PERRIGO Co plcPRGO
PERRIGO Co plc Income Taxes Disclosure
INCOME TAXES
Pre-tax income (loss) and the (benefit) provision for income taxes from continuing operations are summarized as follows (in millions):
| Year Ended | |||||||||||||||||
| December 31, 2025 | December 31, 2024 | December 31, 2023 | |||||||||||||||
| Pre-tax income (loss): | |||||||||||||||||
| Ireland | $ | (620.1) | $ | (224.1) | $ | 72.3 | |||||||||||
| Non-Ireland | (677.8) | 143.5 | (80.7) | ||||||||||||||
| Total pre-tax income (loss) | (1,297.9) | (80.6) | (8.4) | ||||||||||||||
| Current provision (benefit) for income taxes: | |||||||||||||||||
| Ireland | 11.2 | 2.3 | 2.0 | ||||||||||||||
| Non-Ireland | 133.9 | 87.4 | 74.8 | ||||||||||||||
| Total current | 145.1 | 89.7 | 76.8 | ||||||||||||||
| Deferred provision (benefit) for income taxes: | |||||||||||||||||
| Ireland | (3.3) | — | 0.2 | ||||||||||||||
| Non-Ireland | (37.4) | (9.7) | (80.9) | ||||||||||||||
| Total deferred | (40.7) | (9.7) | (80.7) | ||||||||||||||
| Total provision for income taxes | $ | 104.4 | $ | 80.0 | $ | (3.9) | |||||||||||
We 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 disclosure pursuant to ASU 2023-09 and reconciles Ireland's federal statutory tax amount and rate to our actual global effective amount and rate for the year ended December 31, 2025.
| Year Ended | ||||||||
| December 31, 2025 | ||||||||
Amount | Percent | |||||||
Ireland federal statutory tax rate | $ | (162.2) | 12.5 | % | ||||
Foreign tax effects | ||||||||
| Belgium | ||||||||
Statutory income tax rate differential | (9.7) | 0.7 | ||||||
Change in valuation allowances | (9.8) | 0.8 | ||||||
Impairment | 31.9 | (2.5) | ||||||
Other | 10.5 | (0.8) | ||||||
| France | ||||||||
Statutory income tax rate differential | (35.0) | 2.7 | ||||||
Non-deductible currency exchange | 11.5 | (0.9) | ||||||
Impairment | 42.6 | (3.3) | ||||||
Other | 2.1 | (0.2) | ||||||
| Isle of Man | ||||||||
Statutory income tax rate differential | (13.8) | 1.1 | ||||||
Malta | ||||||||
Statutory income tax rate differential | 28.0 | (2.2) | ||||||
Change in valuation allowances | 8.5 | (0.7) | ||||||
Non-taxable currency exchange | (36.2) | 2.8 | ||||||
Deemed interest | (15.4) | 1.2 | ||||||
Other | (0.4) | — | ||||||
| United Kingdom | ||||||||
Statutory income tax rate differential | 10.6 | (0.8) | ||||||
Other | 0.3 | — | ||||||
| United States | ||||||||
Statutory income tax rate differential | (43.5) | 3.4 | ||||||
Effect of cross-border tax laws | 9.7 | (0.7) | ||||||
Changes in tax law or rate | (20.3) | 1.6 | ||||||
Change in valuation allowances | 72.6 | (5.6) | ||||||
Impairment | 19.9 | (1.5) | ||||||
Other | 4.1 | (0.4) | ||||||
| Other foreign jurisdictions | 18.2 | (1.3) | ||||||
| Valuation allowances | (9.2) | 0.7 | ||||||
Nontaxable or nondeductible items | ||||||||
| Disallowed management fees | 13.1 | (1.0) | ||||||
Non-deductible currency exchange | 44.1 | (3.4) | ||||||
Impairment | 124.1 | (9.6) | ||||||
Changes in unrecognized tax benefits | 94.9 | (7.3) | ||||||
Other adjustments | ||||||||
Statutory income tax rate differential | (86.9) | 6.7 | ||||||
Other adjustments | 0.1 | — | ||||||
Effective tax rate | 104.4 | (8.0) | % | |||||
The following table presents the required disclosures prior to our adoption of ASU 2023-09 and reconciles Ireland's federal statutory income tax rate to the actual global effective income tax rate for the years ended December 31, 2024 and December 31, 2023:
| Year Ended | |||||||||||
| December 31, 2024 | December 31, 2023 | ||||||||||
| Provision at statutory rate | 12.5 | % | 12.5 | % | |||||||
| Foreign rate differential | (17.4) | 286.8 | |||||||||
| State income taxes, net of federal benefit | 3.0 | 3.6 | |||||||||
| Provision to return | (3.1) | (67.6) | |||||||||
| Tax credits | 103.4 | 293.3 | |||||||||
| Change in tax law | (0.2) | (25.5) | |||||||||
| Change in valuation allowance | (101.2) | (383.9) | |||||||||
| Change in unrecognized taxes | 3.3 | 654.7 | |||||||||
| Permanent differences | (102.6) | (723.3) | |||||||||
| Taxes on unremitted earnings | (0.6) | 4.7 | |||||||||
| Other | 3.6 | (8.1) | |||||||||
Effective income tax rate | (99.3) | % | 47.2 | % | |||||||
We 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 our adoption, which presents cash income taxes paid (net of refunds received) for the year ended December 31, 2025:
| Year Ended | |||||
| December 31, 2025 | |||||
Ireland | $ | 11.6 | |||
Non-Ireland | |||||
Belgium | 7.7 | ||||
France | (6.6) | ||||
Italy | 5.8 | ||||
Poland | 6.0 | ||||
Sweden | 5.3 | ||||
United Kingdom | 13.4 | ||||
United States | 17.8 | ||||
All other non-Ireland | 17.7 | ||||
Income taxes, net of amounts refunded | $ | 78.7 | |||
The amount of cash income taxes we paid during the years ended December 31, 2024, and December 31, 2023 was $153.1 million and $96.8 million, respectively.
Deferred income taxes arise from temporary differences between the financial reporting and the tax reporting basis of assets and liabilities and operating loss and tax credit carryforwards for tax purposes. The components of our net deferred income tax asset (liability) are presented on a total company basis as follows (in millions). Prior period amounts have been reclassified to conform to current year presentation:
| Year Ended | |||||||||||
| December 31, 2025 | December 31, 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Depreciation and amortization | $ | 35.3 | $ | 48.6 | |||||||
| Inventory basis differences | 26.8 | 27.2 | |||||||||
| Accrued liabilities | 34.9 | 24.8 | |||||||||
| Lease obligations | 42.5 | 44.1 | |||||||||
| Share-based compensation | 15.2 | 18.0 | |||||||||
| Federal benefit of unrecognized tax positions | 15.7 | 12.0 | |||||||||
| Loss and credit carryforwards | 450.6 | 418.7 | |||||||||
| R&D credit carryforwards | — | 23.8 | |||||||||
| Capitalized R&D costs | 33.2 | 39.1 | |||||||||
| Interest carryforward | 131.3 | 119.1 | |||||||||
Derivative instruments and foreign currency | 44.9 | — | |||||||||
Other deferred tax assets | 12.4 | 4.7 | |||||||||
| Total deferred tax assets | 842.8 | 780.1 | |||||||||
Valuation allowance on deferred tax assets (1) | (618.5) | (488.6) | |||||||||
| Net deferred tax assets | 224.3 | 291.5 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Depreciation and amortization | (340.7) | (428.8) | |||||||||
| Right of use assets | (41.4) | (43.0) | |||||||||
| Unremitted earnings | (3.2) | (3.6) | |||||||||
| Derivative instruments and foreign currency | (0.2) | (9.9) | |||||||||
Other deferred tax liabilities | (4.4) | (4.3) | |||||||||
| Total deferred tax liabilities | (389.9) | (489.6) | |||||||||
| Net deferred tax assets (liabilities) | $ | (165.6) | $ | (198.1) | |||||||
(1) The movement in the valuation allowance balance differs from the amount in the effective tax rate reconciliation due to the write-off of tax attributes that are offset with a valuation allowance, adjustments affecting balance sheet only items, discontinued operations, and other comprehensive income.
The above amounts are classified on the Consolidated Balance Sheets as follows (in millions):
| Year Ended | |||||||||||
| December 31, 2025 | December 31, 2024 | ||||||||||
| Assets | $ | 3.3 | 5.1 | ||||||||
| Liabilities | 168.9 | 203.2 | |||||||||
| Net deferred income tax liability | $ | (165.6) | (198.1) | ||||||||
The change in valuation allowance reducing deferred taxes was (in millions). Prior period amounts have been reclassified to conform to the current year presentation:
| Year Ended | ||||||||||||||||||||
| December 31, 2025 | December 31, 2024 | December 31, 2023 | ||||||||||||||||||
| Balance at beginning of period | $ | 488.6 | $ | 440.9 | $ | 394.5 | ||||||||||||||
Change in continuing operations | (28.1) | 76.7 | 31.8 | |||||||||||||||||
Change in discontinued operations | 4.1 | 1.0 | — | |||||||||||||||||
| Change in other comprehensive income | 132.5 | (19.9) | 10.1 | |||||||||||||||||
Change in cumulative translation adjustment | 21.4 | (10.1) | 4.5 | |||||||||||||||||
| Balance at end of period | $ | 618.5 | $ | 488.6 | $ | 440.9 | ||||||||||||||
For the year ended December 31, 2025 we recorded a net increase in valuation allowance of $129.9 million primarily related to the change in realizability of our deferred tax assets in the U.S. For the year ended
December 31, 2024 we recorded a net increase in valuation allowances of $56.8 million comprised primarily of valuation allowances recorded on certain interest carryforward deferred tax assets in our U.S. and Netherlands operations. For the year ended December 31, 2023 we recorded a net increase in valuation allowances of $41.9 million comprised primarily of an increase of valuation allowance on certain operating losses being carried forward which are no longer realizable. Valuation allowances are determined based on management's assessment of its deferred tax assets that are more likely than not to be realized.
We have credit carryforwards of $3.9 million which will expire at various times through 2040 and net operating loss carryforwards of $352.6 million which will expire at various times through 2045. The remaining credit carryforwards of $6.7 million, loss carryforwards of $1.7 billion, and interest carryforwards of $553.5 million have no expiration.
The ending deferred tax liability with respect to undistributed earnings of certain foreign subsidiaries is $3.2 million as of December 31, 2025.
As of December 31, 2025, we considered unremitted earnings of certain foreign subsidiaries as indefinitely reinvested. The unrecognized deferred tax liability related to these earnings is estimated at approximately $0.4 million. However, this estimate could change based on the manner in which the outside basis differences associated with these earnings reverse.
We operate in multiple jurisdictions with complex tax policy and regulatory environments and establish reserves for uncertain tax positions in accordance with the accounting guidance governing uncertainty in income taxes. Uncertainty in a tax position may arise because tax laws are subject to interpretation. The following table is presented on a total company basis and summarizes the activity related to the liability recorded for uncertain tax positions, excluding interest and penalties (in millions):
| Year Ended | ||||||||
| December 31, 2025 | December 31, 2024 | |||||||
| Balance at beginning of period | $ | 239.6 | $ | 239.3 | ||||
| Additions: | ||||||||
| Positions related to the current year | 59.2 | 4.7 | ||||||
| Positions related to prior years | 22.2 | 8.5 | ||||||
| Reductions: | ||||||||
| Settlements with taxing authorities | (19.6) | (1.1) | ||||||
| Decrease in prior year positions | (1.8) | (11.0) | ||||||
| Cumulative translation adjustment | 0.6 | (0.8) | ||||||
| Balance at end of period | $ | 300.2 | $ | 239.6 | ||||
We recognize interest and penalties related to uncertain tax positions as a component of income tax expense. The amounts were not material for the years ended December 31, 2025, December 31, 2024, and December 31, 2023. The total amount accrued for interest and penalties in the liability for uncertain tax positions was $91.6 million, $70.2 million, and $74.9 million as of December 31, 2025, December 31, 2024, and December 31, 2023, respectively.
If recognized, of the total liability for uncertain tax positions, including interest and penalties, $265.5 million, $183.3 million, and $185.2 million as of December 31, 2025, December 31, 2024, and December 31, 2023, respectively, would impact the effective tax rate in future periods.
Our major income tax jurisdictions are Ireland, the U.S., Belgium, France, and the United Kingdom. We are routinely audited by the tax authorities in our major jurisdictions. We have substantially concluded all Ireland income tax matters through the year ended December 31, 2020 and all U.S. federal income tax matters through the year ended June 28, 2008. All significant matters in our remaining major tax jurisdictions have been concluded for tax years through 2022.
Although we believe that our tax estimates are reasonable and that we prepare our tax filings in accordance with all applicable tax laws, the final determination with respect to any tax audit and any related litigation could be materially different from our estimates or from our historical income tax provisions and accruals. The results of an audit or litigation could have a material effect on operating results and/or cash flows in the periods for which that determination is made. In addition, future period earnings may be adversely impacted by litigation costs, settlements, penalties, and/or interest assessments.
Internal Revenue Service Audits of Perrigo Company, a U.S. Subsidiary
Perrigo Company, our U.S. subsidiary ("Perrigo U.S."), is engaged in a series of tax disputes in the U.S. relating primarily to transfer pricing adjustments including income in connection with the purchase, distribution, and sale of store-brand OTC pharmaceutical products in the United States, including the heartburn medication omeprazole. On August 27, 2014, we received a statutory notice of deficiency from the Internal Revenue Service ("IRS") relating to our fiscal tax years ended June 27, 2009, and June 26, 2010 (the “2009 tax year” and “2010 tax year”, respectively). On April 20, 2017, we received a statutory notice of deficiency from the IRS for the years ended June 25, 2011 and June 30, 2012 (the “2011 tax year” and “2012 tax year”, respectively). Specifically, both statutory notices proposed adjustments related to the offshore reporting of profits on sales of omeprazole in the United States resulting from the assignment of an omeprazole distribution contract to an Israeli affiliate. In addition to the transfer pricing adjustments, which applied to all four tax years, the statutory notice of deficiency for the 2011 and 2012 tax years included adjustments requiring the capitalization and amortization of certain legal expenses that were deducted when paid or incurred in defending against certain patent infringement lawsuits related to Abbreviated New Drug Applications (“ANDAs”) filed with a Paragraph IV Certification.
We do not agree with the audit adjustments proposed by the IRS in either of the notices of deficiency. We paid the assessed amounts of tax, interest, and penalties set forth in the statutory notices and timely filed claims for refund on June 11, 2015 for the 2009 and 2010 tax years, and on June 7, 2017, for the 2011 and 2012 tax years. On August 15, 2017, following disallowance of such refund claims, we timely filed a complaint in the United States District Court for the Western District of Michigan seeking refunds of tax, interest, and penalties of $27.5 million for the 2009 tax year, $41.8 million for the 2010 tax year, $40.1 million for the 2011 tax year, and $24.7 million for the 2012 tax year, for a total of $134.1 million, plus statutory overpayment interest thereon from the dates of payment. The amounts sought in the complaint for the 2009 and 2010 tax years were recorded as deferred charges in Other non-current assets on our balance sheet during the three months ended March 28, 2015, and the amounts sought in the complaint for the 2011 and 2012 tax years were recorded as deferred charges in Other non-current assets on our balance sheet during the three months ended July 1, 2017.
A bench trial was held during the period May 25, 2021 to June 7, 2021 for the refund case in the United States District Court for the Western District of Michigan. The total amount of cumulative deferred charge that we are seeking to receive in this litigation is approximately $113.3 million, which reflects the impact of conceding that Perrigo U.S. should have received a 5.24% royalty on all omeprazole sales. That concession was previously paid and is the subject of the above refund claims. The issues outlined in the statutory notices of deficiency described above are continuing in nature, and the IRS will likely carry forward the adjustments set forth therein as long as the OTC medication is sold, in the case of the omeprazole issue, and for all post-2012 Paragraph IV filings that trigger patent infringement suits, in the case of the ANDA issue. On September 25, 2025, the court issued an opinion in the case that predominantly sided with Perrigo U.S. on both the omeprazole and the ANDA issues. The court ordered the parties to submit computations implementing the opinion and to submit a proposed final judgment by January 23, 2026, as extended. The court, thereafter, issued a final, appealable judgment on January 27, 2026. While we generally agree with the opinion, we are still considering all avenues to appeal the portions of the opinion that sided with the government.
On January 13, 2021, the IRS issued a 30-day letter and Revenue Agent's Report ("RAR") with respect to its audit of our fiscal tax years ended June 29, 2013, June 28, 2014, and June 27, 2015. The 30-day letter proposed, among other modifications, transfer pricing adjustments in connection with the distribution of omeprazole consistent with the IRS position in the prior years in the aggregate amount of $141.6 million and ANDA-related adjustments in the aggregate amount of $21.9 million. We timely filed a protest to the 30-day letter for those additional adjustments but noted that due to the pending refund litigation described above, IRS Appeals would not consider the merits of the omeprazole or ANDA matters. We believe that we should prevail on the merits on both carryforward issues and have reserved for taxes and interest payable on the 5.24% deemed royalty on omeprazole through the tax year ended December 31, 2018. Beginning with the tax year ended December 31, 2019, we began reporting income commensurate with the 5.24% deemed royalty. We have not reserved for the ANDA-related issue described above. While we believe we should prevail on the merits of this case, the outcome remains uncertain. If our litigation position on the omeprazole issue is not ultimately sustained as part of any appeal, the outcome for the 2009–2012 tax years could range from a reduction in the refund amount to denial of any refund. In addition, we expect that the outcome of the refund litigation could effectively bind future tax years. In that event, a final adverse ruling on the omeprazole issue could have a material impact on subsequent periods (i.e., 2013 to date), with additional tax liability in the range of $25.0 million to $128.0 million, not including interest and any applicable penalties.
The 30-day letter for the 2013-2015 tax years also proposed to reduce Perrigo U.S.'s deductible interest expense for the 2014 tax year and the 2015 tax year on $7.5 billion in certain intercompany debts owed by it to Perrigo Company plc. The debts were incurred in connection with the Elan merger transaction in 2013. On May 7, 2020, the IRS issued a Notice of Proposed Adjustment ("NOPA") capping the interest rate on the debts for U.S. federal tax
purposes. On May 5, 2023, we finalized an agreement resulting in settlement of the May 7, 2020 NOPA. In fiscal year 2023 we adjusted our previously established reserves related to this matter. On March 28, 2024, we received a Notice of Assessment and on April 10, 2024 we made the settlement payment.
On December 2, 2021, the IRS commenced an audit of our federal income tax returns for the tax years ended December 31, 2015, through December 31, 2019, which remains ongoing. On March 12, 2025, the IRS issued a NOPA to reduce Perrigo U.S.'s deductible interest expense for the 2015 through 2018 tax years by $348.2 million, using the same interest rates that we agreed with IRS Appeals for the 2014 and 2015 tax years, and a Closing Agreement has been since executed that resolves this issue with finality. We previously adjusted our reserves using such interest rates and, as a result, we are fully reserved for the adjustment specified in the NOPA.
Internal Revenue Service Audit of Athena Neurosciences, LLC, a U.S. Subsidiary
On December 22, 2016, we received a NOPA for the year ended December 31, 2011, denying the deductibility of settlement costs incurred in 2011 by Athena's parent company Elan Pharmaceuticals, Inc. ("EPI") related to illegal marketing of Zonegran by EPI's employees in the United States raised in a Qui Tam action under the U.S. False Claims Act. We strongly disagreed with the IRS' position on this issue. Because we believed that any concession on this issue in Appeals would be contrary to our evaluation of the issue and to avoid double taxation of the same income in the United States and Ireland, we pursued our remedies under the Mutual Agreement Procedure ("MAP") of the U.S. - Ireland Income Tax Treaty. On October 20, 2020, we requested Competent Authority assistance and the request was accepted. On April 14, 2025, we received a MAP Closing Letter from the IRS Office of Advance Pricing and Mutual Agreement advising that the U.S. and Ireland Competent Authorities reached a mutual agreement regarding the competent authority request filed by Athena. This mutual agreement is a favorable resolution of this matter and had an immaterial impact on our financial statements.
Recent Tax Law Changes
The Organization for Economic Co-operation and Development (“OECD”), which represents a coalition of member countries, has recommended changes to numerous long-standing tax principles. In particular, the OECD's Pillar Two initiative introduces a global per-country minimum tax of 15%. Pillar Two legislation has been enacted or substantively enacted in many of the jurisdictions in which we operate. We are in compliance with the OECD’s Pillar Two framework. After a comprehensive assessment, we have determined that there is no material impact on our financial results as a result of the implementation of the Pillar Two framework to date.
We believe that our existing global tax strategies will adequately address any necessary adjustments to comply with Pillar Two without significantly affecting our effective tax rate or overall financial position. We will continue to monitor regulatory developments to ensure ongoing compliance, but we do not anticipate any adverse effects on our operations or profitability due to the implementation of the Pillar Two framework.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law. The OBBBA includes significant changes to federal tax law and permanently extends or modifies various provisions from the 2017 Tax Cuts and Jobs Act, including, but not limited to, deductions for federal bonus depreciation, domestic research and development expenditures, and certain changes, some taxpayer-favorable and others not, for determining the limitation on business interest expense. We evaluated the OBBBA provisions enacted and determined they resulted in a tax benefit of $21.7 million for 2025, primarily due to the increased realizability of deferred tax assets associated with interest expense carryforwards following the restoration of depreciation and amortization in the Section 163(j) business interest expense limitation calculation. The remaining provisions of the OBBBA have multiple effective dates, with certain provisions effective in 2025 and others implemented over subsequent years. We are not anticipating the remaining provisions of the OBBBA to have a material effect on our consolidated financial statements.
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.