GILEAD SCIENCES, INC.GILD

GILEAD SCIENCES, INC. Income Taxes Disclosure

10-KFiled Feb 24, 20266 min read
INCOME TAXES
Income before income taxes consists of the following:
Year Ended December 31,
(in millions)202520242023
Domestic$8,310 $(876)$5,467 
Foreign1,486 1,566 1,392 
Income before income taxes$9,796 $690 $6,859 
Income tax expense consists of the following:
Year Ended December 31,
(in millions)202520242023
Federal:
Current$820 $1,495 $1,781 
Deferred424 (1,562)(1,126)
1,244 (67)655 
State:
Current51 39 80 
Deferred(190)(386)170 
(139)(347)250 
Foreign:
Current256 519 381 
Deferred(75)106 (39)
181 625 342 
Income tax expense$1,286 $211 $1,247 
In July 2025, the U.S. enacted tax reform legislation through the One Big Beautiful Bill (“OBBB”) Act. Included in this legislation are provisions that restored immediate expensing of domestic R&D expenditures and certain capital expenditures and modified the U.S. taxation of profits derived from foreign operations. The OBBB Act had no material impact to our income tax expense for 2025.
The reconciliation between the federal statutory tax rate applied to Income before income taxes and our effective tax rate is summarized as follows(1):
Year Ended December 31,
202520242023
(in millions, except percentages)AmountPercentAmountPercentAmountPercent
Income tax expense at U.S. federal statutory tax rate$2,057 21.0 %$145 21.0 %$1,440 21.0 %
State taxes, net of federal benefit(2)
(138)(1.4)%(159)(23.0)%174 2.5 %
Foreign taxes:
Ireland:
Tax rate differential(118)(1.2)%(67)(9.7)%(58)(0.8)%
Other— — %46 6.7 %69 1.0 %
United Kingdom:
Tax rate differential****5 0.1 %
Intercompany asset transfer****92 1.3 %
Other****16 0.2 %
Australia:
Tax rate differential**7 1.0 %**
Intercompany asset transfer**388 56.2 %**
Valuation allowance**(101)(14.6)%**
Other**(44)(6.4)%**
Other foreign jurisdictions(9)(0.1)%41 5.9 %(30)(0.4)%
Effect of cross-border tax laws:
Global intangible low-taxed income85 0.9 %66 9.6 %23 0.3 %
Foreign-derived intangible income(85)(0.9)%(133)(19.3)%(143)(2.1)%
U.S. taxation of foreign branches9 0.1 %(245)(35.5)%— — %
Other2 — %14 2.0 %13 0.2 %
Tax credits:
R&D tax credits(143)(1.5)%(144)(20.9)%(164)(2.4)%
Other(9)(0.1)%(13)(1.9)%(56)(0.8)%
Changes in valuation allowance(3)
(538)(5.5)%588 85.2 %38 0.6 %
Nontaxable or nondeductible items:
Acquired IPR&D and related charges65 0.7 %810 117.4 %88 1.3 %
Other20 0.2 %98 14.2 %(2)— %
Changes in unrecognized tax benefits61 0.6 %(427)(61.9)%(197)(2.9)%
Other adjustments:
Settlement of tax examinations— — %251 36.4 %(67)(1.0)%
Legal entity restructuring— — %(884)(128.1)%— — %
Other27 0.3 %(26)(3.8)%6 0.1 %
Income tax expense / Effective tax rate$1,286 13.1 %$211 30.5 %$1,247 18.2 %
_______________________________
*    Amounts did not meet the disaggregation threshold and therefore are included in Other foreign jurisdictions for this year instead of being broken out separately.
(1)    Recurring items in this rate reconciliation table for 2024 are significantly impacted by the lower Income before income taxes for that year.
(2)    Majority of 2025 state taxes related to Louisiana. Majority of 2024 and 2023 state taxes related to Tennessee.
(3)    The amount in 2025 primarily relates to changes in realizability of a tax loss attribute related to a prior year legal entity restructuring.
Significant components of our deferred tax assets and liabilities are as follows:
December 31,
(in millions)20252024
Deferred tax assets:  
Net operating loss carryforwards$266 $288 
Stock-based compensation83 84 
Reserves and accruals not currently deductible688 685 
Excess of tax basis over book basis of intangible assets776 910 
Deductible acquired IPR&D payments1,293 1,312 
Research and other credit carryforwards353 428 
Equity investments111 237 
Liability related to future royalties270 287 
Capitalized R&D expenditures1,773 2,173 
Capital losses187 590 
Other, net252 213 
Total deferred tax assets before valuation allowance6,052 7,207 
Valuation allowance(1)
(676)(1,217)
Total deferred tax assets5,376 5,990 
Deferred tax liabilities:
Property, plant and equipment(288)(276)
Excess of book basis over tax basis of intangible assets(3,209)(3,836)
Equity investments(92)(81)
Other(225)(143)
Total deferred tax liabilities(3,814)(4,336)
Net deferred tax assets$1,562 $1,654 
_______________________________
(1)    The valuation allowance decreased $541 million in 2025 primarily due to changes in realizability of a tax loss attribute related to a prior year legal entity restructuring. The valuation allowance increased $554 million in 2024 primarily due to capital losses, state research credits, and unrealized losses on our equity investments, partially offset by utilization of foreign net operating losses.
As of December 31, 2025, we had U.S. federal net operating loss and tax credit carryforwards of approximately $355 million and $45 million, respectively, which will start to expire in 2026 if not utilized. In addition, we had state net operating loss and tax credit carryforwards of approximately $3.3 billion and $1.1 billion, respectively, which will start to expire in 2026 and 2027, respectively, if not utilized. Utilization of net operating losses and tax credits may be subject to an annual limitation due to ownership change limitations provided in the Internal Revenue Code of 1986, as amended, and similar state provisions. This annual limitation may result in the expiration of the net operating losses and credits before utilization.
The following is a rollforward of our total gross unrecognized tax benefits:
Year Ended December 31,
(in millions)202520242023
Beginning balance$2,325 $1,962 $1,959 
Tax positions related to current year:
Additions180 743 265 
Tax positions related to prior years:
Additions243 190 109 
Reductions(669)(298)(315)
Settlements— (270)(42)
Lapse of statute of limitations(3)(2)(13)
Ending balance$2,076 $2,325 $1,962 
Of our total unrecognized tax benefits, $0.9 billion and $1.4 billion as of December 31, 2025 and 2024, respectively, if recognized, would reduce our effective tax rate in the period of recognition. Interest and penalties related to unrecognized tax benefits included income tax expenses of $43 million for the year ended December 31, 2025, and income tax benefits of $46 million and $35 million for the years ended December 31, 2024 and 2023, respectively, on our Consolidated Statements of Operations. Accrued interest and penalties related to unrecognized tax benefits were $176 million and $133 million as of December 31, 2025 and 2024, respectively.
We file federal, state and foreign income tax returns in the U.S. and in many foreign jurisdictions. These returns are subject to audit by the respective tax authorities. There are differing interpretations of tax laws and regulations, and as a result, significant disputes may arise with these tax authorities involving issues of the timing and amount of deductions and allocations of income among various tax jurisdictions. We periodically evaluate our exposures associated with our tax filing positions. We are currently under or subject to potential examination for tax years 2019 and onwards for federal income tax purposes and 2016 and onwards for California state income tax purposes. We also have various other state and foreign tax examinations ongoing. For certain acquired entities, the statute of limitations is open for all years from inception due to our utilization of their net operating losses and credits carried over from prior years.
Income taxes paid (net of refunds received), disaggregated by jurisdiction, were as follows:
Year Ended December 31,
(in millions)202520242023
Federal(1)
$2,492 $2,434 $3,411 
State230 107 152 
Foreign:
Australia(2)
253 **
Other240 238 427 
Total income taxes paid$3,215 $2,779 $3,990 
_______________________________
*    Amounts did not meet the disaggregation threshold and therefore are included in Other for this year instead of being broken out separately.
(1)    Includes payments of $1.3 billion in 2025, $1.2 billion in 2024 and $0.9 billion in 2023 related to the transition tax on the mandatory deemed repatriation of foreign earnings in connection with the Tax Cuts and Jobs Act, with the final payment being made in 2025.
(2)    Australia tax payment in 2025 primarily relates to 2024 intercompany asset restructuring involving transfer of certain assets from a prior acquisition to the U.S.

Historical Timeline

Fiscal YearFiled
2025Feb 24, 2026Showing above
2024Feb 28, 2025
2023Feb 23, 2024
2022Feb 22, 2023
2021Feb 23, 2022
2020Feb 25, 2021
2019Feb 25, 2020
2018Feb 26, 2019
2017Feb 27, 2018
2016Feb 27, 2017
2015Feb 24, 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.

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