AbbVie Inc.ABBV
AbbVie Inc. Income Taxes Disclosure
Income Taxes
Earnings Before Income Tax Expense
| years ended December 31 (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Domestic | $ | (3,540) | $ | (7,743) | $ | (3,475) | |||||||||||
| Foreign | 10,137 | 11,459 | 9,725 | ||||||||||||||
| Total earnings before income tax expense | $ | 6,597 | $ | 3,716 | $ | 6,250 | |||||||||||
Income Tax Expense
| years ended December 31 (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Current | |||||||||||||||||
| Domestic | $ | 1,230 | $ | (331) | $ | 3,272 | |||||||||||
| Foreign | 1,626 | 1,210 | 994 | ||||||||||||||
| Total current taxes | $ | 2,856 | $ | 879 | $ | 4,266 | |||||||||||
| Deferred | |||||||||||||||||
| Domestic | $ | (61) | $ | (1,303) | $ | (2,324) | |||||||||||
| Foreign | (431) | (146) | (565) | ||||||||||||||
| Total deferred taxes | $ | (492) | $ | (1,449) | $ | (2,889) | |||||||||||
| Total income tax expense (benefit) | $ | 2,364 | $ | (570) | $ | 1,377 | |||||||||||
Effective Tax Rate Reconciliation
ASU 2023-09 was adopted on a prospective basis for the year ended December 31, 2025, accordingly the following table has been included which reconciles the U.S. federal statutory tax rate and expense to the effective tax rate:
| year ended December 31 (dollars in millions, except for percentages) | 2025 | ||||||||||
| Statutory tax rate | $ | 1,385 | 21.0 | % | |||||||
| Foreign tax effects | |||||||||||
| Puerto Rico | |||||||||||
| Tax rate differential | 1,426 | 21.6 | |||||||||
| Impact from industrial development income | (2,989) | (45.3) | |||||||||
| Other | (23) | (0.3) | |||||||||
| Bermuda | |||||||||||
| Tax rate differential | 104 | 1.6 | |||||||||
| Valuation allowances | 286 | 4.3 | |||||||||
| Other | (14) | (0.2) | |||||||||
| Ireland | |||||||||||
| Tax rate differential | (115) | (1.7) | |||||||||
| Net operating loss utilization | 101 | 1.5 | |||||||||
| Other | (7) | (0.1) | |||||||||
| Malta | |||||||||||
| Tax rate differential | (118) | (1.8) | |||||||||
| Deduction on equity | (128) | (1.9) | |||||||||
| Non-deductible items | 241 | 3.7 | |||||||||
| Other | 35 | 0.5 | |||||||||
| All other, net | 94 | 1.4 | |||||||||
| Effect of cross-border tax laws | |||||||||||
| Global intangible low-taxed income, net of foreign tax credit (FTC) | 1,114 | 16.9 | |||||||||
| U.S. tax impact of branch accounting, net of FTC | (149) | (2.3) | |||||||||
| Other | 99 | 1.5 | |||||||||
| Tax credits | (142) | (2.2) | |||||||||
| Unrecognized tax benefits | 654 | 9.9 | |||||||||
| Change in valuation allowances | (94) | (1.4) | |||||||||
| Non-taxable and non-deductible acquisition costs | 649 | 9.8 | |||||||||
| All other, net | (45) | (0.7) | |||||||||
| Effective tax rate | $ | 2,364 | 35.8 | % | |||||||
As previously disclosed for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, the effective income tax rate differs from the statutory federal income tax rate as follows:
| years ended December 31 | 2024 | 2023 | |||||||||
| Statutory tax rate | 21.0 | % | 21.0 | % | |||||||
| Effect of foreign operations | 7.6 | 8.0 | |||||||||
| U.S. tax credits | (5.4) | (3.1) | |||||||||
| Stock-based compensation | (1.2) | (1.0) | |||||||||
| Non-deductible expenses | 1.1 | 0.7 | |||||||||
| Tax law changes and related structuring | (0.3) | (3.8) | |||||||||
| Tax audits, settlements and reserves | (51.4) | (1.1) | |||||||||
| Acquisition costs | 13.4 | 0.2 | |||||||||
| All other, net | (0.1) | 1.1 | |||||||||
| Effective tax rate | (15.3) | % | 22.0 | % | |||||||
The effective income tax rate fluctuates year to year due to the allocation of the company’s taxable earnings among jurisdictions, as well as certain discrete factors and events in each year, including changes in tax law and business development activities. The effective income tax rates in 2025, 2024 and 2023 differed from the statutory tax rate principally due to the impact of foreign operations with lower income tax rates in locations outside the United States, the U.S. global minimum tax, changes in fair value of contingent consideration, tax audits and settlements, tax credits and incentives in the United States, Puerto Rico and other foreign tax jurisdictions, and business development activities. The effective income tax rate in 2025 was higher than 2024 primarily due to a one-time tax benefit associated with the closing of a three-year U.S. IRS examination in 2024, partially offset by decreases in unrecognized tax benefits, a decrease in the impact of acquisition costs related to certain business development activities and a decrease related to the impact of changes in fair value of contingent consideration. The effective income tax rate in 2024 was lower than 2023 due to the closing of the U.S. IRS examination, partially offset by increases in unrecognized tax benefits pertaining to prior years.
The Tax Cuts and Jobs Act (2017 Act) was signed into law in December 2017, resulting in significant changes to the U.S. corporate tax system, including a one-time transition tax on a mandatory deemed repatriation of earnings of certain foreign subsidiaries that were previously untaxed. The 2017 Act also created a U.S. global minimum tax on certain foreign sourced earnings. The company’s accounting policy for the minimum tax on foreign sourced earnings is to report the tax effects on the basis that the minimum tax will be recognized in tax expense in the year it is incurred as a period expense.
On July 4, 2025, the United States government signed into law the One Big Beautiful Bill Act of 2025 (2025 Act). Included within the 2025 Act are provisions that permanently extend certain expiring provisions of the 2017 Act, modify the international tax framework to reduce the tax rate on certain foreign earned income, restore the tax treatment of expensing for domestic research and development costs and bonus depreciation, and allow for full expensing of qualified production property. In addition, the legislation contains multiple effective dates and transition elections, with certain provisions effective in 2025 and others implemented through 2027. The new legislation had a favorable impact on cash tax payments in the current year.
Income Taxes Paid
ASU 2023-09 was adopted on a prospective basis for the year ended December 31, 2025, accordingly the following table has been included which discloses the amount of income taxes paid (net of refunds) disaggregated by jurisdiction:
| year ended December 31 (in millions) | 2025 | ||||
| Domestic | $ | 2,185 | |||
| Foreign | |||||
| Ireland | 431 | ||||
| Puerto Rico | 297 | ||||
| Other | 713 | ||||
| Total foreign | 1,441 | ||||
| Income taxes paid | $ | 3,626 | |||
As previously disclosed and prior to the adoption of ASU 2023-09, income taxes paid totaled $4.1 billion and $4.7 billion for the years ended December 31, 2024 and 2023.
Deferred Tax Assets and Liabilities
| as of December 31 (in millions) | 2025 | 2024 | |||||||||
| Deferred tax assets | |||||||||||
| Compensation and employee benefits | $ | 74 | $ | 215 | |||||||
| Accruals and reserves | 1,133 | 1,253 | |||||||||
| Chargebacks and rebates | 1,482 | 1,354 | |||||||||
| Net operating losses and other carryforwards | 16,022 | 15,815 | |||||||||
| Other | 2,504 | 2,222 | |||||||||
| Total deferred tax assets | 21,215 | 20,859 | |||||||||
| Valuation allowances | (15,018) | (14,823) | |||||||||
| Total net deferred tax assets | 6,197 | 6,036 | |||||||||
| Deferred tax liabilities | |||||||||||
| Excess of book basis over tax basis of intangible assets | (1,530) | (1,969) | |||||||||
| Excess of book basis over tax basis in investments | (322) | (302) | |||||||||
| Other | (630) | (718) | |||||||||
| Total deferred tax liabilities | (2,482) | (2,989) | |||||||||
| Net deferred tax assets | $ | 3,715 | $ | 3,047 | |||||||
The increase in deferred tax assets is primarily due to losses in other comprehensive income related to net investment hedges. The decrease in deferred tax liabilities is due to the amortization and impairment of intangible assets.
The company had valuation allowances of $15.0 billion as of December 31, 2025 and $14.8 billion as of December 31, 2024. These were principally related to foreign and state net operating losses and other credit carryforwards that are not expected to be realized.
As of December 31, 2025, the company had U.S. federal, state and foreign credit carryforwards of $614 million as well as U.S. federal, state and foreign net operating loss carryforwards of $38.4 billion, which will expire at various times through 2045. The company also had foreign loss carryforwards of $35.1 billion that have no expiration.
Unremitted foreign earnings subject to the 2017 Act’s transition tax are not considered indefinitely reinvested. Post-2017 earnings subject to the U.S. minimum tax on foreign sourced earnings or eligible for the 100% foreign dividends received deduction are also not considered indefinitely reinvested earnings. However, the company generally considers instances of outside basis differences in foreign subsidiaries that would incur additional U.S. tax upon reversal (e.g., capital gain distributions) to be permanent in duration. The unrecognized tax liability is not practicable to determine.
Unrecognized Tax Benefits
| years ended December 31 (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Beginning balance | $ | 4,401 | $ | 5,762 | $ | 5,670 | |||||||||||
| Increase due to current year tax positions | 337 | 173 | 129 | ||||||||||||||
| Increase due to prior year tax positions | 20 | 454 | 109 | ||||||||||||||
| Decrease due to prior year tax positions | (18) | (1,741) | (21) | ||||||||||||||
| Settlements | (222) | (284) | (86) | ||||||||||||||
| Increase due to acquisitions | 12 | 82 | — | ||||||||||||||
| Lapse of statutes of limitations | (25) | (45) | (39) | ||||||||||||||
| Ending balance | $ | 4,505 | $ | 4,401 | $ | 5,762 | |||||||||||
If recognized, the net amount of potential tax benefits that would impact the company's effective tax rate is $4.4 billion in 2025 and $4.3 billion in 2024. The "Increase due to current year tax positions" and "Increase due to prior year tax positions" in the table above include amounts related to federal, state and international tax items.
AbbVie recognizes interest and penalties related to income tax matters in income tax expense in the consolidated statements of earnings. AbbVie recognized a gross income tax expense of $315 million in 2025, a gross income tax benefit of $179 million in 2024 and a gross income tax expense of $430 million in 2023 for interest and penalties related to income tax matters. AbbVie had an accrual for the payment of gross interest and penalties of $1.7 billion at December 31, 2025, $1.4 billion at December 31, 2024 and $1.6 billion at December 31, 2023.
The company is routinely audited by the tax authorities in significant jurisdictions and various federal, state and foreign examinations are currently ongoing. All significant federal, state and international tax matters have been concluded for years before 2010. The company believes adequate provision has been made for all income tax uncertainties.Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 14, 2025 | |
| 2023 | Feb 20, 2024 | |
| 2022 | Feb 17, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2019 | Feb 21, 2020 | |
| 2018 | Feb 27, 2019 | |
| 2017 | Feb 16, 2018 | |
| 2016 | Feb 17, 2017 | |
| 2015 | Feb 19, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.