Edwards Lifesciences CorpEW
Edwards Lifesciences Corp Income Taxes Disclosure
19. INCOME TAXES
The Company's net income (loss) from continuing operations before provision for income taxes was generated from operations in the United States and outside of the United States as follows (in millions):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| United States | $ | (157.5) | $ | 265.7 | $ | 290.1 | |||||||||||
| Outside of the United States, including Puerto Rico | 1,430.4 | 1,282.4 | 1,082.3 | ||||||||||||||
| $ | 1,272.9 | $ | 1,548.1 | $ | 1,372.4 | ||||||||||||
The provision for income taxes consists of the following (in millions):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| United States: | |||||||||||||||||
| Federal | $ | 19.3 | $ | 248.4 | $ | 291.7 | |||||||||||
| State and local | 38.6 | 40.7 | 50.1 | ||||||||||||||
| Outside of the United States, including Puerto Rico | 224.8 | 25.8 | 53.0 | ||||||||||||||
| Current income tax expense | $ | 282.7 | $ | 314.9 | $ | 394.8 | |||||||||||
| Deferred | |||||||||||||||||
| United States: | |||||||||||||||||
| Federal | $ | (16.6) | $ | (117.8) | $ | (165.7) | |||||||||||
| State and local | (41.5) | (31.0) | (54.2) | ||||||||||||||
| Outside of the United States, including Puerto Rico | (7.7) | (14.0) | (22.5) | ||||||||||||||
| Deferred income tax benefit | (65.8) | (162.8) | (242.4) | ||||||||||||||
| Total income tax provision | $ | 216.9 | $ | 152.1 | $ | 152.4 | |||||||||||
The components of deferred tax assets and liabilities are as follows (in millions):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets | |||||||||||
Capitalized research and development expenses | $ | 604.1 | $ | 533.8 | |||||||
| Compensation and benefits | 144.4 | 123.7 | |||||||||
| Benefits from uncertain tax positions | 162.3 | 89.6 | |||||||||
| Net tax credit carryforwards | 243.9 | 289.1 | |||||||||
| Net operating loss carryforwards | 143.5 | 132.1 | |||||||||
| Accrued liabilities | 181.4 | 145.2 | |||||||||
| Inventories | 11.1 | 14.9 | |||||||||
| Lease liability obligations | 4.5 | 6.5 | |||||||||
| Other | 11.6 | 7.2 | |||||||||
| Total deferred tax assets | 1,506.8 | 1,342.1 | |||||||||
| Deferred tax liabilities | |||||||||||
| Property, plant, and equipment | (77.8) | (76.4) | |||||||||
| Cash flow and net investment hedges | (0.4) | (11.8) | |||||||||
| Deferred tax on foreign earnings | (1.2) | (3.6) | |||||||||
| Right-of-use assets | (3.8) | (4.3) | |||||||||
| Other intangible assets | (231.9) | (230.3) | |||||||||
| Other | (5.5) | (4.8) | |||||||||
| Total deferred tax liabilities | (320.6) | (331.2) | |||||||||
| Valuation allowance | (104.1) | (87.8) | |||||||||
| Net deferred tax assets | $ | 1,082.1 | $ | 923.1 | |||||||
During 2025, net deferred tax assets increased $159.0 million, including items that were recorded to stockholders' equity and which did not impact the Company's income tax provision.
The valuation allowance of $104.1 million as of December 31, 2025 reduces certain deferred tax assets to amounts that are more likely than not to be realized. This allowance primarily relates to the net operating loss carryforwards of certain non-United States subsidiaries and certain United States foreign tax credit carryforwards.
Net operating loss and capital loss carryforwards and the related carryforward periods at December 31, 2025 are summarized as follows (in millions):
| Carryforward Amount | Tax Benefit Amount | Valuation Allowance | Net Tax Benefit | Carryforward Period Ends | |||||||||||||||||||||||||
| United States federal net operating losses | $ | 14.9 | $ | 3.1 | $ | — | $ | 3.1 | 2026-2037 | ||||||||||||||||||||
| United States federal net operating losses | 99.0 | 20.8 | — | 20.8 | Indefinite | ||||||||||||||||||||||||
| United States state net operating losses | 180.7 | 12.9 | (3.7) | 9.2 | 2029-2044 | ||||||||||||||||||||||||
| United States state net operating losses | 0.4 | — | — | — | Indefinite | ||||||||||||||||||||||||
| Non-United States net operating losses | 8.9 | 2.2 | — | 2.2 | 2030 | ||||||||||||||||||||||||
| Non-United States net operating losses | 575.4 | 104.5 | (74.6) | 29.9 | Indefinite | ||||||||||||||||||||||||
| Total | $ | 879.3 | $ | 143.5 | $ | (78.3) | $ | 65.2 | |||||||||||||||||||||
The gross tax credit carryforwards and the related carryforward periods at December 31, 2025 are summarized as follows (in millions):
| Carryforward Amount | Valuation Allowance | Net Tax Benefit | Carryforward Period Ends | ||||||||||||||||||||
| California research expenditure tax credits | $ | 245.3 | $ | — | $ | 245.3 | Indefinite | ||||||||||||||||
| Federal research expenditure tax credits | 8.2 | — | 8.2 | 2025-2034 | |||||||||||||||||||
| United States foreign tax credits | 69.5 | (22.3) | 47.2 | 2025-2034 | |||||||||||||||||||
| Non-United States tax credits | — | — | — | 2025-2028 | |||||||||||||||||||
| Total | $ | 323.0 | $ | (22.3) | $ | 300.7 | |||||||||||||||||
The Company has $245.3 million of gross California research expenditure tax credits it expects to use in future periods. The credits may be carried forward indefinitely. Based upon anticipated future taxable income, the Company expects that it is more likely than not that all California research expenditure tax credits will be utilized, although the utilization of the full benefit is expected to be realized over an extended period of time. Accordingly, no valuation allowance has been provided. The Company has $69.5 million of United States foreign tax credits of which $47.2 million are expected to be utilized before the end of the 10-year carryforward period. As a result, the Company recorded a valuation allowance of $22.3 million on the United States foreign tax credit carryforwards which have been determined to be unrealizable.
In December 2017, the Tax Cuts and Jobs Act of 2017 (the “2017 Act”) was signed into law. The 2017 Act required companies to pay a one-time mandatory deemed repatriation tax on the cumulative earnings of certain foreign subsidiaries that were previously tax deferred. The Company elected to pay the repatriation tax in installments over eight years. As of December 31, 2024, the Company had a remaining tax obligation of $78.5 million related to the deemed repatriation. The final installment of $78.5 million was paid in the second quarter of 2025.
The Company asserts that $405.8 million of its foreign earnings continue to be indefinitely reinvested and it intends to repatriate $720.9 million of its foreign earnings as of December 31, 2025. The estimated net tax liability on the indefinitely reinvested earnings if repatriated is $1.2 million.
The Company has received tax incentives in certain non-United States tax jurisdictions, the primary benefit for which will expire in 2032. The tax reductions to cash tax expense as compared to the local statutory rates were $93.9 million ($0.16 per diluted share), $249.3 million ($0.42 per diluted share), and $294.2 million ($0.48 per diluted share) for the years ended December 31, 2025, 2024, and 2023, respectively.
The Company adopted ASU 2023-09 “Income Taxes (Topic 740): Improvements To Income Tax Disclosures” on a prospective basis beginning with the year ended December 31, 2025. The following table presents the required disclosures pursuant to ASU 2023-09 and reconciles the U.S. federal statutory income tax amount to the global effective amount for the year ended December 31, 2025 (in millions, except for percentages):
Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
Amount | Percent | ||||||||||
| Income tax expense at United States federal statutory rate | $ | 267.3 | 21.0 | % | |||||||
State and local income taxes, net of federal income tax benefit (a) | (26.6) | (2.1) | % | ||||||||
| Foreign Tax Effects | |||||||||||
Costa Rica | |||||||||||
Statutory tax rate differential | 35.3 | 2.8 | % | ||||||||
Tax holiday in Costa Rica | (117.8) | (9.3) | % | ||||||||
| Singapore | |||||||||||
| Statutory tax rate differential | (34.8) | (2.7) | % | ||||||||
Tax holiday in Singapore | (45.4) | (3.6) | % | ||||||||
Other | (11.8) | (0.9) | % | ||||||||
| Other foreign jurisdictions | 46.1 | 3.6 | % | ||||||||
Effects of Cross-Border Tax Laws | |||||||||||
Global intangible low-taxed income | 60.7 | 4.8 | % | ||||||||
Foreign-derived intangible income | (11.5) | (0.9) | % | ||||||||
Other | (3.6) | (0.3) | % | ||||||||
Tax Credits | |||||||||||
Research and development tax credits | (31.3) | (2.5) | % | ||||||||
Other | (0.8) | (0.1) | % | ||||||||
Change in Valuation Allowances | 0.4 | — | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
Certain non-deductible litigation expenses | 24.2 | 1.9 | % | ||||||||
Other | 4.4 | 0.4 | % | ||||||||
Changes in unrecognized tax benefits | 50.2 | 3.9 | % | ||||||||
Other adjustments | 11.9 | 1.0 | % | ||||||||
Income tax provision and effective tax rate | $ | 216.9 | 17.0 | % | |||||||
______________________________________
(a) State and local taxes provided a provision benefit of $26.6 million, driven primarily by state tax credits from California and Utah, which reduced the state tax provision by $22.6 million and $0.2 million, respectively. Further, state taxes in California, Pennsylvania, New York, Illinois, New Jersey, Florida and Minnesota made up the majority (greater than 50 percent) of the tax effect in this category.
The Company's effective tax rate for 2025 increased in comparison to 2024 primarily due to the impact of Pillar Two (see below), other local tax increases, and certain non-deductible litigation expenses. For further information, see Note 3.
The following table presents the required disclosures prior to the Company’s adoption of ASU 2023-09 and reconciles the U.S. federal statutory income tax amount to the actual global effective amount for the years ended December 31, 2024 and 2023 (in millions):
| Years Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Income tax expense at United States federal statutory rate | $ | 325.1 | $ | 288.1 | |||||||
| Foreign income taxed at different rates | (190.6) | (133.8) | |||||||||
| State and local taxes, net of federal tax benefit | 16.0 | 15.9 | |||||||||
| Tax credits, federal and state | (58.9) | (55.9) | |||||||||
| Build of reserve for prior years' uncertain tax positions | (31.3) | (2.9) | |||||||||
| Tax on global intangible low-taxed income | 90.2 | 82.3 | |||||||||
| Foreign-derived intangible income deduction | (16.5) | (20.9) | |||||||||
| Contingent consideration liabilities | — | (5.5) | |||||||||
| United States federal deductible employee share-based compensation | (8.3) | (11.9) | |||||||||
| Nondeductible employee share-based compensation | 6.2 | 5.7 | |||||||||
| Other | 20.2 | (8.7) | |||||||||
| Income tax provision | $ | 152.1 | $ | 152.4 | |||||||
The Company's effective tax rate for 2024 decreased in comparison to 2023 primarily due to an increase in tax benefits from foreign earnings taxed at lower rates net of an increase in tax on global intangible low-taxed income and favorable global income tax audit settlements.
Many countries are implementing some or all of the Organisation for Economic Co-operation and Development’s Base Erosion and Profit Shifting Pillar Two (“Pillar Two”) rules that impose a global minimum tax of 15% on reported profits. Although Pillar Two provides a framework for applying the minimum tax, countries may enact Pillar Two differently than the model rules and on different timelines and may adjust domestic tax incentives in response to Pillar Two. In addition, in January 2025, the United States issued an executive order announcing opposition to aspects of these rules. As countries continue to enact and refine the Pillar Two rules, the Company will evaluate the potential effects of Pillar Two on its effective tax rate. In 2025, the Pillar Two provisions resulted in additional tax expense of approximately $19.1 million.
On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the 2017 Act, modifications to the international tax framework, and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA did not have a material impact to the Company’s tax expense in 2025 and is not expected to have a material impact on future periods.
Uncertain Tax Positions
As of December 31, 2025 and 2024, the gross uncertain tax positions were $767.4 million and $678.8 million, respectively. The Company estimates that these liabilities would be reduced by $377.0 million and $319.9 million, respectively, from offsetting tax benefits associated with the correlative effects of potential transfer pricing adjustments, foreign income taxes, state income taxes, and timing adjustments. The net amounts of $390.4 million and $358.9 million, respectively, if not required, would favorably affect the Company's effective tax rate.
A reconciliation of the beginning and ending amount of uncertain tax positions, excluding interest, penalties, and foreign exchange, is as follows (in millions):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Uncertain gross tax positions, January 1 | $ | 678.8 | $ | 583.9 | $ | 475.3 | |||||||||||
Current year tax positions | 88.5 | 125.8 | 127.0 | ||||||||||||||
Increase in prior year tax positions | 8.4 | 3.2 | 0.8 | ||||||||||||||
Decrease in prior year tax positions | (7.5) | (34.1) | (16.2) | ||||||||||||||
Settlements | (0.8) | — | (3.0) | ||||||||||||||
| Uncertain gross tax positions, December 31 | $ | 767.4 | $ | 678.8 | $ | 583.9 | |||||||||||
The table above summarizes the gross amounts of uncertain tax positions without regard to reductions in tax liabilities or additions to deferred tax assets and liabilities if such uncertain tax positions were settled.
The Company recognizes interest and penalties, if any, related to uncertain tax positions in the provision for income taxes. As of December 31, 2025, the Company had accrued $73.2 million (net of $80.2 million tax benefit) of interest related to uncertain tax positions, and as of December 31, 2024, the Company had accrued $55.4 million (net of $52.5 million tax benefit) of interest related to uncertain tax positions. During 2025, 2024, and 2023, the Company recognized interest expense, net of tax benefit, of $17.8 million, $14.0 million, and $12.3 million, respectively, in Provision for Income Taxes on the Consolidated Statements of Operations.
In the normal course of business, the Internal Revenue Service (“IRS”) and other taxing authorities are in different stages of examining various years of the Company's tax filings. During these audits, the Company may receive proposed audit adjustments that could be material. Therefore, there is a possibility that an adverse outcome in these audits could have a material effect on the Company's results of operations and financial condition. The Company strives to resolve open matters with each tax authority at the examination level and could reach an agreement with a tax authority at any time. While the Company has accrued for matters it believes are more likely than not to require settlement, the final outcome with a tax authority may result in a tax liability that is materially different from that reflected in the consolidated financial statements. Furthermore, the Company may later decide to challenge any assessments, if made, and may exercise its right to appeal. The uncertain tax positions are reviewed quarterly and adjusted as events occur that affect potential liabilities for additional taxes, such as lapsing of applicable statutes of limitations, proposed assessments by tax authorities, negotiations between tax authorities, identification of new issues, and issuance of new legislation, regulations, or case law. Management believes that adequate amounts of tax and related penalty and interest have been provided for any adjustments that may result from these uncertain tax positions.
In the first quarter of 2022, the Company executed an Advance Pricing Agreement (“APA”) between Japan and Switzerland covering distribution transactions for tax years 2020 through 2024, and in 2023, the Company executed an APA between Japan and the United States covering tax years 2020 through 2024. The Company also executed an APA in the fourth quarter of 2024 between Japan and Singapore covering tax years 2022 through 2026 with roll-back terms to cover the distribution of TAVR products beginning in 2020 and the distribution of Surgical products beginning in 2018. Considering ongoing supply chain changes, the Company has withdrawn its APA renewal application between Japan and the United States for tax years 2025 through 2029.
The audits of the Company’s United States federal income tax returns through 2014 have been closed. The IRS audit field work for the 2015 through 2017 tax years was completed during the second quarter of 2021, except for transfer pricing and related matters. The IRS is currently examining the 2018 through 2020 tax years.
At December 31, 2025, all material state, local, and foreign income tax matters have been concluded for years through 2015.
During 2021, the Company received a Notice of Proposed Adjustment (“NOPA”) from the IRS for the 2015 through 2017 tax years relating to transfer pricing involving Surgical/TAVR intercompany royalty transactions between the Company's United States and Switzerland subsidiaries. The NOPA proposed a substantial increase to the Company's United States taxable income, which could result in additional tax expense for the 2015 through 2017 period of approximately $260.0 million and reflects a departure from a transfer pricing method the Company had previously agreed upon with the IRS. The Company disagreed with the NOPA and pursued an administrative appeal with the IRS Independent Office of Appeals (“Appeals”). The Appeals process culminated in the third quarter of 2023 when the Company and Appeals concluded that a satisfactory resolution of the matter at the administrative level was not possible.
During the fourth quarter of 2023, Appeals issued a notice of deficiency (“NOD”) increasing the Company's 2015 through 2017 United States federal income tax in amounts resulting from the income adjustments previously reflected in the NOPA. The additional tax sought in excess of the Company's filing position is $269.3 million before consideration of interest and a repatriation tax offset.
The Company plans to vigorously contest the additional tax claimed by the IRS through the judicial process. Final resolution of this matter is not likely within the next 12 months. The Company believes the amounts previously accrued related to this uncertain tax position are appropriate for a number of reasons, including the interpretation and application of relevant tax law and accounting standards to the Company's facts and, accordingly, has not accrued any additional amount based on the NOD and other proceedings to date. Nonetheless, the outcome of the judicial process cannot be predicted with certainty, and it is possible that the outcome of that process could have a material impact on the Company's consolidated financial statements. The Company made deposits with the IRS of $75 million in November 2022 and $305.1 million in March 2024 to prevent the further accrual of interest on that portion of any additional tax and interest the Company may ultimately be found to owe while the Company prepares to contest through the judicial process the IRS's entitlement to any of the additional tax claimed by the IRS. The IRS converted those deposits to advance payments and, on December 20, 2024, the Company filed administrative claims for refunds of those payments with the IRS for the 2015 through 2017 tax years. The Company is now able to sue for refunds in the appropriate judicial forum.
Surgical/TAVR intercompany royalty transactions covering tax years 2018 through 2025 remain subject to IRS examination, and those transactions and related tax positions remain uncertain as of December 31, 2025. The Company has considered this information, as well as information regarding the NOD and other proceedings described above, in its evaluation of its uncertain tax positions. The impact of these unresolved transfer pricing matters, net of any correlative tax adjustments, may be significant to the Company’s consolidated financial statements. Based on the information currently available and numerous possible outcomes, the Company cannot reasonably estimate what, if any, changes in its existing uncertain tax positions may occur in the next 12 months and, therefore, has continued to record the uncertain tax positions as a long-term liability.
During the first quarter of 2024, the Company received a notice of assessment from the Israel Tax Authority (the “ITA”) wherein the ITA claimed that the Company owes approximately $110.0 million of tax excluding interest and penalties in connection with a claimed 2017 transfer of intellectual property. The Company maintains that it did not transfer intellectual property outside of Israel in 2017 or in any subsequent year. The Company filed a formal appeal of the assessment in the third quarter of 2024. During the fourth quarter of 2024, the Company received a second notice of assessment from the ITA claiming that the Company owes additional tax of approximately $16.0 million excluding interest and penalties for the 2018 through 2022 tax years based entirely on the collateral impacts of the 2017 assessment. The Company filed a formal appeal of the second assessment in the first quarter of 2025. In the third quarter of 2025, the ITA agreed that intellectual property was not transferred in 2017 and withdrew its assessment. The ITA has until March 2026 to respond to the appeal for the 2018 through 2022 taxable years. If not withdrawn, the Company will defend its position through judicial proceedings.
Income Taxes Paid
The Company adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025 and have included the following table as a result of the adoption, which presents income taxes paid (net of refunds received) for the year December 31, 2025 (in millions):
| December 31, | |||||
| 2025 | |||||
Federal | $ | 110.9 | |||
State | 34.1 | ||||
Foreign | |||||
Dominican Republic | 175.3 | ||||
Singapore | 62.3 | ||||
Other foreign jurisdictions | 107.8 | ||||
Total | $ | 490.4 | |||
The amounts paid to the Dominican Republic relate to the sale of Critical Care and will not recur in future periods. For further information, see Note 5.
Below is a summary of income taxes paid (net of refunds received) for the years December 31, 2024 and 2023 (in millions):
| December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Federal | $ | 778.8 | $ | 356.6 | |||||||
State | 120.4 | 55.5 | |||||||||
Foreign | 296.9 | 58.0 | |||||||||
Total | $ | 1,196.1 | $ | 470.1 | |||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 25, 2026 | Showing above |
| 2024 | Feb 28, 2025 | |
| 2023 | Feb 12, 2024 | |
| 2022 | Feb 13, 2023 | |
| 2021 | Feb 14, 2022 | |
| 2020 | Feb 12, 2021 | |
| 2019 | Feb 14, 2020 | |
| 2018 | Feb 15, 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.