INCOME TAXES

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

INCOME TAXES

INCOME TAXES

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

	Year Ended December 31,
Dollars in millions	2023		2022		2021
Current:
U.S.	$	2,745	$	3,017	$	1,879
Non-U.S.	943		1,089		598
Total current	3,688		4,106		2,477
Deferred:
U.S.	(2,339)		(2,889)		(1,255)
Non-U.S.	(949)		151		(138)
Total deferred	(3,288)		(2,738)		(1,393)
Total Provision for Income Taxes	$	400	$	1,368	$	1,084

Effective Tax Rate

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	2023				2022				2021
Earnings before income taxes:
U.S.	$	2,624			$	(140)			$	1,593
Non-U.S.	5,816				7,853				6,505
Total	8,440				7,713				8,098
U.S. statutory rate	1,772		21.0	%	1,620		21.0	%	1,701		21.0	%
GILTI, net of foreign derived intangible income deduction	223		2.6	%	634		8.2	%	645		8.0	%
Foreign tax effect of certain operations in Ireland, Puerto Rico and Switzerland	(850)		(10.1)	%	(416)		(5.4)	%	(143)		(1.8)	%
Non-U.S. tax ruling	(656)		(7.8)	%	—		—	%	—		—	%
Internal transfers of intangible and other assets	—		—	%	(93)		(1.2)	%	(983)		(12.1)	%
U.S. Federal valuation allowance	(171)		(2.0)	%	58		0.8	%	6		0.1	%
U.S. Federal, state and foreign contingent tax matters	143		1.7	%	(297)		(3.9)	%	154		1.9	%
U.S. Federal research-based credits	(243)		(2.9)	%	(142)		(1.8)	%	(165)		(2.0)	%
Charitable contributions of inventory	(75)		(0.9)	%	(94)		(1.2)	%	(42)		(0.5)	%
Contingent value rights	—		—	%	—		—	%	(108)		(1.3)	%
Puerto Rico excise tax credit	—		—	%	(144)		(1.9)	%	(152)		(1.9)	%
State and local taxes (net of valuation allowance)	92		1.1	%	103		1.3	%	33		0.4	%
Foreign and other	165		2.0	%	139		1.8	%	138		1.6	%
Total Provision for Income Taxes	$	400	4.7	%	$	1,368	17.7	%	$	1,084	13.4	%

GILTI, net of foreign derived intangible income deduction includes a benefit of approximately $325 million due to the revised 2023 guidance regarding the deductibility of certain research and development expenses.

Foreign tax effect of certain operations in Ireland, Puerto Rico and Switzerland includes the impact of earnings mix and a $123 million benefit from the impact of foreign currency on net operating loss and other carryforwards in 2023.

The Non-U.S. tax ruling includes a $656 million deferred income tax benefit regarding the deductibility of a statutory impairment of subsidiary investments in 2023.

Internal transfers of intangible and other assets to streamline our legal entity structure subsequent to the Celgene acquisition resulted in a tax benefit in 2022 and 2021.

U.S. Federal valuation allowance includes a $193 million reversal related to unrealized equity investment losses in 2023.

U.S. Federal, state and foreign contingent tax matters include tax benefits related to lapse of statute and effectively settled contingent tax matters of $89 million in 2023 and $522 million in 2022.

U.S. Federal research-based credits includes credits both on research and development as well as orphan drug. The credits in 2023 include revised estimates upon finalization of prior year tax returns.

Fair value adjustments for contingent value rights are not taxable or tax deductible.

Puerto Rico imposed an excise tax on the gross company purchase price of goods sold from BMS’s manufacturer in Puerto Rico. The excise tax was recognized in Cost of products sold when the intra-entity sale occurred. For U.S. income tax purposes, the excise tax was not deductible but resulted in foreign tax credits that were generally recognized in BMS’s provision for income taxes when the excise tax was incurred. As of December 31, 2022, BMS amended its existing Puerto Rico decree, eliminating the excise tax and increasing its Puerto Rico tax rate to 10.5% effective for the tax year beginning January 1, 2023, and extending BMS’s tax grants an additional 15 years to 2038.

Deferred Taxes and Valuation Allowance

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

	December 31,
Dollars in millions	2023		2022
Deferred tax assets
Foreign net operating loss and other carryforwards	$	2,017	$	566
State net operating loss and credit carryforwards	349		329
U.S. Federal capital loss, net operating loss and tax credit	249		236
Milestone payments and license fees	918		1,030
Capitalized research expenditures	2,682		1,573
Other	1,883		1,284
Total deferred tax assets	8,098		5,018
Valuation allowance	(764)		(873)
Deferred tax assets net of valuation allowance	$	7,334	$	4,145
Deferred tax liabilities
Acquired intangible assets	$	(4,052)	$	(4,362)
Goodwill and other	(852)		(605)
Total deferred tax liabilities	$	(4,904)	$	(4,967)
Deferred tax assets/(liabilities), net	$	2,430	$	(822)
Recognized as:
Deferred income taxes assets – non-current	$	2,768	$	1,344
Deferred income taxes liabilities – non-current	(338)		(2,166)
Total	$	2,430	$	(822)

BMS is not indefinitely reinvested with respect to its undistributed earnings from foreign subsidiaries and has provided a deferred tax liability for foreign and state income and withholding tax that would apply. BMS remains indefinitely reinvested with respect to its financial statement basis in excess of tax basis of its foreign subsidiaries. A determination of the deferred tax liability with respect to this basis difference is not practicable.

Foreign net operating loss and other carryforwards includes the impact of a non-U.S. tax ruling regarding the deductibility of a statutory impairment of subsidiary investments.

The U.S. Federal net operating loss carryforwards were $420 million at December 31, 2023. These carryforwards were acquired as a result of certain acquisitions and are subject to limitations under Section 382 of the Internal Revenue Code. The net operating loss carryforwards expire in varying amounts beginning in 2024. The foreign and state net operating loss carryforwards expire in varying amounts beginning in 2024 (certain amounts have unlimited lives).

At December 31, 2023, a valuation allowance of $764 million exists for the following items: $319 million primarily for foreign net operating loss and tax credit carryforwards, $303 million for state deferred tax assets including net operating loss and tax credit carryforwards and $142 million for U.S. Federal deferred tax assets including equity investment fair value adjustments and U.S. Federal net operating loss carryforwards.

Changes in the valuation allowance were as follows:

	Year Ended December 31,
Dollars in millions	2023		2022		2021
Balance at beginning of year	$	873	$	1,056	$	2,809
Provision	(39)		213		201
Utilization	(54)		(68)		(1,087)
Foreign currency translation	(19)		(59)		(157)
Acquisitions/(dispositions)/(liquidations), net	—		(271)		(720)
Non-U.S. rate change	3		2		10
Balance at end of year	$	764	$	873	$	1,056

In 2022 and 2021, certain foreign net operating losses and related valuation allowances were utilized or eliminated as a result of internal legal entity restructurings.

Income tax payments were $4.3 billion in 2023, $5.4 billion in 2022 and $3.5 billion in 2021.

In connection with the enactment of the TCJA, we were required to pay a one-time transition tax and elected to pay over a period of eight years as permitted under the TCJA. The remaining amounts payable are as follows: $799 million in 2024; $1.0 billion in 2025; and $244 million in 2026.

Business is conducted in various countries throughout the world and is subject to tax in numerous jurisdictions. A significant number of tax returns that are filed are subject to examination by various federal, state and local tax authorities. Tax examinations are often complex, as tax authorities may disagree with the treatment of items reported requiring several years to resolve. Liabilities are established for possible assessments by tax authorities resulting from known tax exposures including, but not limited to, transfer pricing matters, tax credit deductibility of certain expenses, and deemed repatriation transition tax. Such liabilities represent a reasonable provision for taxes ultimately expected to be paid and may need to be adjusted over time as more information becomes known. The effect of changes in estimates related to contingent tax liabilities is included in the effective tax rate reconciliation above.

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	2023		2022		2021
Balance at beginning of year	$	1,766	$	2,042	$	2,003
Gross additions to tax positions related to current year	38		53		66
Gross additions to tax positions related to prior years	145		137		75
Gross additions to tax positions assumed in acquisitions	—		15		—
Gross reductions to tax positions related to prior years	(5)		(381)		(22)
Settlements	(30)		(8)		(70)
Reductions to tax positions related to lapse of statute	(4)		(83)		(5)
Cumulative translation adjustment	4		(9)		(5)
Balance at end of year	$	1,914	$	1,766	$	2,042

Additional information regarding unrecognized tax benefits is as follows:

	Year Ended December 31,
Dollars in millions	2023		2022		2021
Unrecognized tax benefits that if recognized would impact the effective tax rate	$	1,872	$	1,736	$	1,957
Accrued interest	434		332		424
Accrued penalties	23		25		26
Interest and penalties expense/(benefit)	110		(87)		66

Accrued interest and penalties payable for unrecognized tax benefits are included in either current or non-current income taxes payable. Interest and penalties related to unrecognized tax benefits are included in income tax expense. These amounts reflect the beneficial impacts of various tax settlements, including the settlement discussed below.

BMS is currently under examination by a number of tax authorities that proposed or are considering proposing material adjustments to tax positions for issues such as transfer pricing, certain tax credits and the deductibility of certain expenses. As previously disclosed, BMS received several notices of proposed adjustments from the IRS related to transfer pricing and other tax issues for the 2008 to 2012 tax years. BMS disagrees with the IRS’s positions and continues to work cooperatively with the IRS to resolve these issues. In 2022, BMS entered the IRS administrative appeals process to resolve these matters. Timing of the final resolution of these complex matters is uncertain and could have a material impact on BMS’s financial statements. Tax positions for these years unrelated to matters that entered the administrative appeals process are considered effectively settled.

It is reasonably possible that new issues will be raised by tax authorities that may increase unrecognized tax benefits; however, an estimate of such increases cannot reasonably be made at this time. BMS believes that it has adequately provided for all open tax years by tax jurisdiction.

It is also reasonably possible that the total amount of unrecognized tax benefits at December 31, 2023 could decrease in the range of approximately $100 million to $140 million in the next twelve months as a result of the settlement of certain tax audits and other events. The expected change in unrecognized tax benefits may result in the payment of additional taxes, adjustment of certain deferred taxes and/or recognition of tax benefits. The following is a summary of major tax jurisdictions for which tax authorities may assert additional taxes based upon tax years currently under audit and subsequent years that will likely be audited:

U.S.	2008 to 2012, 2016 to 2023
Canada	2012 to 2023
France	2020 to 2023
Germany	2015 to 2023
Italy	2019 to 2023
Japan	2018 to 2023
UK	2012 to 2023