THERMO FISHER SCIENTIFIC INC.TMO

THERMO FISHER SCIENTIFIC INC. Income Taxes Disclosure

10-KFiled Feb 26, 20268 min read
Income Taxes
The components of income before provision for income taxes are as follows:
(In millions)202520242023
U.S.$2,608 $2,226 $2,431 
Non-U.S.4,700 4,812 3,867 
Income before income taxes
$7,308 $7,037 $6,298 
The components of the provision for income taxes are as follows:
(In millions)202520242023
Current income tax provision
Federal$402 $561 $228 
Non-U.S.658 1,175 1,206 
State126 130 150 
1,186 1,866 1,584 
Deferred income tax provision/(benefit)
Federal$(385)$(1,026)$(551)
Non-U.S.(221)(72)(647)
State(34)(111)(102)
 (639)(1,209)(1,300)
Provision for/(benefit from) income taxes$547 $657 $284 
The provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate to income before income taxes due to the following:
(Dollars in millions)2025
U.S. federal statutory tax rate$1,535 21.0 %
State and local income taxes, net of federal income tax effect (a)68 0.9 %
Foreign tax effects
Malta
Changes in valuation allowances2,351 32.2 %
Statutory tax rate difference between Malta and United States473 6.5 %
Deferred interest(2,351)(32.2)%
Notional interest deduction(1,186)(16.2)%
Other19 0.3 %
Netherlands
Changes in valuation allowances144 2.0 %
Deferred interest(97)(1.3)%
Other(27)(0.4)%
United Kingdom
Partnership income/(loss)(118)(1.6)%
Foreign exchange131 1.8 %
Other(41)(0.6)%
Other foreign jurisdictions166 2.3 %
Effect of changes in tax laws or rates enacted in the current period12 0.2 %
Effect of cross-border tax laws
Foreign-derived intangible income(268)(3.7)%
U.S. tax on branch income/(loss)390 5.3 %
Other125 1.7 %
Tax credits
Foreign tax credits(181)(2.5)%
Other(36)(0.5)%
Changes in valuation allowances(157)(2.1)%
Nontaxable or nondeductible items1 0.0 %
Changes in unrecognized tax benefits(64)(0.9)%
Other adjustments
Intra-entity transfer(133)(1.8)%
Domestication transaction(240)(3.3)%
Other31 0.4 %
Effective tax rate$547 7.5 %
(a)State taxes in California, Massachusetts, Illinois, and Pennsylvania comprise the majority of the tax effect in this category.
Under previous tax disclosure guidance, the provision for income taxes in the accompanying statement of income differs from the provision calculated by applying the statutory federal income tax rate to income before income taxes due to the following:
(In millions)20242023
Statutory federal income tax rate
21 %21 %
Provision for income taxes at statutory rate
$1,478 $1,323 
Increases (decreases) resulting from:
Foreign rate differential
(131)(223)
Income tax credits
(333)(276)
Global intangible low-taxed income
57 113 
Foreign-derived intangible income
(133)(108)
Excess tax benefits from stock options and restricted stock units
(67)(69)
Provision for (reversal of) tax reserves, net
218 13 
Intra-entity transfers
(106)(233)
Foreign exchange loss on inter-company debt refinancing
— (112)
Provision for (reversal of) valuation allowances, net
(229)(32)
Withholding taxes
74 33 
Tax return reassessments and settlements
(192)(187)
State income taxes, net of federal tax66 70 
Other, net
(45)(28)
Provision for/(benefit from) income taxes
$657 $284 
The company has operations and a taxable presence in approximately 70 countries outside the U.S. The company's effective income tax rate differs from the U.S. federal statutory rate each year due to certain operations that are subject to tax incentives, state and local taxes, nondeductible interest in certain foreign jurisdictions, and foreign taxes that are different than the U.S. federal statutory rate.
During 2025, the company recorded tax benefits of $269 million and $153 million for domestication transactions and capital losses generated as part of intra-entity transactions, respectively, as well as $93 million of tax benefits related to tax return reassessments associated with the company’s foreign-derived intangible income. The company also recorded net tax benefits of $157 million, primarily in jurisdictions where the deferred tax assets are now expected to be realized due to forecasted income.
During 2024, the company recorded a tax reserve and associated interest of $240 million related to the settlement of international tax audits for tax years 2009 through 2016, which were settled in 2024. The company also recorded tax benefits of $459 million, primarily in jurisdictions where the deferred tax assets are now expected to be realized due to forecasted income. The benefits were partially offset by tax provisions primarily associated with disallowed interest expense and net operating loss carryforwards that are not expected to be realized.
During 2023, the company released valuation allowances of $32 million in jurisdictions where the deferred tax assets are now expected to be realized. In 2023, the company also recorded a tax benefit of $127 million for U.S. tax credits and the revaluation of net operating loss carryforwards due to higher tax rates as a result of its tax return resubmissions, a $91 million tax benefit, net of related tax expenses, from a foreign exchange loss on an intercompany debt refinancing transaction, and $233 million of tax benefits resulting from intra-entity transactions.
Net deferred tax asset/(liability) in the accompanying balance sheets consists of the following:
(In millions)20252024
Deferred tax asset/(liability)
Depreciation and amortization
$(4,304)$(4,133)
Net operating loss and credit carryforwards
3,662 2,915 
Reserves and accruals
139 161 
Accrued compensation
321 318 
Inventory basis difference
293 309 
Deferred interest3,365 534 
Research and development and other capitalized costs
372 536 
Unrealized (gains) losses on hedging instruments
20 (363)
Contract liabilities289 280 
Other, net
(346)147 
Deferred tax assets/(liabilities), net before valuation allowance
3,811 705 
Less: Valuation allowance
3,561 1,043 
Deferred tax assets/(liabilities), net
$249 $(338)
Prior to 2025, certain of the company’s non-U.S. attributes were determined to have a remote possibility of realization and therefore were not reported in the table above. In connection with the Organization for Economic Cooperation and Development global minimum tax initiative, Pillar Two, any existing deferred taxes not disclosed in the company’s 2025 financial statements will not be available in the future to reduce tax otherwise due under Pillar Two. Accordingly, beginning in 2025, the company is disclosing in the above table the tax effects of these non-US attributes offset with a full valuation allowance.
The company estimates the degree to which tax assets, losses and credit carryforwards will result in a benefit based on expected profitability by tax jurisdiction and provides a valuation allowance for tax assets and loss and credit carryforwards that it believes will more likely than not expire unutilized. At December 31, 2025, all of the company’s valuation allowance relates to deferred tax assets, primarily net operating losses and disallowed interest expense carryforward, for which any subsequently recognized tax benefits will reduce income tax expense.
The changes in the valuation allowance are as follows:
 Year Ended December 31,
(In millions)202520242023
Beginning balance
$1,043 $1,317 $1,322 
Additions/(reductions) recognized in income tax provision, net
2,455 (229)(32)
Additions due to acquisitions
— — 4 
Currency translation and other
64 (46)23 
Ending balance$3,561 $1,043 $1,317 
At December 31, 2025, the company had net federal, state and non-U.S. net operating loss carryforwards of $317 million, $72 million and $2.20 billion, respectively. Use of the carryforwards is limited based on the future income of certain subsidiaries. Of the federal net operating loss carryforwards, $38 million expire in the years 2026 through 2037, and the remainder do not expire. Of the state net operating loss carryforwards, $56 million expire in the years 2026 through 2044, and the remainder do not expire. Of the net non-U.S. net operating loss carryforwards, $1.04 billion expire in the years 2028 through 2045, and the remainder do not expire.
At December 31, 2025, the company had foreign tax credit carryforwards of $554 million and deferred interest carryforwards of $3.36 billion. The foreign tax credit carryforwards will expire in the years 2026 through 2034. Of the deferred interest carryforwards, $301 million expire in the years 2026 through 2035 and the remainder do not expire.
A provision has not been made for certain U.S. state income taxes or additional non-U.S. taxes that would be due when cash is repatriated to the U.S. as the company’s undistributed foreign earnings are intended to be reinvested outside of the U.S. indefinitely. The determination of the amount of the unrecognized deferred tax liability related to the undistributed foreign earnings is not practicable due to the uncertainty in the manner in which these earnings will be distributed. The company’s intent is to only make distributions from non-U.S. subsidiaries in the future when they can be made at no net tax cost.
Unrecognized Tax Benefits
As of December 31, 2025, the company had $0.42 billion of unrecognized tax benefits substantially all of which, if recognized, would reduce the effective tax rate.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
(In millions)202520242023
Beginning balance
$525 $540 $572 
Additions due to acquisitions
— 19 — 
Additions for tax positions of current year
25 91 4 
Additions for tax positions of prior years
— 244 34 
Reductions for tax positions of prior years
(34)(182)(43)
Closure of tax years
(19)— (6)
Settlements
(78)(187)(21)
Ending balance
$419 $525 $540 
Substantially all of the unrecognized tax benefits are classified as long-term liabilities.
During 2025, the company’s tax benefits decreased by $103 million as a result of uncertain tax positions relating to foreign tax positions, which included $72 million of reserve and associated interest from the settlement of international tax audits and decreased $3 million relating to U.S. federal and state tax positions.
During 2024, the company’s unrecognized tax benefits decreased by $99 million as a result of uncertain tax positions relating to foreign tax positions which included $240 million of reserve and associated interest from the settlement of international tax audits for tax years 2009 through 2016 and increased $84 million relating to U.S. federal and state tax positions.
During 2023, the company’s unrecognized tax benefits decreased by $12 million as a result of uncertain tax positions relating to foreign tax positions and decreased $19 million relating to U.S. federal and state tax positions.
The company classified interest and penalties related to unrecognized tax benefits as income tax expense. The total amount of interest and penalties related to uncertain tax positions and recognized in the balance sheet as of December 31, 2025 and 2024 was $39 million and $75 million, respectively.
The company conducts business globally and, as a result, Thermo Fisher or one or more of its subsidiaries files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, the company is subject to examination by taxing authorities throughout the world, including such major jurisdictions as Australia, Canada, China, Denmark, Finland, France, Germany, Japan, Singapore, Sweden, the United Kingdom and the United States. With few exceptions, the company is no longer subject to U.S. state and local or non-U.S. income tax examinations for years before 2012 and no longer subject to U.S. federal income tax examinations for years before 2019.
On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was enacted. The OBBBA includes a broad range of provisions, such as the permanent extension of certain otherwise expiring provisions, modifications to the international tax framework and the reinstatement of favorable tax treatment for certain business provisions. While most of the changes made by the OBBBA are effective in future tax years, some of its provisions are effective in 2025. There was no material impact on the company’s effective tax rate. We will continue to monitor and assess the impact of OBBBA on our consolidated financial statements.

Historical Timeline

Fiscal YearFiled
2025Feb 26, 2026Showing above
2024Feb 20, 2025
2023Feb 22, 2024
2022Feb 23, 2023
2021Feb 24, 2022
2020Feb 25, 2021
2019Feb 26, 2020
2018Feb 27, 2019
2017Feb 28, 2018
2016Feb 28, 2017
2015Feb 25, 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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