Bausch Health Companies Inc.BHC

Bausch Health Companies Inc. Income Taxes Disclosure

10-KFiled Feb 19, 202610 min read
INCOME TAXES
The components of Income (loss) before income taxes for 2025, 2024 and 2023 consist of:
(in millions)202520242023
Domestic$(743)$(596)$(382)
Foreign1,110 763 (8)
$367 $167 $(390)
The components of Provision for income taxes for 2025, 2024 and 2023 consist of:
(in millions)202520242023
Current:   
Domestic$25 $(9)$(21)
Foreign(140)(161)(194)
(115)(170)(215)
Deferred: 
Domestic(3)(4)(21)
Foreign(129)(65)15 
(132)(69)(6)
$(247)$(239)$(221)
Provision for income taxes differs from the expected amount calculated by applying the Company’s Canadian statutory federal rate of 25% to Income (loss) before income taxes for 2025. The provincial impacts in the reconciliation below reflect the impact of a full valuation allowance on the net deferred tax assets in Canada. A reconciliation of the differences is as follows:
(in millions)2025Percent
Income before income taxes$367 
Expected provision for income taxes at Canadian statutory rate$(92)25 %
Provincial and local income tax, net of federal (national) income tax effect— — %
Foreign Tax Effects
GermanyForeign tax rate differences8 (2)%
Other(2)(1)%
IrelandForeign tax rate differences157 (43)%
Changes in valuation allowances(11)3 %
Nondeductible expense(17)5 %
Other(22)6 %
NetherlandsLoss carryforwards10 (3)%
Changes in valuation allowances(16)4 %
Other(6)2 %
PolandUnremitted Earnings — Withholding tax5 (1)%
Nondeductible interest(8)2 %
Other15 (4)%
United StatesForeign tax rate differences(17)5 %
Loss carryforwards72 (20)%
Research and development tax credits12 (3)%
Changes in valuation allowances(87)24 %
State and local tax provision net of valuation allowances(41)11 %
Contingent consideration fair value adjustments6 (2)%
Non-deductible impairment(47)13 %
Other(10)3 %
ColombiaOther(6)2 %
Other countriesOther(13)4 %
Effect of cross-border tax laws — Foreign accrual property income
(7)2 %
Changes in valuation allowances(61)17 %
Nontaxable or nondeductible items
Share based compensation(23)6 %
Nondeductible interest(24)7 %
Other
Original issue discount and debt financing costs119 (32)%
Foreign exchange gain(175)48 %
Other(13)4 %
Changes in unrecognized tax benefits47 (13)%
Provision for income taxes$(247)(67)%

As a Canadian domiciled company, the Company’s applicable tax rate prior to 2025 was the Canadian combined tax rate for its federal and provincial filings. The Provision for income taxes differs from the expected amount calculated by applying the Company’s Canadian statutory federal plus provincial rate of 26.9% to Income (loss) before income taxes for 2024 and 2023 as follows:
(in millions)20242023
Income (loss) before income taxes$167 $(390)
Provision for income taxes
Expected (provision for) benefit from income taxes at Canadian statutory rate$(45)$105 
Non-deductible amount of share-based compensation(19)(19)
Adjustments to tax attributes(4)32 
Change in valuation allowance related to foreign tax credits and NOLs
(21)(6)
Change in valuation allowance on Canadian deferred tax assets and tax rate changes
(82)(158)
Change in uncertain tax positions(62)(28)
Foreign tax rate differences(4)(42)
Non-deductible portion of Goodwill impairments— (104)
Other(2)(1)
$(239)$(221)
Other consists of adjustments affecting the tax provision such as those related to the filing of tax returns which are not material.
Deferred tax assets and liabilities as of December 31, 2025 and 2024 consist of:
(in millions)20252024
Deferred tax assets:  
Tax loss carryforwards$3,346 $3,243 
Provisions515 633 
Debt discounts and deferred financing costs197 282 
Restricted interest and financing expenses363 148 
Research and development tax credits70 69 
Scientific Research and Experimental Development pool41 40 
Tax credit carryforwards13 12 
Deferred revenue2 5 
Prepaid expenses56 56 
Share-based compensation30 23 
Other18 9 
Total deferred tax assets4,651 4,520 
Less valuation allowance(2,576)(2,284)
Deferred tax assets net of valuation allowance2,075 2,236 
Deferred tax liabilities: 
Intangible assets171 201 
Plant, equipment and technology63 62 
Outside basis differences145 133 
Total deferred tax liabilities379 396 
Net deferred tax asset$1,696 $1,840 
The following table presents a reconciliation of the deferred tax asset valuation allowance:
(in millions)202520242023
Balance, beginning of year$2,284 $2,254 $2,023 
Charged to Benefit from income taxes201 103 164 
Charged to other accounts91 (73)67 
Balance, end of year$2,576 $2,284 $2,254 
The Company has provided for income taxes in accordance with guidance issued by accounting regulatory bodies, the U.S. Internal Revenue Service and state and local governments through the date of the issuance of these Consolidated Financial Statements. Additional guidance and interpretations can be expected and such guidance, if any, could impact future results. While management continues to monitor these matters, the ultimate impact, if any, as a result of the application of any guidance issued in the future cannot be determined at this time.
The realization of deferred tax assets is dependent on the Company generating sufficient domestic and foreign taxable income in the years that the temporary differences become deductible. A valuation allowance has been provided for the portion of the deferred tax assets that the Company determined is more likely than not to remain unrealized based on estimated future taxable income and tax planning strategies. In 2025, the valuation allowance increased $292 million primarily due to losses in Canada and a change in the expected realizability of net deferred tax assets in the United States. In 2024, the valuation allowance increased $30 million primarily due to an increase for state tax losses expected to be unusable in the United States.
The Company’s U.S. interest expense is subject to limitation rules which limit U.S. interest expense to 30% of adjusted taxable income, defined similar to EBITA. Disallowed interest can be carried forward indefinitely and any unused interest deduction is assessed for recoverability. In 2025, a valuation allowance was established against this carryforward.
As of December 31, 2025 and 2024, the Company had accumulated taxable losses available to offset future years’ federal and provincial taxable income in Canada of approximately $6,607 million and $6,341 million, respectively. As of December 31, 2025 and 2024, unclaimed input tax credits available to offset future federal taxes in Canada were approximately $15 million and $19 million, respectively, which expire in the years 2026 through 2043. In addition, as of December 31, 2025 and 2024, pooled scientific research and experimental development expenditures available to offset against future taxable income in Canada were approximately $157 million and $150 million, respectively, which may be carried forward indefinitely. As of December 31, 2025 and 2024, a full valuation allowance against the net Canadian federal and provincial deferred tax assets on the parent company (BHCI) and the Bausch + Lomb parent company (B+L Corporate Canada) has been provided of $2,182 million and $2,045 million, respectively.
As of December 31, 2025 and 2024, the Company had accumulated taxable losses available to offset future years’ federal taxable income in the U.S. of approximately $539 million and $427 million, respectively, including acquired losses that expire in the years 2026 through 2033. As of December 31, 2025, the remaining taxable losses are subject to multiple annual loss limitations as a result of previous ownership changes, and the Company believes that the recoverability of the deferred tax assets associated with these taxable losses is not more likely than not to be realized. As of December 31, 2025 and 2024, U.S. research and development credits available to offset future years’ federal income taxes in the U.S. were approximately $15 million and $10 million, respectively, which include acquired research and development credits and which expire in the years 2026 through 2045.
As of December 31, 2025 and 2024, the Company had accumulated taxable losses available to offset future years’ taxable income in Ireland of approximately $12,101 million and $12,437 million, respectively.
The Company provides for income taxes on the unremitted earnings of its direct foreign affiliates except for its investment in the Bausch Health Americas group. The Company continues to assert that the unremitted earnings of its Bausch Health Americas group will be permanently reinvested and not repatriated. As of December 31, 2025, the Company estimates that there will be no tax liability attributable to unremitted earnings of its BHC U.S. subsidiaries. However, future distributions could be subject to U.S. withholding tax. Income Taxes are accrued on the Solta U.S. subsidiaries in accordance with the US-Canada tax treaty.
As of December 31, 2025 and 2024, unrecognized tax benefits (including interest and penalties) were $914 million and $924 million, of which $368 million and $405 million would affect the effective income tax rate, respectively. In 2025 and 2024, the remaining unrecognized tax benefits would not impact the effective tax rate as the tax positions are offset against existing tax attributes or are timing in nature.
The Company provides for interest and penalties related to unrecognized tax benefits in the provision for income taxes. As of December 31, 2025 and 2024, accrued interest and penalties related to unrecognized tax benefits were approximately $68 million for both years. In 2025, the amount of interest and penalties recognized by the Company was not material. In 2024, the Company recognized a net increase of $17 million of interest and penalties.
The Company and one or more of its subsidiaries file federal income tax returns in Canada, the U.S. and other foreign jurisdictions, as well as various provinces and states in Canada and the U.S. The Company and its subsidiaries have open tax years, primarily from 2012 to 2025, with significant taxing jurisdictions, respectively, including Canada and the U.S. These open years contain certain matters that could be subject to differing interpretations of applicable tax laws and regulations and tax treaties, as they relate to the amount, timing, or inclusion of revenues and expenses, or the sustainability of income tax positions of the Company and its subsidiaries. Certain of these tax years are expected to remain open indefinitely.
Jurisdiction:Open Years
United States - Federal
2017 - 2025
Canada
2012 - 2025
Germany
2017 - 2025
France2013 - 2015, 2022 - 2025
Ireland
2018 - 2025
Luxembourg
2018 - 2021
In June 2025, the Company and the Internal Revenue Service (the “IRS”) concluded the tax audit of its short period 2017 tax years closing all federal tax periods through the short period 2017. As a result of the settlement, the Company recorded a tax benefit of approximately $64 million. The IRS has begun the next audit cycle starting with the stub period ending December 31, 2017.
The Company is currently under examination by the Canada Revenue Agency (“CRA”) for seven separate cycles ranging from years 2012 through 2024. During 2025, the Company received various assessments by the CRA to which the Company has responded.
During the fourth quarter of 2025, the Company and the CRA settled certain transfer pricing matters related to the Canadian distribution business for 2019, resulting in a tax payment of CAD 5.5 million. A reserve had previously been established for this.
The Company’s subsidiaries in Germany are under audit for tax years 2017 through 2019. During the three months ended September 30, 2023, the Company received a preliminary assessment from the German taxing authority for the 2014 through 2016 period that would disallow certain transfer pricing adjustments. The Company contested this alleged tax deficiency through the appropriate appeals process, and reached a preliminary settlement with the German taxing authority during the year ended December 31, 2024. The settlement was then finalized with the taxing authority and resulted in the accrual of an immaterial tax cost that will close out the 2014 to 2016 audit period.
On November 8, 2022, the Company’s affiliate in Netherlands received an assessment from the Luxembourg Tax Authorities as successor in interest to its affiliate in Luxembourg for tax years 2018 – 2019 for €271.7 million. The Company is vigorously defending its position and no reserves have been recorded.
On January 9, 2025, the Company’s affiliate in Switzerland received a decision by the Tax Chamber of the Administrative Court of the Canton of Zug denying the affiliate’s objection to certain transfer pricing adjustments proposed by the Swiss Tax Authorities for its 2018 tax year. The Company is preparing to pursue the resolution of this dispute through the mutual agreement procedure and is expecting the impact of the decision to be immaterial.
The Company’s U.S. affiliates remain under examination for various state tax audits in the U.S. for years 2017 through 2024.
Certain affiliates of the Company in regions outside of Canada, the U.S., Germany and Luxembourg are currently under examination by relevant taxing authorities, and all necessary accruals have been recorded, including uncertain tax benefits. At this time, the Company does not expect that proposed adjustments, if any, would be material to the Company’s Consolidated Financial Statements.
The following table presents a reconciliation of the unrecognized tax benefits not including interest and penalties:
(in millions)202520242023
Balance, beginning of year$856 $867 $849 
Additions based on tax positions related to the current year6 60 5 
Additions for tax positions of prior years40 — 29 
Reductions for tax positions of prior years(53)(53)(14)
Lapse of statute of limitations(2)(18)(2)
Balance, end of year$847 $856 $867 
Additions for tax positions of prior years includes a currency translation adjustment for tax positions that are denominated in a currency other than U.S. dollars.
Income taxes paid (net of refunds) exceeding 5 percent of total income taxes paid (net of refunds) in the following jurisdictions for 2025 were as follows:
(in millions)2025
Federal$9 
Provincial3
Foreign
Mexico29 
Ireland28 
Germany27 
France16 
United States15 
China10 
Other26 
$163 

Historical Timeline

Fiscal YearFiled
2025Feb 19, 2026Showing above
2024Feb 20, 2025
2023Feb 22, 2024
2022Feb 23, 2023
2021Feb 23, 2022
2020Feb 24, 2021
2019Feb 19, 2020
2018Feb 20, 2019
2017Feb 28, 2018
2016Mar 1, 2017
2015Apr 29, 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.

Other Available Disclosures

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