BRISTOL MYERS SQUIBB COBMY

BRISTOL MYERS SQUIBB CO Income Taxes Disclosure

10-KFiled Feb 11, 20268 min read
INCOME TAXES
The provision/(benefit) for income taxes consisted of:
Year Ended December 31,
Dollars in millions202520242023
Current:
U.S.(a)
$1,699 $1,279 $2,745 
Non-U.S.1,538 1,364 943 
Total current3,237 2,643 3,688 
Deferred:
U.S.(a)
(1,107)(2,185)(2,339)
Non-U.S.142 96 (949)
Total deferred(965)(2,089)(3,288)
 Income tax provision
$2,272 $554 $400 
(a)    The Company's 2025 U.S. income tax provision reflects federal current tax expense of $1.5 billion and federal deferred tax benefit of $1.0 billion as well as the impact of U.S. state taxes.
Effective Tax Rate

The reconciliation of the effective tax rate to the U.S. statutory Federal income tax rate in 2025 was as follows:
% of Earnings Before Income Taxes
Dollars in millions2025
Earnings/(Loss) before income taxes:
U.S.$(19)
Non-U.S.9,347 
Total9,328 
U.S. Federal statutory rate
1,959 21.0 %
Effects of cross-border tax laws:
GILTI
228 2.4 %
FDII deduction
(170)(1.8)%
Foreign tax effects:
Switzerland
Statutory tax rate difference between Switzerland and the U.S.(565)(6.1)%
Canton
284 3.0 %
Pillar Two
24 0.3 %
Withholding Tax
87 0.9 %
Other
(11)(0.1)%
Ireland
Statutory tax rate difference between Ireland and the U.S.(390)(4.2)%
Pillar Two
37 0.4 %
Other
2 — %
Other foreign jurisdictions
129 1.4 %
U.S. Federal research-based credits
(152)(1.6)%
Changes in valuation allowances
84 0.9 %
Nondeductible R&D charges290 3.1 %
Changes in unrecognized tax benefits
146 1.6 %
State and local taxes
43 0.5 %
Other adjustments
247 2.7 %
Income tax provision
$2,272 24.4 %

U.S. Federal research-based credits includes credits both on research and development as well as orphan drug. The credits in 2025 include revised estimates upon finalization of prior year tax returns.

Nondeductible R&D charges in 2025 of $290 million primarily relates to the impact of a $1.4 billion one-time, non-tax deductible charge for the acquisition of Orbital Therapeutics.

State and local tax expense was not material in 2025.
The reconciliation of the effective tax rate to the U.S. statutory Federal income tax rate in 2024 and 2023 were as follows:

% of Earnings Before Income Taxes
Dollars in millions20242023
Earnings/(Loss) before income taxes:
U.S.$(14,893)$2,624 
Non-U.S.6,514 5,816 
Total(8,379)8,440 
U.S. Federal statutory rate
(1,759)21.0 %1,772 21.0 %
Nondeductible R&D charges
2,538 (30.3)%— — %
GILTI, net of foreign derived intangible income deduction 501 (6.0)%223 2.6 %
Foreign tax effect of certain operations in Ireland, Puerto Rico and Switzerland(302)3.6 %(850)(10.1)%
Non-U.S. tax ruling
— — %(656)(7.8)%
U.S. Federal valuation allowance
46 (0.5)%(171)(2.0)%
U.S. Federal, state and foreign contingent tax matters(459)5.5 %143 1.7 %
U.S. Federal research-based credits(291)3.5 %(243)(2.9)%
Charitable contributions of inventory(36)0.4 %(75)(0.9)%
State and local taxes (net of valuation allowance)(25)0.3 %92 1.1 %
Foreign and other341 (4.1)%165 2.0 %
Income tax provision
$554 (6.6)%$400 4.7 %

Nondeductible R&D charges in 2024 of $2.5 billion primarily relates to the impact of a $12.1 billion one-time, non-tax deductible charge for the acquisition of Karuna.

GILTI, net of foreign derived intangible income deduction in 2023 includes a benefit of approximately $325 million due to the revised 2023 guidance regarding the deductibility of certain research and development expenses.

Foreign tax effect of certain operations in Ireland, Puerto Rico and Switzerland includes the impact of earnings mix and a benefit from the impact of foreign currency on net operating loss and other carryforwards of $123 million in 2023.

The Non-U.S. tax ruling includes a $656 million deferred income tax benefit regarding the deductibility of a statutory impairment of subsidiary investments in 2023.

U.S. Federal valuation allowance includes a $193 million reversal related to unrealized equity investment losses in 2023.

U.S. Federal, state and foreign contingent tax matters include tax benefits related to lapse of statute and effectively settled contingent tax matters of $644 million in 2024 related to the resolution of Celgene's 2017-2019 IRS audit and $89 million in 2023.

U.S. Federal research-based credits includes credits both on research and development as well as orphan drug.
Deferred Taxes and Valuation Allowance

The components of deferred income tax assets/(liabilities) were as follows:
 December 31,
Dollars in millions20252024
Deferred tax assets
Foreign net operating loss and other carryforwards$1,229 $1,521 
State net operating loss and credit carryforwards629 529 
U.S. Federal capital loss, net operating loss and tax credit
557 695 
Milestone payments and license fees1,330 999 
Capitalized research expenditures4,366 3,886 
Other1,771 1,738 
Total deferred tax assets9,882 9,368 
Valuation allowance(960)(929)
Deferred tax assets net of valuation allowance$8,922 $8,439 
Deferred tax liabilities
Acquired intangible assets$(3,069)$(3,781)
Goodwill and other(698)(791)
Total deferred tax liabilities$(3,767)$(4,572)
Deferred tax assets/(liabilities), net
$5,155 $3,867 
Recognized as:
Deferred income taxes assets – non-current$5,378 $4,236 
Deferred income taxes liabilities – non-current(222)(369)
Total$5,155 $3,867 

BMS is not indefinitely reinvested with respect to its undistributed earnings from foreign subsidiaries and has provided a deferred tax liability for foreign and state income and withholding tax that would apply. BMS remains indefinitely reinvested with respect to its financial statement basis in excess of tax basis of its foreign subsidiaries. A determination of the deferred tax liability with respect to this basis difference is not practicable.

The U.S. Federal net operating loss carryforwards were $1.3 billion at December 31, 2025. These carryforwards were acquired as a result of certain acquisitions and while they generally have unlimited lives, they are subject to limitations under Section 382 of the Internal Revenue Code. Foreign and state net operating loss carryforwards begin expiring in varying years starting in 2026 (certain amounts have unlimited lives).

At December 31, 2025, a valuation allowance of $960 million exists for the following items: $163 million primarily for foreign net operating loss and tax credit carryforwards, $527 million for state deferred tax assets including net operating loss and tax credit carryforwards and $270 million for U.S. Federal deferred tax assets including equity investment fair value adjustments and U.S. Federal net operating loss carryforwards.

Changes in the valuation allowance were as follows:
 Year Ended December 31,
Dollars in millions202520242023
Beginning balance
$929 $764 $873 
Provision231 242 (39)
Utilization(108)(182)(54)
Foreign currency translation14 (9)(19)
Acquisitions/(dispositions)/(liquidations), net(109)113 — 
Non-U.S. tax rate change
3 1 3 
Ending balance
$960 $929 $764 
Income tax payments in 2025 were as follows:

 Year Ended December 31,
Dollars in millions2025
Federal
$2,199 
State
207 
Foreign
Switzerland
298 
Ireland
179 
Other foreign
381 
Income tax payments
$3,264 

Income tax payments in 2024 and 2023 were $3.9 billion and $4.3 billion, respectively. Included in the income tax payments were $991 million in 2025, $799 million in 2024 and $567 million in 2023, for the transition tax following the TCJA enactment. The remaining amount payable for the transition tax is $244 million, which will be paid in 2026.

Business is conducted in various countries throughout the world and is subject to tax in numerous jurisdictions. A significant number of tax returns that are filed are subject to examination by various federal, state and local tax authorities. Tax examinations are often complex, as tax authorities may disagree with the treatment of items reported requiring several years to resolve. Liabilities are established for possible assessments by tax authorities resulting from known tax exposures including, but not limited to, transfer pricing matters, tax credit deductibility of certain expenses, and deemed repatriation transition tax. Such liabilities represent a reasonable provision for taxes ultimately expected to be paid and may need to be adjusted over time as more information becomes known. The effect of changes in estimates related to contingent tax liabilities is included in the effective tax rate reconciliation above.

A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows (excluding interest and penalties):
 Year Ended December 31,
Dollars in millions202520242023
Beginning balance
$1,428 $1,914 $1,766 
Gross additions to tax positions related to current year73 68 38 
Gross additions to tax positions related to prior years(a)
269 64 145 
Gross additions to tax positions assumed in acquisitions12 113 — 
Gross reductions to tax positions related to prior years(55)(670)(5)
Settlements(18)(50)(30)
Reductions to tax positions related to lapse of statute(b)
(239)(3)(4)
Cumulative translation adjustment13 (8)4 
Ending balance$1,483 $1,428 $1,914 
(a)    Amounts in 2025 include certain transfer pricing and other matters.
(b)    Amounts in 2025 primarily relate to the lapse of statute for the U.S. federal years 2019-2020.

Additional information regarding unrecognized tax benefits is as follows:
 Year Ended December 31,
Dollars in millions202520242023
Unrecognized tax benefits that if recognized would impact the effective tax rate$1,356 $1,394 $1,872 
Accrued interest536 507 434 
Accrued penalties23 19 23 
Interest and penalties expense/(benefit)209 89 110 

Accrued interest and penalties payable for unrecognized tax benefits are included in either current or non-current income taxes payable. Interest and penalties related to unrecognized tax benefits are included in income tax expense. These amounts reflect the beneficial impacts of various tax settlements, including the settlement discussed below.
BMS is currently under examination by a number of tax authorities that proposed or are considering proposing material adjustments to tax positions for issues such as transfer pricing, certain tax credits and the deductibility of certain expenses. As previously disclosed, BMS received several notices of proposed adjustments from the IRS related to transfer pricing and other tax issues for the 2008 to 2012 tax years. BMS disagrees with the IRS’s positions and continues to work cooperatively with the IRS to resolve these issues. In 2022, BMS entered the IRS administrative appeals process to resolve these matters, and that appeals process is ongoing. Timing of the final resolution of these complex matters is uncertain and could have a material impact on BMS’s financial statements. Tax positions for these years unrelated to matters that entered the administrative appeals process are considered effectively settled. In 2025, U.S. Federal uncertain tax positions for 2019 and 2020 were released as result of a lapse of statute.

It is reasonably possible that new issues will be raised by tax authorities that may increase unrecognized tax benefits; however, an estimate of such increases cannot reasonably be made at this time. BMS believes that it has adequately provided for all open tax years by tax jurisdiction.

It is also reasonably possible that the total amount of unrecognized tax benefits at December 31, 2025 could decrease as a result of the settlement of certain tax audits and other events. The expected change in unrecognized tax benefits may result in the payment of additional taxes, adjustment of certain deferred taxes and/or recognition of tax benefits. The following is a summary of major tax jurisdictions for which tax authorities may assert additional taxes based upon tax years currently under audit and subsequent years that are subject to audit:
Jurisdictions
Tax Years
U.S.
2008 to 2012, 2016 to 2018, 2021 to 2025
Canada2012 to 2025
France
2022 to 2025
Germany2015 to 2025
Italy
2019 to 2025
Japan2023 to 2025
UK
2017 to 2025

Historical Timeline

Fiscal YearFiled
2025Feb 11, 2026Showing above
2024Feb 12, 2025
2023Feb 13, 2024
2022Feb 14, 2023
2021Feb 9, 2022
2020Feb 10, 2021
2019Feb 24, 2020
2018Feb 25, 2019
2017Feb 13, 2018
2016Feb 21, 2017
2015Feb 12, 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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