INTUITIVE SURGICAL INCISRG
INTUITIVE SURGICAL INC Income Taxes Disclosure
INCOME TAXES
Income before provision for income taxes for the years ended December 31, 2025, 2024, and 2023, consisted of the following (in millions):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| U.S. | $ | 2,283.8 | $ | 1,754.8 | $ | 1,251.1 | |||||||||||
| Foreign | 1,027.6 | 919.0 | 707.8 | ||||||||||||||
| Total income before provision for income taxes | $ | 3,311.4 | $ | 2,673.8 | $ | 1,958.9 | |||||||||||
The provision for income taxes for the years ended December 31, 2025, 2024, and 2023, consisted of the following (in millions):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Federal | $ | 235.6 | $ | 321.9 | $ | 315.2 | |||||||||||
| State | 58.9 | 47.9 | 32.8 | ||||||||||||||
| Foreign | 121.2 | 101.8 | 74.4 | ||||||||||||||
Total current income tax expense | 415.7 | 471.6 | 422.4 | ||||||||||||||
| Deferred | |||||||||||||||||
| Federal | (34.4) | (157.7) | (122.4) | ||||||||||||||
| State | (14.8) | (23.9) | (25.1) | ||||||||||||||
| Foreign | 68.3 | 46.3 | (133.3) | ||||||||||||||
Total deferred income tax expense (benefit) | 19.1 | (135.3) | (280.8) | ||||||||||||||
| Total income tax expense | $ | 434.8 | $ | 336.3 | $ | 141.6 | |||||||||||
On July 4, 2025, OBBBA was enacted, introducing amendments to U.S. tax laws with various effective dates from 2025 to 2027. The changes introduced by OBBBA did not have a material impact on the Company’s effective tax rate for 2025.
The Company’s provision for income taxes for 2023 reflected Swiss tax benefits of $92.3 million, net of a $67.3 million valuation allowance, related to certain tax assets recorded by our Swiss entity. In addition, a one-time net benefit of $67.1 million was recorded from the re-measurement of the Company’s Swiss deferred tax assets resulting from the Swiss cantonal tax rate increase enacted in December 2023 for years after 2024 as well as a Swiss cantonal tax rate increase from the discontinuation of the Company’s 2017 Swiss tax ruling, which was deemed effective as of January 1, 2023.
A reconciliation of the U.S. federal statutory rate to the Company’s effective tax rate for the year ended December 31, 2025, subsequent to the adoption of ASU 2023-09, including the amount and percentage of income before taxes, was as follows (dollars in millions):
Year Ended December 31, 2025 | |||||||||||
Amount | Percentage | ||||||||||
| U.S. federal tax at statutory rate | $ | 695.4 | 21.0 | % | |||||||
State and local income tax, net of federal effect (1) | 35.0 | 1.1 | % | ||||||||
| Foreign tax effects | |||||||||||
Switzerland – Federal | |||||||||||
Statutory tax rate difference between Switzerland and U.S. | (57.0) | (1.7) | % | ||||||||
Other | 6.2 | 0.2 | % | ||||||||
Switzerland – Cantonal | |||||||||||
Cantonal tax | 60.5 | 1.8 | % | ||||||||
Other foreign jurisdictions | (35.0) | (1.1) | % | ||||||||
| Effect of cross-border tax laws | 27.8 | 0.8 | % | ||||||||
| Tax credits | |||||||||||
| Research and development tax credit | (81.7) | (2.5) | % | ||||||||
| Non-taxable or non-deductible items | |||||||||||
| Excess tax benefit | (210.9) | (6.4) | % | ||||||||
| Share-based compensation not benefitted | 38.1 | 1.2 | % | ||||||||
| Other | (24.1) | (0.7) | % | ||||||||
| Changes in unrecognized tax benefits | (12.1) | (0.4) | % | ||||||||
| Other | (7.4) | (0.2) | % | ||||||||
Effective tax rate | $ | 434.8 | 13.1 | % | |||||||
(1)State and local taxes in New York, Illinois, New Jersey, Minnesota, Texas, and Michigan made up greater than 50% of the tax effect in this category.
A reconciliation of the U.S. federal statutory rate of 21% to the Company’s effective rate for the years ended December 31, 2024 and 2023, prior to the adoption of ASU 2023-09, was as follows (dollars in millions):
Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Federal tax at statutory rate | $ | 561.5 | $ | 411.4 | |||||||
| Increase (reduction) in tax resulting from: | |||||||||||
| State taxes, net of federal benefits | 41.7 | 35.0 | |||||||||
| Foreign rate differential | (59.3) | (64.4) | |||||||||
| U.S. tax on foreign earnings | 73.1 | 70.9 | |||||||||
Research and development credit | (75.1) | (48.6) | |||||||||
| Excess tax benefits related to share-based compensation | (223.3) | (107.9) | |||||||||
| Share-based compensation not benefited | 32.4 | 29.5 | |||||||||
Unrecognized tax benefits related to share-based compensation | 5.3 | 4.4 | |||||||||
| Reversal of unrecognized tax benefits | (29.5) | (20.9) | |||||||||
Swiss tax benefits, net of valuation allowance | — | (92.3) | |||||||||
| Deferred tax re-measurement | — | (67.1) | |||||||||
| Other | 9.5 | (8.4) | |||||||||
| Total income tax expense | $ | 336.3 | $ | 141.6 | |||||||
Deferred income taxes reflect tax carryforwards and the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in millions):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Intangible assets | $ | 330.2 | $ | 377.5 | |||||||
Capitalized research and development expenditures | 562.5 | 468.6 | |||||||||
| Research and development credits | 288.8 | 240.3 | |||||||||
| Share-based compensation expense | 178.4 | 155.3 | |||||||||
Swiss tax credits | 84.1 | 107.4 | |||||||||
| Expenses deducted in later years for tax purposes | 76.1 | 67.4 | |||||||||
| Lease liabilities | 23.1 | 23.0 | |||||||||
Other | 9.4 | 15.8 | |||||||||
| Gross deferred tax assets | 1,552.6 | 1,455.3 | |||||||||
| Valuation allowance | (361.5) | (314.8) | |||||||||
| Deferred tax assets | 1,191.1 | 1,140.5 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Property, plant, and equipment | (140.4) | (65.7) | |||||||||
| Right-of-use assets | (16.9) | (18.9) | |||||||||
Intangible assets and other | (15.2) | (10.8) | |||||||||
| Deferred tax liabilities | (172.5) | (95.4) | |||||||||
| Net deferred tax assets | $ | 1,018.6 | $ | 1,045.1 | |||||||
As of December 31, 2025, the Company had $85.4 million of federal and state net operating loss carryforwards, certain of which will expire starting in 2026 if not utilized. Utilization of these net operating loss carryforwards may be subject to certain limitations. The Company does not expect the limitations to result in any permanent loss of these tax benefits. As of December 31, 2025, the Company had $84.1 million of Swiss tax credit carryforwards, which will expire in 2028. As of
December 31, 2025, the Company had $395.0 million of California research and development credit carryforwards, which do not expire, and $4.4 million of other state research and development credit carryforwards, which begin to expire in 2030.
As of December 31, 2025, the Company had a valuation allowance of $361.5 million, primarily related to California deferred tax assets and certain Swiss deferred tax assets, for which the Company does not believe a tax benefit is more likely than not to be realized. As of December 31, 2024, the Company had a valuation allowance of $314.8 million, primarily related to California deferred tax assets and Swiss deferred tax assets, for which the Company does not believe a tax benefit is more likely than not to be realized. The increase in the valuation allowance during 2025 is primarily related to California research and development credits. These valuation allowances would result in a reduction to the income tax provision in the consolidated statements of income if they are ultimately not necessary.
The Company intends to repatriate earnings from its Swiss and Dutch subsidiaries and joint venture in Hong Kong, as needed, and the U.S. and foreign tax implications of such repatriations are not expected to be significant. The Company will continue to indefinitely reinvest earnings from the rest of its foreign subsidiaries and does not expect the tax implications of repatriating these earnings to be significant.
Income taxes paid, net of refunds, during the periods presented were as follows (in millions):
Year Ended December 31, | ||||||||
| 2025 | ||||||||
Federal | $ | 348.8 | ||||||
State | 57.0 | |||||||
Switzerland | 67.3 | |||||||
Other foreign | 64.8 | |||||||
| Total income taxes paid, net of refunds | $ | 537.9 | ||||||
A reconciliation of the beginning and ending amounts of gross unrecognized income tax benefits for the years ended December 31, 2025, 2024, and 2023, are as follows (in millions):
Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Beginning balance | $ | 310.0 | $ | 260.4 | $ | 252.6 | |||||||||||
| Increases related to tax positions taken during the current year | 61.4 | 67.8 | 48.5 | ||||||||||||||
| Increases related to tax positions taken during a prior year | 2.4 | 13.9 | — | ||||||||||||||
| Decreases related to tax positions taken during a prior year | (7.7) | — | (18.9) | ||||||||||||||
| Decreases related to settlements with tax authorities | (20.3) | (3.7) | (1.0) | ||||||||||||||
| Decreases related to expiration of statute of limitations | (59.7) | (28.4) | (20.8) | ||||||||||||||
| Ending balance | $ | 286.1 | $ | 310.0 | $ | 260.4 | |||||||||||
As of December 31, 2025, 2024, and 2023, gross interest related to unrecognized tax benefits accrued was $21.8 million, $37.0 million, and $31.2 million, respectively. Total gross unrecognized tax benefits as of December 31, 2025, were $286.1 million, of which $175.3 million, if recognized, would have an impact on the Company’s effective tax rate.
The Company files federal, state, and foreign income tax returns in many jurisdictions in the U.S. and OUS. Years before 2020 are considered closed for significant jurisdictions. Certain of the Company’s unrecognized tax benefits could change due to activities of various tax authorities, including evolving interpretations of existing tax laws in the jurisdictions in which the Company operates, potential assessment of additional tax, possible settlement of audits, or through normal expiration of various statutes of limitations, which could affect the Company’s effective tax rate in the period in which they change.
The Company is subject to the examination of its income tax returns by the Internal Revenue Service and other tax authorities. The outcome of these audits cannot be predicted with certainty. The Company’s management regularly assesses the likelihood of adverse outcomes resulting from these examinations to determine the adequacy of the Company’s provision for income taxes. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company could be required to adjust its provision for income taxes in the period such resolution occurs.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 3, 2026 | Showing above |
| 2024 | Jan 31, 2025 | |
| 2023 | Jan 31, 2024 | |
| 2022 | Feb 10, 2023 | |
| 2021 | Feb 3, 2022 | |
| 2020 | Feb 10, 2021 | |
| 2019 | Feb 7, 2020 | |
| 2018 | Feb 4, 2019 | |
| 2017 | Feb 2, 2018 | |
| 2016 | Feb 6, 2017 | |
| 2015 | Feb 2, 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.