ABBOTT LABORATORIESABT
ABBOTT LABORATORIES Income Taxes Disclosure
Taxes on Earnings
Taxes on earnings reflect the annual effective rates, including charges for interest and penalties. Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts.
Taxes on earnings included $92 million, $50 million, and $22 million in excess tax benefits associated with share-based compensation in 2025, 2024, and 2023, respectively. As a result of the resolution of various tax positions related to prior years, taxes on earnings in 2025, 2024, and 2023 also included approximately $70 million of net tax benefit, $25 million, and $80 million of net tax expense, respectively. In 2025, taxes on earnings included approximately $610 million of tax expense related to a deferred tax asset that was recognized as a significant non-cash tax benefit in a prior year. In 2024, taxes on earnings included $7.5 billion in non-cash valuation allowance adjustments resulting from the restructuring of certain foreign affiliates and the confirmation of certain tax filing positions. The restructuring improved profitability to several of Abbott’s affiliates and management concluded that the related preexisting deferred tax assets, which historically had a full valuation allowance, were more likely than not to be realizable in future periods. In particular, Abbott considered the likelihood of sustained ongoing profitability of the affiliates as a positive factor that outweighed all available negative evidence considered. Accordingly, Abbott released the full valuation allowance on such deferred tax assets and recorded the offset to taxes on earnings.
The TCJA included a one-time transition tax that is based on Abbott’s total post-1986 earnings and profits (E&P) that were previously deferred from U.S. income taxes. The tax computation also required the determination of the amount of post-1986 E&P considered held in cash and other specified assets. As of December 31, 2025, the remaining balance of Abbott’s transition tax obligation related to the TCJA was approximately $205 million. The final installment will be paid in 2026 as allowed by the TCJA. Undistributed foreign earnings remain indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any remaining undistributed foreign earnings not subject to the transition tax and additional outside basis difference in its foreign entities is not practicable.
In the U.S., Abbott’s federal income tax returns through 2016 are settled. In September 2023, Abbott received a Statutory Notice of Deficiency (SNOD) from the IRS for the 2019 Federal tax year in the amount of $417 million. The primary adjustments proposed in the SNOD relate to the reallocation of income between Abbott’s U.S. entities and its foreign affiliates. Abbott believes that the income reallocation adjustments proposed in the SNOD are without merit, in part because certain adjustments contradict methods that were agreed to with the IRS in prior audit periods. The SNOD also contains other proposed adjustments that Abbott believes are erroneous and unsupported. Abbott filed a petition with the U.S. Tax Court contesting the SNOD in December 2023.
In June 2024, Abbott received a SNOD from the IRS for the 2017 and 2018 Federal tax years in the amount of $192 million. The matters proposed in the 2017/2018 SNOD are substantially similar to the income allocation adjustments included in the 2019 SNOD. Abbott filed a petition in September 2024 with the U.S. Tax Court contesting the 2017/2018 SNOD in a manner consistent with its petition for the 2019 SNOD.
In October 2024, Abbott received a SNOD from the IRS for the 2020 Federal tax year assessing an additional $443 million of income tax. The primary adjustments proposed in the SNOD are substantially similar to the income allocation adjustments included in the 2017/2018 and 2019 SNODs. Abbott believes that the income reallocation adjustments proposed in the SNOD are without merit. The SNOD also contains other proposed adjustments and omissions that Abbott believes are erroneous and unsupported. In addition to the tax assessment for the 2020 tax year, the 2020 SNOD also contested a deduction for which an estimated $440 million cash tax benefit would be available in a different taxable year as allowed under applicable U.S. tax law. Abbott filed a petition with the U.S. Tax Court contesting the SNOD in December 2024.
Abbott and the IRS are in active discussions regarding several of the disputed items contained in the 2017 – 2020 SNODs.
In July 2024, Abbott received a $413 million tax assessment from the Malaysian tax authorities for the 2023 tax year. The assessment applies a property capital gains tax on the value of the shares associated with the intercompany sale of an affiliate. Abbott believes the assessment of the Malaysian tax authority to be without merit. In October 2025, the Penang High Court upheld the assessment of the Malaysian tax authority. In October 2025, Abbott filed an appeal with the Malaysian Court of Appeals.
There are numerous other income tax jurisdictions for which tax returns are not yet settled, none of which Abbott expects to be individually significant. Abbott intends to vigorously defend its filing positions in all jurisdictions in which it has unresolved tax matters through ongoing discussions with taxing administrations and/or through litigation as necessary. Abbott reserves for uncertain tax positions related to unresolved tax matters where Abbott’s tax filing position does not meet the standard for recognition of an income tax benefit. Abbott continues to believe that the amount of its recorded reserves for uncertain tax positions is appropriate. Reserves for interest and penalties are not significant.
The Organization for Economic Cooperation & Development (OECD) has proposed a two-pillared plan for a revised international tax system. Pillar 1 proposes to reallocate taxing rights among the jurisdictions in which in-scope multinational corporations operate. Pillar 2 proposes to assess a 15 percent minimum tax on the earnings of in-scope multinational corporations on a country-by-country basis. Numerous countries have enacted legislation to adopt the Pillar 2 model rules. On January 5, 2026, the OECD released administrative guidance that, when enacted, exempts US-parented groups from the Pillar 2 minimum tax. Abbott continues to monitor legislative developments and assess any potential impacts on Abbott's operations for both the Pillar 1 and Pillar 2 proposals.
Earnings before taxes, and the related provisions for taxes on earnings, were as follows:
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Earnings Before Taxes: | ||||||||||||||||||||
| Domestic | $ | 1,762 | $ | 947 | $ | 1,192 | ||||||||||||||
| Foreign | 6,704 | 6,066 | 5,472 | |||||||||||||||||
| Total | $ | 8,466 | $ | 7,013 | $ | 6,664 | ||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | |||||||||||||||||
| Taxes on Earnings: | ||||||||||||||||||||
| Current: | ||||||||||||||||||||
Domestic | $ | — | $ | 497 | $ | 528 | ||||||||||||||
Federal | 302 | |||||||||||||||||||
State | 85 | |||||||||||||||||||
| Foreign | 1,114 | 1,075 | 874 | |||||||||||||||||
| Total current | 1,501 | 1,572 | 1,402 | |||||||||||||||||
| Deferred: | ||||||||||||||||||||
Domestic | — | (459) | (382) | |||||||||||||||||
Federal | (217) | |||||||||||||||||||
State | (40) | |||||||||||||||||||
| Foreign | 698 | (7,502) | (79) | |||||||||||||||||
| Total deferred | 441 | (7,961) | (461) | |||||||||||||||||
| Total | $ | 1,942 | $ | (6,389) | $ | 941 | ||||||||||||||
Income taxes paid (net of refunds received) were as follows:
| (in millions) | 2025 | |||||||
Income taxes paid (net of refunds received): | ||||||||
Federal | $ | 683 | ||||||
State | 33 | |||||||
Foreign: | ||||||||
| Germany | 139 | |||||||
| United Kingdom | 384 | |||||||
All other jurisdictions | 694 | |||||||
Total | $ | 1,933 | ||||||
Differences between the effective income tax rate and the U.S. statutory tax rate were as follows:
| 2025 | |||||||||||
| (dollars in millions) | Amount | Percent | |||||||||
U.S. federal statutory tax rate | $ | 1,778 | 21.0 | % | |||||||
Foreign tax effects | |||||||||||
Costa Rica | |||||||||||
Tax rate differential | (116) | (1.4) | |||||||||
Germany | |||||||||||
Affiliate financing | 100 | 1.2 | |||||||||
Other | 40 | 0.5 | |||||||||
| Luxembourg | |||||||||||
Affiliate investing | 596 | 7.0 | |||||||||
| Malta | |||||||||||
Tax rate differential | (137) | (1.6) | |||||||||
Affiliate financing | (159) | (1.9) | |||||||||
| Other | (40) | (0.5) | |||||||||
Other foreign jurisdictions | 128 | 1.5 | |||||||||
Effect of cross-border tax laws | |||||||||||
| Foreign derived intangible income (FDII) | (148) | (1.7) | |||||||||
| Other | 40 | 0.5 | |||||||||
Other adjustments | (140) | (1.7) | |||||||||
Effective tax rate | $ | 1,942 | 22.9 | % | |||||||
| 2024 | 2023 | ||||||||||
| Statutory tax rate on earnings | 21.0 | % | 21.0 | % | |||||||
| Impact of foreign operations | (1.8) | (3.6) | |||||||||
| Foreign-derived intangible income benefit | (2.3) | (2.2) | |||||||||
| Valuation allowance adjustments | (107.1) | — | |||||||||
| Excess tax benefits related to stock compensation | (0.7) | (0.3) | |||||||||
| Research tax credit | (1.0) | (1.1) | |||||||||
| Resolution of certain tax positions pertaining to prior years | 0.4 | 1.2 | |||||||||
| Intercompany restructurings and integration | 0.2 | (1.4) | |||||||||
| State taxes, net of federal benefit | 0.3 | 0.5 | |||||||||
| All other, net | (0.1) | — | |||||||||
| Effective tax rate on earnings | (91.1) | % | 14.1 | % | |||||||
Impact of foreign operations is primarily derived from operations in Puerto Rico, Switzerland, Ireland, the Netherlands, Costa Rica, Singapore, Malta, and Malaysia.
The tax effect of the differences that give rise to deferred tax assets and liabilities were as follows:
| (in millions) | 2025 | 2024 | ||||||||||||
| Deferred tax assets: | ||||||||||||||
| Trade receivable reserves | $ | 227 | $ | 230 | ||||||||||
| Research and development costs | 902 | 773 | ||||||||||||
| Inventory reserves | 146 | 168 | ||||||||||||
| Lease liabilities | 280 | 265 | ||||||||||||
| Deferred intercompany profit | 319 | 284 | ||||||||||||
| NOLs, reserves not currently deductible, credit carryforwards and other | 9,730 | 10,353 | ||||||||||||
| Total deferred tax assets before valuation allowance | 11,604 | 12,073 | ||||||||||||
| Valuation allowance | (1,771) | (1,664) | ||||||||||||
| Total deferred tax assets | 9,833 | 10,409 | ||||||||||||
| Deferred tax liabilities: | ||||||||||||||
| Compensation and employee benefits | (520) | (276) | ||||||||||||
| Depreciation | (489) | (408) | ||||||||||||
Right of use lease assets | (263) | (249) | ||||||||||||
| Other, primarily the excess of book basis over tax basis of intangible assets | (1,056) | (1,365) | ||||||||||||
| Total deferred tax liabilities | (2,328) | (2,298) | ||||||||||||
| Total net deferred tax assets (liabilities) | $ | 7,505 | $ | 8,111 | ||||||||||
The following table summarizes the gross amounts of unrecognized tax benefits without regard to reduction in tax liabilities or additions to deferred tax assets and liabilities if such unrecognized tax benefits were settled:
| (in millions) | 2025 | 2024 | ||||||||||||
| January 1 | $ | 3,568 | $ | 3,323 | ||||||||||
| Increase due to current year tax positions | 343 | 167 | ||||||||||||
| Increase due to prior year tax positions | 245 | 174 | ||||||||||||
| Decrease due to prior year tax positions | (77) | (50) | ||||||||||||
| Settlements | (18) | (13) | ||||||||||||
| Lapse of statute | (24) | (33) | ||||||||||||
| December 31 | $ | 4,037 | $ | 3,568 | ||||||||||
Abbott’s unrecognized tax benefits table includes amounts related to tax positions for which a deferred tax asset has not been recognized because the recognition of the future benefit is not expected.
The total amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate is approximately $2.6 billion.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
| 2023 | Feb 16, 2024 | |
| 2022 | Feb 17, 2023 | |
| 2021 | Feb 18, 2022 | |
| 2020 | Feb 19, 2021 | |
| 2016 | Feb 17, 2017 | |
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.