Taxes on Earnings

3 Months Ended

Mar. 31, 2017

Taxes on Earnings

Taxes on Earnings

Note 14 — Taxes on Earnings

Taxes on earnings from continuing operations reflect the estimated annual effective rates and include charges for interest and penalties. In the first quarter of 2017, taxes on earnings from continuing operations include $430 million of tax expense related to the gain on the sale of the AMO business, which is taxed at a discrete tax rate.  Earnings from discontinued operations, net of tax, in the first quarter of 2017 reflected the recognition of $33 million of net tax benefits primarily as a result of the resolution of various tax positions related to prior years which decreased the gross amount of unrecognized tax benefits by $33 million.  In the first quarter of 2016, taxes on earnings from continuing operations included the impact of a net tax benefit of approximately $140 million as a result of the resolution of various tax positions from prior years, partially offset by the unfavorable impact of non-deductible foreign exchange losses related to Venezuela.  Earnings from discontinued operations, net of tax, in the first quarter of 2016 reflected the recognition of $247 million of net tax benefits primarily as a result of the resolution of various tax positions related to prior years. The conclusion of these tax matters decreased the gross amount of unrecognized tax benefits by approximately $444 million.

Tax authorities in various jurisdictions regularly review Abbott’s income tax filings.  Abbott believes that it is reasonably possible that the recorded amount of gross unrecognized tax benefits may decrease by $200 million to $350 million, including cash adjustments, within the next twelve months as a result of concluding various domestic and international tax matters. In the U.S., Abbott’s federal income tax returns are settled through 2013 and St. Jude Medical’s federal income tax returns are settled through 2013 except for one item.