v3.25.4
INCOME TAXES (Tables)
 12 Months Ended
Dec. 31, 2025
Income Tax Disclosure [Abstract]  
Summary of Income Before Income Taxes
Income before income taxes consists of the following:
Year Ended December 31,
(in millions)202520242023
Domestic$8,310 $(876)$5,467 
Foreign1,486 1,566 1,392 
Income before income taxes$9,796 $690 $6,859 
Summary of Income Tax Expense
Income tax expense consists of the following:
Year Ended December 31,
(in millions)202520242023
Federal:
Current$820 $1,495 $1,781 
Deferred424 (1,562)(1,126)
1,244 (67)655 
State:
Current51 39 80 
Deferred(190)(386)170 
(139)(347)250 
Foreign:
Current256 519 381 
Deferred(75)106 (39)
181 625 342 
Income tax expense$1,286 $211 $1,247 
Summary of Effective Tax Rate Reconciliation
The reconciliation between the federal statutory tax rate applied to Income before income taxes and our effective tax rate is summarized as follows(1):
Year Ended December 31,
202520242023
(in millions, except percentages)AmountPercentAmountPercentAmountPercent
Income tax expense at U.S. federal statutory tax rate$2,057 21.0 %$145 21.0 %$1,440 21.0 %
State taxes, net of federal benefit(2)
(138)(1.4)%(159)(23.0)%174 2.5 %
Foreign taxes:
Ireland:
Tax rate differential(118)(1.2)%(67)(9.7)%(58)(0.8)%
Other— — %46 6.7 %69 1.0 %
United Kingdom:
Tax rate differential****5 0.1 %
Intercompany asset transfer****92 1.3 %
Other****16 0.2 %
Australia:
Tax rate differential**7 1.0 %**
Intercompany asset transfer**388 56.2 %**
Valuation allowance**(101)(14.6)%**
Other**(44)(6.4)%**
Other foreign jurisdictions(9)(0.1)%41 5.9 %(30)(0.4)%
Effect of cross-border tax laws:
Global intangible low-taxed income85 0.9 %66 9.6 %23 0.3 %
Foreign-derived intangible income(85)(0.9)%(133)(19.3)%(143)(2.1)%
U.S. taxation of foreign branches9 0.1 %(245)(35.5)%— — %
Other2 — %14 2.0 %13 0.2 %
Tax credits:
R&D tax credits(143)(1.5)%(144)(20.9)%(164)(2.4)%
Other(9)(0.1)%(13)(1.9)%(56)(0.8)%
Changes in valuation allowance(3)
(538)(5.5)%588 85.2 %38 0.6 %
Nontaxable or nondeductible items:
Acquired IPR&D and related charges65 0.7 %810 117.4 %88 1.3 %
Other20 0.2 %98 14.2 %(2)— %
Changes in unrecognized tax benefits61 0.6 %(427)(61.9)%(197)(2.9)%
Other adjustments:
Settlement of tax examinations— — %251 36.4 %(67)(1.0)%
Legal entity restructuring— — %(884)(128.1)%— — %
Other27 0.3 %(26)(3.8)%6 0.1 %
Income tax expense / Effective tax rate$1,286 13.1 %$211 30.5 %$1,247 18.2 %
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*    Amounts did not meet the disaggregation threshold and therefore are included in Other foreign jurisdictions for this year instead of being broken out separately.
(1)    Recurring items in this rate reconciliation table for 2024 are significantly impacted by the lower Income before income taxes for that year.
(2)    Majority of 2025 state taxes related to Louisiana. Majority of 2024 and 2023 state taxes related to Tennessee.
(3)    The amount in 2025 primarily relates to changes in realizability of a tax loss attribute related to a prior year legal entity restructuring.
Summary of Deferred Tax Assets and Liabilities
Significant components of our deferred tax assets and liabilities are as follows:
December 31,
(in millions)20252024
Deferred tax assets:  
Net operating loss carryforwards$266 $288 
Stock-based compensation83 84 
Reserves and accruals not currently deductible688 685 
Excess of tax basis over book basis of intangible assets776 910 
Deductible acquired IPR&D payments1,293 1,312 
Research and other credit carryforwards353 428 
Equity investments111 237 
Liability related to future royalties270 287 
Capitalized R&D expenditures1,773 2,173 
Capital losses187 590 
Other, net252 213 
Total deferred tax assets before valuation allowance6,052 7,207 
Valuation allowance(1)
(676)(1,217)
Total deferred tax assets5,376 5,990 
Deferred tax liabilities:
Property, plant and equipment(288)(276)
Excess of book basis over tax basis of intangible assets(3,209)(3,836)
Equity investments(92)(81)
Other(225)(143)
Total deferred tax liabilities(3,814)(4,336)
Net deferred tax assets$1,562 $1,654 
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(1)    The valuation allowance decreased $541 million in 2025 primarily due to changes in realizability of a tax loss attribute related to a prior year legal entity restructuring. The valuation allowance increased $554 million in 2024 primarily due to capital losses, state research credits, and unrealized losses on our equity investments, partially offset by utilization of foreign net operating losses.
Summary of Unrecognized Tax Benefits Roll Forward
The following is a rollforward of our total gross unrecognized tax benefits:
Year Ended December 31,
(in millions)202520242023
Beginning balance$2,325 $1,962 $1,959 
Tax positions related to current year:
Additions180 743 265 
Tax positions related to prior years:
Additions243 190 109 
Reductions(669)(298)(315)
Settlements— (270)(42)
Lapse of statute of limitations(3)(2)(13)
Ending balance$2,076 $2,325 $1,962 
Summary of Income Taxes Paid (Net of Refunds Received)
Income taxes paid (net of refunds received), disaggregated by jurisdiction, were as follows:
Year Ended December 31,
(in millions)202520242023
Federal(1)
$2,492 $2,434 $3,411 
State230 107 152 
Foreign:
Australia(2)
253 **
Other240 238 427 
Total income taxes paid$3,215 $2,779 $3,990 
_______________________________
*    Amounts did not meet the disaggregation threshold and therefore are included in Other for this year instead of being broken out separately.
(1)    Includes payments of $1.3 billion in 2025, $1.2 billion in 2024 and $0.9 billion in 2023 related to the transition tax on the mandatory deemed repatriation of foreign earnings in connection with the Tax Cuts and Jobs Act, with the final payment being made in 2025.
(2)    Australia tax payment in 2025 primarily relates to 2024 intercompany asset restructuring involving transfer of certain assets from a prior acquisition to the U.S.