INCOME TAXES



	Three Months Ended March 31,
Dollars in Millions	2015			2014
Earnings Before Income Taxes	$	1,448		$	985
Provision for Income Taxes	249			49
Effective tax rate	17.2		%	5.0		%

The effective tax rate is lower than the U.S. statutory rate of 35% primarily because of undistributed earnings of certain foreign subsidiaries that have been considered or are expected to be indefinitely reinvested offshore. These undistributed earnings primarily relate to operations in Ireland and Puerto Rico, which operate under favorable tax grants not scheduled to expire prior to 2023. If these undistributed earnings are repatriated to the U.S. in the future, or if it were determined that such earnings are to be remitted in the foreseeable future, additional tax provisions would be required. Reforms to U.S. tax laws related to foreign earnings have been proposed and if adopted, may increase taxes, which could reduce the results of operations and cash flows.

The current period includes a $57 million reduction of valuation allowances for U.S. capital loss carryforwards as a result of gains from business divestitures. The prior period includes a $96 million tax benefit attributed to the sale of the diabetes business primarily as a result of a capital loss deduction from the sale of the Amylin shares.

BMS is currently being audited by a number of tax authorities and significant disputes may arise related to issues such as transfer pricing, certain tax credits and the deductibility of certain expenses. BMS estimates that it is reasonably possible that the total amount of unrecognized tax benefits at March 31, 2015 could decrease in the range of approximately $310 million to $370 million in the next twelve months as a result of the settlement of certain tax audits and other events resulting in the payment of additional taxes, the adjustment of certain deferred taxes and/or the recognition of tax benefits. It is also reasonably possible that new issues will be raised by tax authorities which may require adjustments to the amount of unrecognized tax benefits; however, an estimate of such adjustments cannot reasonably be made at this time. BMS believes that it has adequately provided for all open tax years by tax jurisdiction.