INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2022

The provision/(benefit) for income taxes consisted of:


	Year Ended December 31,
Dollars in Millions	2022		2021		2020
Current:
U.S.	$	3,017	$	1,879	$	1,245
Non-U.S.	1,089		598		(104)
Total current	4,106		2,477		1,141
Deferred:
U.S.	(2,889)		(1,255)		229
Non-U.S.	151		(138)		754
Total deferred	(2,738)		(1,393)		983
Total Provision for Income Taxes	$	1,368	$	1,084	$	2,124

The reconciliation of the effective tax rate to the U.S. statutory Federal income tax rate was as follows:


	% of Earnings Before Income Taxes
Dollars in Millions	2022				2021				2020
Earnings/(Loss) before income taxes:
U.S.	$	(140)			$	1,593			$	(10,106)
Non-U.S.	7,853				6,505				3,235
Total	7,713				8,098				(6,871)
U.S. statutory rate	1,620		21.0	%	1,701		21.0	%	(1,443)		21.0	%
GILTI, net of foreign derived intangible income deduction	634		8.2	%	645		8.0	%	685		(10.0)	%
Foreign tax effect of certain operations in Ireland, Puerto Rico and Switzerland	(416)		(5.4)	%	(143)		(1.8)	%	(86)		1.3	%
Internal transfers of intangible and other assets	(93)		(1.2)	%	(983)		(12.1)	%	853		(12.4)	%
U.S. Federal, state and foreign contingent tax matters	(297)		(3.9)	%	154		1.9	%	136		(2.0)	%
U.S. Federal research-based credits	(142)		(1.8)	%	(165)		(2.0)	%	(165)		2.4	%
Charitable contributions of inventory	(94)		(1.2)	%	(42)		(0.5)	%	(36)		0.5	%
Contingent value rights	—		—		(108)		(1.3)	%	(363)		5.3	%
Non-deductible R&D charges	—		—		—		—		2,461		(35.8)	%
Puerto Rico excise tax credit	(144)		(1.9)	%	(152)		(1.9)	%	(147)		2.1	%
State and local taxes (net of valuation allowance)	103		1.3	%	33		0.4	%	103		(1.5)	%
Foreign and other	197		2.6	%	144		1.7	%	126		(1.8)	%
Total	$	1,368	17.7	%	$	1,084	13.4	%	$	2,124	(30.9)	%

The components of deferred income tax assets/(liabilities) were as follows:


	December 31,
Dollars in Millions	2022		2021
Deferred tax assets
Foreign net operating loss and other carryforwards	$	566	$	945
State net operating loss and credit carryforwards	329		304
U.S. Federal net operating loss and credit carryforwards	236		226
Milestone payments and license fees	1,030		887


Capitalized research expenditures	1,573		—
Other	1,284		1,390
Total deferred tax assets	5,018		3,752
Valuation allowance	(873)		(1,056)
Deferred tax assets net of valuation allowance	$	4,145	$	2,696

Deferred tax liabilities
Acquired intangible assets	$	(4,362)	$	(4,867)
Goodwill and other	(605)		(891)
Total deferred tax liabilities	$	(4,967)	$	(5,758)

Deferred tax liabilities, net	$	(822)	$	(3,062)

Recognized as:
Deferred income taxes assets – non-current	$	1,344	$	1,439

Deferred income taxes liabilities – non-current	(2,166)		(4,501)
Total	$	(822)	$	(3,062)

Changes in the valuation allowance were as follows:


	Year Ended December 31,
Dollars in Millions	2022		2021		2020
Balance at beginning of year	$	1,056	$	2,809	$	2,844
Provision	213		201		62
Utilization	(68)		(1,087)		(488)
Foreign currency translation	(59)		(157)		212
Acquisitions/(dispositions)/(liquidations), net	(271)		(720)		179
Non U.S. rate change	2		10		—
Balance at end of year	$	873	$	1,056	$	2,809

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (excluding interest and penalties):


	Year Ended December 31,
Dollars in Millions	2022		2021		2020
Balance at beginning of year	$	2,042	$	2,003	$	1,905
Gross additions to tax positions related to current year	53		66		76
Gross additions to tax positions related to prior years	137		75		325
Gross additions to tax positions assumed in acquisitions	15		—		51
Gross reductions to tax positions related to prior years	(381)		(22)		(352)
Settlements	(8)		(70)		(7)
Reductions to tax positions related to lapse of statute	(83)		(5)		(5)
Cumulative translation adjustment	(9)		(5)		10
Balance at end of year	$	1,766	$	2,042	$	2,003

Additional information regarding unrecognized tax benefits is as follows:


	Year Ended December 31,
Dollars in Millions	2022		2021		2020
Unrecognized tax benefits that if recognized would impact the effective tax rate	$	1,736	$	1,957	$	1,900
Accrued interest	332		424		366
Accrued penalties	25		26		20