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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income before provision for income taxes are as follows:
(In millions)202420232022
U.S.$2,226 $2,431 $3,859 
Non-U.S.4,812 3,867 3,976 
Income before income taxes
$7,037 $6,298 $7,835 
The components of the provision for income taxes are as follows:
(In millions)202420232022
Current income tax provision
Federal$561 $228 $813 
Non-U.S.1,175 1,206 633 
State130 150 254 
1,866 1,584 1,700 
Deferred income tax provision/(benefit)
Federal$(1,026)$(551)$(611)
Non-U.S.(72)(647)(314)
State(111)(102)(72)
 (1,209)(1,300)(997)
Provision for/(benefit from) income taxes$657 $284 $703 
The provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate to income before income taxes due to the following:
(In millions)202420232022
Statutory federal income tax rate
21 %21 %21 %
Provision for income taxes at statutory rate
$1,478 $1,323 $1,645 
Increases (decreases) resulting from:
Foreign rate differential
(131)(223)(329)
Income tax credits
(333)(276)(202)
Global intangible low-taxed income
57 113 96 
Foreign-derived intangible income
(133)(108)(149)
Excess tax benefits from stock options and restricted stock units
(67)(69)(80)
Provision for (reversal of) tax reserves, net
218 13 (544)
Intra-entity transfers
(106)(233)(18)
Foreign exchange loss on inter-company debt refinancing
— (112)— 
Provision for (reversal of) valuation allowances, net
(229)(32)344 
Withholding taxes
74 33 84 
Tax return reassessments and settlements
(192)(187)(210)
State income taxes, net of federal tax66 70 111 
Other, net
(45)(28)(45)
Provision for/(benefit from) income taxes
$657 $284 $703 
The company has operations and a taxable presence in approximately 70 countries outside the U.S. The company's effective income tax rate differs from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state and local taxes, non-deductible interest in certain foreign jurisdictions, and foreign taxes that are different than the U.S. federal statutory rate.
During 2024, the company recorded a tax reserve and associated interest of $240 million related to the settlement of international tax audits for tax years 2009 through 2016, which were settled in 2024. The company also recorded tax benefits of $459 million, primarily in jurisdictions where the deferred tax assets are now expected to be realized due to forecasted income. The benefits were partially offset by tax provisions primarily associated with disallowed interest expense and net operating loss carryforwards that are not expected to be realized.
During 2023, the company released valuation allowances of $32 million in jurisdictions where the deferred tax assets are now expected to be realized. In 2023 the company also recorded a tax benefit of $127 million for U.S. tax credits and the revaluation of net operating loss carryforwards due to higher tax rates as a result of its tax return resubmissions, a $91 million tax benefit, net of related tax expenses, from a foreign exchange loss on an intercompany debt refinancing transaction, and $233 million of tax benefits resulting from intra-entity transactions.
During 2022, the company settled an IRS audit relating to the 2017 and 2018 tax years. The company recorded a $208 million net tax benefit primarily from this settlement and related impacts, which resulted in a decrease in the company’s unrecognized tax benefits of $658 million. The company recorded $49 million of charges for expired tax credits and other related components of the settlement. The company recorded a charge of $395 million to establish a valuation allowance against certain U.S. foreign tax credits which the company believes will more likely than not expire unutilized. The company also recorded $101 million of additional net unrecognized tax benefit liabilities related to other tax audits.
The company generally receives a tax deduction upon the exercise of non-qualified stock options by employees, or the vesting of restricted stock units held by employees, for the difference between the exercise price and the market price of the underlying common stock on the date of exercise. The company uses the incremental tax benefit approach for utilization of tax attributes. These excess tax benefits reduce the tax provision. In 2024, 2023 and 2022, the company's tax provision was reduced by $67 million, $69 million and $80 million, respectively, of such benefits.
Net deferred tax asset/(liability) in the accompanying balance sheet consists of the following:
(In millions)20242023
Deferred tax asset/(liability)
Depreciation and amortization
$(4,133)$(4,286)
Net operating loss and credit carryforwards
2,915 2,385 
Reserves and accruals
161 157 
Accrued compensation
318 299 
Inventory basis difference
309 275 
Deferred interest534 753 
Research and development and other capitalized costs
536 380 
Unrealized (gains) losses on hedging instruments
(363)(66)
Contract liabilities280 130 
Other, net
147 199 
Deferred tax assets/(liabilities), net before valuation allowance
705 226 
Less: Valuation allowance
1,043 1,317 
Deferred tax assets/(liabilities), net
$(338)$(1,091)
The company estimates the degree to which tax assets, losses and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction and provides a valuation allowance for tax assets and loss and credit carryforwards that it believes will more likely than not expire unutilized. At December 31, 2024, all of the company’s valuation allowance relates to deferred tax assets, primarily net operating losses and disallowed interest expense carryforward, for which any subsequently recognized tax benefits will reduce income tax expense.
The changes in the valuation allowance are as follows:
 Year Ended December 31,
(In millions)202420232022
Beginning balance
$1,317 $1,322 $968 
Additions/(reductions) recognized in income tax provision, net
(229)(32)344 
Additions due to acquisitions
— 4 14 
Currency translation and other
(46)23 (4)
Ending balance$1,043 $1,317 $1,322 
At December 31, 2024, the company had net federal, state and non-U.S. net operating loss carryforwards of $109 million, $63 million and $1.54 billion, respectively. Use of the carryforwards is limited based on the future income of certain subsidiaries. Of the federal net operating loss carryforwards, $43 million expire in the years 2025 through 2037, and the remainder do not expire. Of the state net operating loss carryforwards, $54 million expire in the years 2025 through 2043, and the remainder do not expire. Of the net non-U.S. net operating loss carryforwards, $574 million expire in the years 2027 through 2044, and the remainder do not expire.
At December 31, 2024, the company had foreign tax credit carryforwards of $729 million and deferred interest carryforwards of $534 million. The foreign tax credit carryforwards will expire in the years 2025 through 2034. Of the deferred interest carryforwards, $201 million expire in the years 2025 through 2034 and the remainder do not expire.
U.S. federal taxes have been recorded on approximately $40 billion of undistributed foreign earnings as of December 31, 2024. A provision has not been made for certain U.S. state income taxes or additional non-U.S. taxes that would be due when cash is repatriated to the U.S. as the company’s undistributed foreign earnings are intended to be reinvested outside of the U.S. indefinitely. The determination of the amount of the unrecognized deferred tax liability related to the undistributed foreign earnings is not practicable due to the uncertainty in the manner in which these earnings will be distributed. The company’s intent is to only make distributions from non-U.S. subsidiaries in the future when they can be made at no net tax cost.
Unrecognized Tax Benefits
As of December 31, 2024, the company had $0.52 billion of unrecognized tax benefits substantially all of which, if recognized, would reduce the effective tax rate.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
(In millions)202420232022
Beginning balance
$540 $572 $1,124 
Additions due to acquisitions
19 — 15 
Additions for tax positions of current year
91 4 104 
Additions for tax positions of prior years
244 34 24 
Reductions for tax positions of prior years
(182)(43)(659)
Closure of tax years
— (6)(4)
Settlements
(187)(21)(32)
Ending balance
$525 $540 $572 
Substantially all of the unrecognized tax benefits are classified as long-term liabilities. The company does not expect its unrecognized tax benefits to change significantly over the next twelve months.
During 2024, the company’s unrecognized tax benefits decreased by $99 million as a result of uncertain tax positions relating to foreign tax positions which included $240 million of reserve and associated interest from the settlement of international tax audits for tax years 2009 through 2016 and increased $84 million relating to U.S. federal and state tax positions.
During 2023, the company’s unrecognized tax benefits decreased by $12 million as a result of uncertain tax positions relating to foreign tax positions and decreased $19 million relating to U.S. federal and state tax positions.
During 2022, the company’s unrecognized tax benefits increased by $143 million as a result of uncertain tax positions relating to foreign tax positions and decreased $610 million relating to U.S. federal and state tax positions which included $658 million from the settlement of the IRS audit of the 2017 and 2018 tax years. The company also assumed $15 million of uncertain tax benefits as part of the acquisition of PPD.
The company classified interest and penalties related to unrecognized tax benefits as income tax expense. The total amount of interest and penalties related to uncertain tax positions and recognized in the balance sheet as of December 31, 2024 and 2023 was $75 million and $95 million, respectively.
The company conducts business globally and, as a result, Thermo Fisher or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Canada, China, Denmark, Finland, France, Germany, Japan, Singapore, Sweden, the United Kingdom and the United States. With few exceptions, the company is no longer subject to U.S. state and local or non-U.S. income tax examinations for years before 2012 and no longer subject to U.S. federal income tax examinations for years before 2019.