Tax Matters

9 Months Ended

Sep. 29, 2024

Income Tax Disclosure [Abstract]

Tax Matters

Tax Matters

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

Our effective tax rate for continuing operations was 5.0% for the third quarter of 2024, compared to 28.8% for the third quarter of 2023, and was 4.9% for the first nine months of 2024, compared to (6.2)% for the first nine months of 2023. The effective tax rate for the third quarter of 2024 is primarily a result of the jurisdictional mix of earnings and, to a lesser extent, tax benefits related to the closing of IRS audits covering multiple tax years. The positive effective tax rate for the third quarter of 2023 reflects a tax benefit on a pre-tax loss. The increase in the effective tax rate for the first nine months ended September 29, 2024, compared to the first nine months ended October 1, 2023, was primarily due to the non-recurrence of tax benefits related to global income tax resolutions in multiple tax jurisdictions spanning multiple tax years in the second quarter of 2023 partially offset by tax benefits related to the closing of the IRS audits covering multiple 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 sixth annual installment was paid by its April 15, 2024 due date. The seventh annual installment is due April 15, 2025 and is reported in current Income taxes payable as of September 29, 2024. The remaining liability is reported in noncurrent Other taxes payable. Our obligations may vary due to the availability of attributes such as foreign tax and other credit carryforwards or carrybacks.

For the year ended December 31, 2023, our cash paid for income taxes, net of refunds, was $3.1 billion, of which $1.9 billion was paid in the U.S.

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. During the third quarter of 2024, we effectively settled the audit of Pfizer’s federal income tax returns for years 2016-2018. Tax years 2019-2024 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 2023 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)	September 29, 2024		October 1, 2023		September 29, 2024		October 1, 2023
Foreign currency translation adjustments, net(a)	$	(50)	$	(28)	$	(7)	$	(33)
Unrealized holding gains/(losses) on derivative financial instruments, net	(65)		80		5		108
Reclassification adjustments for (gains)/losses included in net income/(loss)	(42)		(5)		(68)		(16)
	(107)		75		(63)		91
Unrealized holding gains/(losses) on available-for-sale securities, net	7		(10)		(2)		4
Reclassification adjustments for (gains)/losses included in net income/(loss)	(1)		6		10		(55)
	7		(4)		8		(51)
Reclassification adjustments related to amortization of prior service costs and other, net	(6)		(7)		(20)		(21)
Reclassification adjustments related to curtailments of prior service costs and other, net	—		(1)		1		(3)
	(6)		(7)		(18)		(24)
Tax provision/(benefit) on other comprehensive income/(loss)	$	(157)	$	36	$	(81)	$	(17)

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