 10.5% for the first nine months of 2022. The positive effective tax rate for the third quarter of 2023 reflects a tax benefit on a pre-tax loss primarily resulting from changes in forecast and jurisdictional mix of earnings. The tax benefit for the third quarter of 2023 and the negative effective tax rate for the first nine months of 2023, compared to the tax provisions for the third quarter and first nine months of 2022, were primarily due to changes in forecast and jurisdictional mix of earnings. The tax provisions for the third quarter and first nine months of 2022 also included tax benefits related to global income tax resolutions in multiple tax jurisdictions spanning multiple tax years that included the closing of U.S. Internal Revenue Service audits covering five tax years.

We elected, with the filing of our 2018 U.S. Federal Consolidated Income Tax Return, to pay our initial estimated $15 billion repatriation tax liability on accumulated post-1986 foreign earnings over eight years through 2026. The fifth annual installment of this liability was paid by its April 18, 2023 due date. The sixth annual installment is due April 15, 2024 and is reported in current Income taxes payable as of October 1, 2023. The remaining liability is reported in noncurrent Other taxes payable. 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.

The U.S. is one of our major tax jurisdictions, and we are regularly audited by the IRS. With respect to Pfizer, tax years 2016-2018 are under audit. Tax years 2019-2023 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 and certain related audits, appeals and investigations in certain major international tax jurisdictions dating back to 2012.

See Note 5D in our 2022 Form 10-K.

C. Tax Provision/(Benefit) on Other Comprehensive Income/(Loss)

Components of Tax provision/(benefit) on other comprehensive income/(loss) include:
	Three Months Ended				Nine Months Ended
(MILLIONS)	October 1, 2023		October 2, 2022		October 1, 2023		October 2, 2022
Foreign currency translation adjustments, net(a)	$	(28)	$	20	$	(33)	$	(165)
Unrealized holding gains/(losses) on derivative financial instruments, net	80		47		108		177
Reclassification adjustments for (gains)/losses included in net income/(loss)	(5)		(72)		(16)		(97)
	75		(25)		91		80
Unrealized holding gains/(losses) on available-for-sale securities, net	(10)		(97)		4		(175)
Reclassification adjustments for (gains)/losses included in net income/(loss)	6		76		(55)		137
	(4)		(21)		(51)		(38)
Reclassification adjustments related to amortization of prior service costs and other, net	(7)		(7)		(21)		(23)
Reclassification adjustments related to curtailments of prior service costs and other, net	(1)		—		(3)		(3)
	(7)		(8)		(24)		(26)
Tax provision/(benefit) on other comprehensive income/(loss)	$	36	$	(33)	$	(17)	$	(149)

(a)Taxes are not provided for foreign currency translation adjustments relating to investments in international subsidiaries that we intend to hold indefinitely.