Income Taxes

12 Months Ended

Dec. 31, 2012

Income Taxes Disclosure [Abstract]

Income Taxes [Text Block]

Note 7.Income Taxes

       The components of income from continuing operations before provision for income taxes are as follows:

(In millions)	2012		2011		2010
U.S.	$	908.5	$	812.1	$	710.3
Non-U.S.		360.9		320.7		377.4
	$	1,269.4	$	1,132.8	$	1,087.7

       The components of the provision for income taxes of continuing operations are as follows:

(In millions)		2012		2011		2010
Current Income Tax Provision
	Federal	$	160.5	$	149.7	$	226.0
	Non-U.S.		92.1		68.5		104.5
	State		16.1		14.6		32.5
			268.7		232.8		363.0
Deferred Income Tax Provision (Benefit)
	Federal	$	(40.8)	$	(11.4)	$	(169.1)
	Non-U.S.		(205.2)		(107.0)		(68.3)
	State		(11.7)		(5.0)		(24.0)
			(257.7)		(123.4)		(261.4)
		$	11.0	$	109.4	$	101.6

       The income tax provision (benefit) included in the accompanying statement of income is as follows:

(In millions)	2012		2011		2010
Continuing Operations	$	11.0	$	109.4	$	101.6
Discontinued Operations		(44.0)		191.5		31.4
	$	(33.0)	$	300.9	$	133.0

The company receives a tax deduction upon the exercise of non-qualified stock options by employees for the difference between the exercise price and the market price of the underlying common stock on the date of exercise. The provision for income taxes that is currently payable does not reflect $18.7 million and $14.6 million of such benefits that have been allocated to capital in excess of par value in 2012 and 2011, respectively.

The provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate of 35% to income from continuing operations before provision for income taxes due to the following:

(In millions)		2012		2011		2010
Provision for Income Taxes at Statutory Rate		$	444.3	$	396.5	$	380.7
Increases (Decreases) Resulting From:
	Foreign rate differential		(319.5)		(279.6)		(156.0)
	Impact of change in tax laws and apportionment on deferred taxes		(53.7)		11.7		(11.0)
	Income tax credits		(52.1)		(24.8)		(79.5)
	Manufacturing deduction		(27.3)		(27.0)		(31.5)
	State income taxes, net of federal tax		(8.6)		0.3		2.8
	Nondeductible expenses		8.1		17.5		5.8
	Provision (reversal) of tax reserves, net		14.8		0.6		(6.4)
	Tax return reassessments and settlements		—		3.0		(1.3)
	Other, net		5.0		11.2		(2.0)
		$	11.0	$	109.4	$	101.6

The impact of change in tax laws and apportionment on deferred taxes in 2012 includes $54.8 million of benefit from a tax rate reduction enacted in Sweden.

Net deferred tax asset (liability) in the accompanying balance sheet consists of the following:

(In millions)		2012		2011
Deferred Tax Asset (Liability)
	Depreciation and amortization	$	(2,543.9)	$	(2,778.3)
	Net operating loss and credit carryforwards		504.9		497.4
	Reserves and accruals		116.0		132.0
	Accrued compensation		210.0		206.4
	Inventory basis difference		67.4		38.1
	Available-for-sale investments		2.9		4.5
	Non U.S. earnings expected to be repatriated		1.6		1.6
	Other capitalized costs		35.6		45.1
	Unrealized losses on hedging instruments		21.0		22.3
	Other, net		44.4		46.4
			(1,540.1)		(1,784.5)
	Less: Valuation allowance		113.7		141.9
		$	(1,653.8)	$	(1,926.4)

The company estimates the degree to which tax assets and loss 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 go unused. At December 31,2012, all of the company's valuation allowance relates to deferred tax assets for which any subsequently recognized tax benefits will reduce income tax expense.

       At December 31,2012, the company had federal, state and non-U.S. net operating loss carryforwardsof $141.7 million, $793.8 million and $1.35billion, respectively. Use of the carryforwards is limited based on the future income of certain subsidiaries. The federal and state net operating loss carryforwards expire in the years 2013 through 2032. Of the non-U.S. net operating loss carryforwards, $150.5 million expire in the years 2013 through 2031, and the remainder do not expire. The company also had $110.3 million of federal foreign tax credit carryforwards as of December 31,2012, which expire in the years 2013 through 2022.

       A provision has not been made for U.S. or additional non-U.S. taxes on $5.42 billion of undistributed earnings of international subsidiaries that could be subject to taxation if remitted to the U.S. because the company plans to keep these amounts permanently reinvested overseas except for instances where the company can remit such earnings to the U.S. without an associated net tax cost. During 2009, the company changed its position regarding the undistributed earnings of a Japan subsidiary and a portion of the earnings of the subsidiary are no longer considered permanently reinvested. During 2010, the company repatriated part of those earnings and as a result, the company provided deferred U.S. income taxes of $14.0million, offset by a U.S. foreign tax credit of $15.6 million, on the remaining undistributed earnings not considered permanently reinvested overseas.

Unrecognized Tax Benefits

       As of December 31,2012, the company had $164.8 million of unrecognized tax benefits 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)	2012		2011		2010
Balance at beginning of year	$	120.3	$	62.1	$	76.2
Additions for tax positions of current year		20.5		43.2		1.3
Additions for tax positions of prior years		31.8		18.6		2.9
Reductions for tax positions of prior years		—		(2.1)		—
Closure of tax years		(7.8)		—		(7.8)
Settlements		—		(1.5)		(10.5)
	$	164.8	$	120.3	$	62.1

       During 2012, the company's liability for unrecognized tax benefits increased primarily due to additional tax benefits associated with foreign currency transactions and interest deductions.Of the total $165 million of liability, $24 million is classified as a current liability and the remainder is long-term.

       During 2012, the statute of limitations on certain unrecognized tax benefits lapsed which resulted in a decrease in the liability for unrecognized tax benefits of $7.8 million, all of which reduced income tax expense.

During 2011, the company's liability for unrecognized tax benefits increased primarily due to additional unrecognized tax benefits associated with the liquidation of a U.S. subsidiary, utilization of capital loss carryforwards and acquisitions.

In 2011, the company settled the IRS audit of a refund claim relating to the 2000 and 2001 tax years which resulted in a $1.5 million decrease in the liability for unrecognized tax benefits. The company is also under audit by the IRS for the 2008 and 2009 tax years. It is likely that the examination phase of this audit will be completed within 12 months. There were no significant changes to the status of these examinations during 2012.

During 2010, the statute of limitations on certain unrecognized tax benefits lapsed which resulted in a decrease in the liability for unrecognized tax benefits of $7.8 million, all of which reduced income tax expense.

In 2010, the company settled a Swiss audit of one of its subsidiary's 2006 and 2007 tax years which resulted in a $8.5 million decrease in the liability for unrecognized tax benefits. The company also settled the IRS audit of its 2007 tax year and the IRS completed the examination phase of its 2006 tax year and the 2006 pre-acquisition tax years of certain Fisher subsidiaries in 2010 which resulted in a $1.2 million decrease in the liability for unrecognized tax benefits.Completion of the audits of the 2006 tax year and the 2006 pre-acquisition tax years of certain Fisher subsidiaries is pending appeals at the IRS. In addition, the company settled various state income tax audits during 2010, which resulted in a $0.8 million decrease in the liability forunrecognized tax benefits.

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, 2012 and 2011 was $10.9 million.

       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, Italy, Japan, the United Kingdom and the United States. With few exceptions, the company is no longer subject to U.S. federal, state and local, or non-U.S., income tax examinations for years before 2007.