Entity information:
Tax Matters
A.
Taxes on Income
The income tax provision in the consolidated statements of income includes tax costs and benefits, such as uncertain tax positions, repatriation decisions and audit settlements, among others.
On December 22, 2017, the Tax Cuts and Jobs Act (the Tax Act) was enacted which, among other changes, reduces the U.S. federal corporate tax rate from 35% to 21% effective January 1, 2018. The Tax Act makes broad and complex changes to the U.S. tax code and it will take time to fully analyze the impact of the changes. Based on the information available, and the current interpretation of the Tax Act, the company was able to make a reasonable estimate and recorded a provisional net tax expense related to the one-time mandatory deemed repatriation tax, payable over eight years, partially offset by the remeasurement of the deferred tax assets and liabilities, as of the date of enactment, due to the reduction in the U.S. federal corporate tax rate. Pursuant to the Staff Accounting Bulletin published by the Securities and Exchange Commission on December 22, 2017, addressing the challenges in accounting for the effects of the Tax Act in the period of enactment, companies must report provisional amounts for those specific income tax effects of the Tax Act for which the accounting is incomplete but a reasonable estimate can be determined. Those provisional amounts will be subject to adjustment during a measurement period of up to one year from the enactment date. Pursuant to this guidance, the estimated impact of the Tax Act is based on a preliminary review of the new tax law and projected future financial results and is subject to revision based upon further analysis and interpretation of the Tax Act and to the extent that future results differ from currently available projections.
Our accounting for the following elements of the Tax Act is incomplete. However, we are able to make reasonable estimates and recorded a provisional net tax expense of $212 million related to the following elements of the Tax Act pursuant to the Staff Accounting Bulletin referred to above:
•
One-Time Mandatory Deemed Repatriation Tax: As a result of the enactment of the Tax Act, the company will be subject to a one-time mandatory deemed repatriation tax on accumulated non-U.S. earnings. Due to the fact that the non-U.S. subsidiaries are on a fiscal year ending November 30, this tax liability will not become a fixed obligation until 2018. The estimated impact of the Tax Act is based on a preliminary review of the new law and projected future financial results and is subject to revision based upon further analysis and interpretation of the Tax Act and to the extent that future results differ from currently available projections.
•
Reduction of U.S. Federal Corporate Tax Rate: The Tax Act reduces the corporate tax rate to 21%, effective January 1, 2018. Consequently, we have recorded a decrease related to deferred tax assets and liabilities with a corresponding net adjustment to deferred income tax benefit for the year ended December 31, 2017. Since, as discussed herein, the company has recorded provisional amounts related to certain portions of the Tax Act, any corresponding deferred tax remeasurement is also provisional.
•
Valuation Allowances: The company must assess whether its valuation allowance analyses are affected by various aspects of the Tax Act (e.g., one-time mandatory deemed repatriation of deferred foreign income, global intangible low-taxed income inclusions, and new categories of foreign tax credits). Since, as discussed herein, the company has recorded provisional amounts related to certain portions of the Tax Act, any corresponding determination of the need for or change in a valuation allowance is also provisional.
•
Global Intangible Low-Taxed Income (GILTI) Policy Election: The GILTI provisions of the Tax Act do not apply to the company until 2019 and we are still evaluating its impact. The FASB allows companies to adopt an accounting policy to either recognize deferred taxes for GILTI or treat such tax cost as a current-period expense when incurred. We have not yet determined our accounting policy because determining the impact of the GILTI provisions requires analysis of our existing legal entity structure, the reversal of our U.S. GAAP and U.S. tax basis differences in the assets and liabilities of our foreign subsidiaries, and our ability to offset any tax with foreign tax credits. As such, we have not made a policy decision regarding whether to record deferred taxes on GILTI or treat such tax cost as a current-period expense.
On January 11, 2016, the European Commission concluded that the Belgium “excess profits tax scheme” constitutes illegal state aid and ordered the Belgian authorities to recover benefits from taxpayers who are parties to an Excess Profits Ruling. As a result, the 2017 and 2016 effective tax rates do not reflect any benefit of the excess profits ruling and does incorporate the Belgium government's recovery of benefits for the periods 2013 through 2015 offset by the remeasurement of the company’s deferred tax assets and liabilities using the rates expected to be in place at the time of the reversal and without consideration of implementation of any future operational changes. The 2015 effective tax rate includes the benefit of the incentive tax rulings in Belgium and Singapore.
The components of Income before provision for taxes on income follow:
 
 
Year Ended December 31,
(MILLIONS OF DOLLARS)
 
2017

 
2016

 
2015

United States
 
$
897

 
$
723

 
$
469

International
 
628

 
505

 
76

Income before provision for taxes on income
 
$
1,525

 
$
1,228

 
$
545


The components of Provision for taxes on income based on the location of the taxing authorities follow:
 
 
Year Ended December 31,
(MILLIONS OF DOLLARS)
 
2017

 
2016

 
2015

United States:
 
 
 
 
 
 
Current income taxes:
 
 
 
 
 
 
Federal
 
$
384

 
$
281

 
$
221

State and local
 
25

 
3

 
19

Deferred income taxes:
 
 
 
 
 
 
Federal
 
113

 
(38
)
 
(63
)
State and local
 
2

 
11

 
(15
)
Total U.S. tax provision
 
524

 
257

 
162

International:
 
 
 
 
 
 
Current income taxes
 
126

 
179

 
50

Deferred income taxes
 
13

 
(27
)
 
(6
)
Total international tax provision
 
139

 
152

 
44

Provision for taxes on income(a)(b)(c)
 
$
663

 
$
409

 
$
206

(a)  
In 2017, the Provision for taxes on income reflects the following:
•
the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from (i) operations and (ii) restructuring charges related to the operational efficiency initiative and supply network strategy, as well as repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions and as a result of operating fluctuations in the normal course of business, the impact of non-deductible items and the extent and location of other income and expense items, such as restructuring charges/(benefits), asset impairments and gains and losses on asset divestitures;
•
a $212 million net discrete provisional tax expense recorded in the fourth quarter of 2017, related to the impact of the Tax Act enacted on December 22, 2017, including a one-time mandatory deemed repatriation tax, partially offset by a net tax benefit related to the remeasurement of the deferred tax assets and liabilities, as of the date of enactment, due to the reduction in the U.S. federal corporate tax rate;
•
U.S. tax benefit related to U.S. Research and Development Tax Credit and the U.S. Domestic Production Activities deduction;
•
a $15 million discrete tax benefit recorded in the fourth quarter of 2017 related to the effective settlement of certain issues with U.S. and non-U.S. tax authorities;
•
a $9 million discrete tax benefit recorded in 2017 related to the excess tax benefits for share-based payments;
•
a $3 million discrete tax benefit recorded in the first quarter of 2017 related to a remeasurement of the company’s deferred tax assets and liabilities using the tax rates expected to be in place going forward;
•
tax expense related to the changes in valuation allowances and the resolution of other tax items; and
•
tax expense related to changes in uncertain tax positions (see D. Tax Contingencies).
(b)
In 2016, the Provision for taxes on income reflects the following:
•
the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from (i) operations and (ii) restructuring charges related to the operational efficiency initiative and supply network strategy, as well as repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions and as a result of operating fluctuations in the normal course of business, the impact of non-deductible items and the extent and location of other income and expense items, such as restructuring charges/(benefits), asset impairments and gains and losses on asset divestitures;
•
U.S. tax benefit related to U.S. Research and Development Tax Credit and the U.S. Domestic Production Activities deduction;
•
a $15 million discrete tax benefit recorded in the fourth quarter of 2016 related to prior period tax adjustments;
•
a $10 million discrete tax benefit recorded in the first quarter of 2016 related to a remeasurement of deferred taxes as a result of a change in statutory tax rates;
•
a $7 million discrete tax benefit recorded in 2016 related to the excess tax benefits for share-based payments;
•
a $2 million discrete tax benefit related to a remeasurement of the company’s deferred tax assets and liabilities using the tax rates expected to be in place going forward;
•
a net tax expense of approximately $35 million mainly recorded in the first half of 2016 related to the impact of the European Commission’s negative decision on the excess profits rulings in Belgium. This net charge represents the recovery of prior tax benefits for the periods 2013 through 2015 offset by the remeasurement of the company’s deferred tax assets and liabilities using the rates expected to be in place at the time of the reversal and without consideration of implementation of any future operational changes, and does not include any benefits associated with a successful appeal of the decision;
•
tax expense related to the changes in valuation allowances and the resolution of other tax items; and
•
tax expense related to changes in uncertain tax positions (see D. Tax Contingencies).
(c)  
In 2015, the Provision for taxes on income reflects the following:
•
the change in the jurisdictional mix of earnings, which includes the impact of the location of earnings from (i) operations and (ii) restructuring charges related to the operational efficiency initiative and supply network strategy, as well as repatriation costs. The jurisdictional mix of earnings can vary as a result of repatriation decisions and as a result of operating fluctuations in the normal course of business, the impact of non-deductible items and the extent and location of other income and expense items, such as restructuring charges/(benefits), asset impairments and gains and losses on asset divestitures;
•
the tax expense related to the non-deductible revaluation of the net monetary assets in Venezuela to the SIMADI exchange rate recorded in the fourth quarter of 2015;
•
tax expense related to the changes in valuation allowances and the resolution of other tax items;
•
tax expense related to changes in uncertain tax positions (see D. Tax Contingencies);
•
a $9 million discrete tax benefit recorded in the first quarter of 2015 related to a remeasurement of deferred taxes as a result of a change in tax rates;
•
a $6 million discrete tax benefit recorded in the second quarter of 2015 related to prior period tax adjustments; and
•
U.S. tax benefit related to U.S. Research and Development Tax Credit which was permanently extended on December 18, 2015, and the U.S. Domestic Production Activities deduction.
Tax Rate Reconciliation
The reconciliation of the U.S. statutory income tax rate to our effective tax rate follows:
 
 
Year Ended December 31,
 
 
2017

 
2016

 
2015

U.S. statutory income tax rate
 
35.0
 %
 
35.0
 %
 
35.0
 %
State and local taxes, net of federal benefits
 
0.7

 
0.8

 
(1.1
)
Taxation of non-U.S. operations(a)(b)
 
(3.9
)
 
(3.0
)
 
(3.2
)
Unrecognized tax benefits and tax settlements and resolution of certain tax positions(c)
 
6.0

 
0.4

 
1.8

Impact of the Tax Act(d)
 
7.7

 
—

 
—

Venezuela revaluation(e)
 
—

 
—

 
5.6

Annulment of Belgium Excess Profit Ruling(f)
 
—

 
2.9

 
—

U.S. Research and Development Tax Credit and U.S. Domestic Production Activities deduction(g)
 
(1.3
)
 
(1.4
)
 
(2.8
)
Stock-based compensation(h)
 
(0.5
)
 
(0.5
)
 
—

Non-deductible / non-taxable items(i)
 
0.5

 
0.2

 
1.3

All other—net
 
(0.7
)
 
(1.1
)
 
1.2

Effective tax rate
 
43.5
 %
 
33.3
 %
 
37.8
 %
(a)
The rate impact of taxation of non-U.S. operations was a decrease to our effective tax rate in 2015 through 2017 due to (i) the jurisdictional mix of earnings as tax rates outside the United States are generally lower than the U.S. statutory income tax rate; and (ii) incentive tax rulings in Belgium and Singapore in 2015.
(b)
In all years, the impact to the rate due to increases in uncertain tax positions was more than offset by the jurisdictional mix of earnings and other U.S. tax implications of our foreign operations described in the above footnotes.
(c) 
For a discussion about unrecognized tax benefits and tax settlements and resolution of certain tax positions, see A. Taxes on Income and D. Tax Contingencies.
(d) 
The rate impact related to the Tax Act was an increase to our effective tax rate in 2017. This provisional net tax charge represents the amount related to the one-time mandatory deemed repatriation tax on the company’s undistributed non-U.S. earnings, partially offset by a net tax benefit related to the remeasurement of the company’s deferred tax assets and liabilities, as of the date of enactment, due to the reduction in the U.S. federal corporate tax rate.    
(e) 
The rate impact related to the non-deductible revaluation of the net monetary assets in Venezuela to the SIMADI exchange rate was an increase to our effective tax rate in 2015.
(f) 
The rate impact related to the European Commission’s negative decision on the excess profits rulings in Belgium was an increase to our effective tax rate in 2016. This net charge represents the recovery of prior tax benefits for the periods 2013 through 2015 offset by the remeasurement of the company’s deferred tax assets and liabilities using the rates expected to be in place at the time of the reversal and without consideration of implementation of any future operational changes, and does not include any benefits associated with a successful appeal of the decision.
(g) 
In all years, the decrease in the rate was due to the benefit associated with the U.S. Research and Development Tax Credit and the U.S. Domestic Production Activities deduction.
(h) 
The rate impact related to the excess tax benefits for share-based payments was a decrease to our effective tax rate in 2017 and 2016.
(i) 
In all years, non-deductible items include meals and entertainment expenses.
B.
Tax Matters Agreement
In connection with the separation from Pfizer in 2013, we entered into a tax matters agreement with Pfizer that governs the parties' respective rights, responsibilities and obligations with respect to tax liabilities and benefits, tax attributes, the preparation and filing of tax returns, the control of audits and other tax proceedings and other matters regarding taxes.
In general, under the agreement:
•
Pfizer will be responsible for any U.S. federal, state, local or foreign income taxes and any U.S. state or local non-income taxes (and any related interest, penalties or audit adjustments and including those taxes attributable to our business) reportable on a consolidated, combined or unitary return that includes Pfizer or any of its subsidiaries (and us and/or any of our subsidiaries) for any periods or portions thereof ending on or prior to December 31, 2012. We will be responsible for the portion of any such taxes for periods or portions thereof beginning on or after January 1, 2013, as would be applicable to us if we filed the relevant tax returns on a standalone basis.
•
We will be responsible for any U.S. federal, state, local or foreign income taxes and any U.S. state or local non-income taxes (and any related interest, penalties or audit adjustments) that are reportable on returns that include only us and/or any of our subsidiaries, for all tax periods whether before or after the completion of the separation from Pfizer.
•
Pfizer will be responsible for certain specified foreign taxes directly resulting from certain aspects of the separation from Pfizer.
We will not generally be entitled to receive payment from Pfizer in respect of any of our tax attributes or tax benefits or any reduction of taxes of Pfizer. Neither party's obligations under the agreement will be limited in amount or subject to any cap. The agreement also assigns responsibilities for administrative matters, such as the filing of returns, payment of taxes due, retention of records and conduct of audits, examinations or similar proceedings. In addition, the agreement provides for cooperation and information sharing with respect to tax matters.
Pfizer is primarily responsible for preparing and filing any tax return with respect to the Pfizer affiliated group for U.S. federal income tax purposes and with respect to any consolidated, combined, unitary or similar group for U.S. state or local or foreign income tax purposes or U.S. state or local non-income tax purposes that includes Pfizer or any of its subsidiaries, including those that also include us and/or any of our subsidiaries. We are generally responsible for preparing and filing any tax returns that include only us and/or any of our subsidiaries.
The party responsible for preparing and filing a given tax return will generally have exclusive authority to control tax contests related to any such tax return.
C.
Deferred Taxes
Deferred taxes arise as a result of basis differentials between financial statement accounting and tax amounts.
The components of our deferred tax assets and liabilities follow:
 
 
As of December 31,
 
 
2017

 
2016

(MILLIONS OF DOLLARS)
 
Assets (Liabilities)
Prepaid/deferred items
 
$
54

 
$
52

Inventories
 
8

 
47

Intangibles
 
(170
)
 
(203
)
Property, plant and equipment
 
(80
)
 
(101
)
Employee benefits
 
53

 
63

Restructuring and other charges
 
4

 
9

Legal and product liability reserves
 
14

 
18

Net operating loss/credit carryforwards
 
137

 
94

Unremitted earnings
 
(148
)
 
—

All other
 
(2
)
 
(2
)
Subtotal
 
(130
)
 
(23
)
Valuation allowance
 
(170
)
 
(125
)
Net deferred tax liability(a)(b)
 
$
(300
)
 
$
(148
)
(a) 
The increase in the total net deferred tax liability from December 31, 2016, to December 31, 2017, is primarily attributable to the provisional liability recorded for the one-time mandatory deemed repatriation tax on the company’s undistributed non-U.S. earnings, partially offset by the remeasurement of all U.S. deferred tax assets and liabilities as of December 22, 2017, based on the provisions of the Tax Act. In addition, the increase in the total net deferred tax liability was also attributable to an increase in valuation allowances representing the amounts determined to be unrecoverable, a decrease in deferred tax assets related to inventory, and employee benefits, partially offset by an increase in deferred tax assets related to net operating loss/credit carryforwards and a decrease in deferred tax liabilities related to intangibles, and property, plant and equipment.
(b) 
In 2017, included in Noncurrent deferred tax assets ($80 million) and Noncurrent deferred tax liabilities ($380 million). In 2016, included in Noncurrent deferred tax assets ($96 million) and Noncurrent deferred tax liabilities ($244 million).
We have carryforwards, primarily related to net operating losses, which are available to reduce future foreign and U.S. state income taxes payable with either an indefinite life or expiring at various times from 2018 to 2037.
Valuation allowances are provided when we believe that our deferred tax assets are not recoverable based on an assessment of estimated future taxable income that incorporates ongoing, prudent and feasible tax planning strategies. On the basis of this evaluation, as of December 31, 2017, and December 31, 2016, a valuation allowance of $170 million and $125 million, respectively, has been recorded to record only the portion of the deferred tax asset that is more likely than not to be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as projections for growth.
In general, it is our practice and intention to permanently reinvest the majority of the earnings of the company’s non U.S. subsidiaries. As of December 31, 2017, the cumulative amount of such undistributed earnings was approximately $4.5 billion, for which we have not provided taxes for U.S. state income, foreign withholding and currency gains and losses. As these earnings are intended to be indefinitely reinvested overseas, as of December 31, 2017, we cannot predict the time or manner of a potential repatriation. As such, other than the deferred tax liability associated with the one-time mandatory deemed repatriation tax on such undistributed earnings imposed by the Tax Act, it is not practicable to estimate the amount of any additional deferred tax liabilities associated with the actual repatriation of the unremitted earnings due to the complexity of its hypothetical calculation.
D.
Tax Contingencies
We are subject to income tax in many jurisdictions, and a certain degree of estimation is required in recording the assets and liabilities related to income taxes. All of our tax positions are subject to audit by the local taxing authorities in each tax jurisdiction. These tax audits can involve complex issues, interpretations and judgments and the resolution of matters may span multiple years, particularly if subject to negotiation or litigation. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and variation from such estimates could materially affect our financial statements in the period of settlement or when the statute of limitations expire. We treat these events as discrete items in the period of resolution.
For a description of our accounting policies associated with accounting for income tax contingencies, see Note 3. Significant Accounting Policies: Deferred Tax Assets and Liabilities and Income Tax Contingencies. For a description of the risks associated with estimates and assumptions, see Note 3. Significant Accounting Policies: Estimates and Assumptions.
Uncertain Tax Positions
As tax law is complex and often subject to varied interpretations, it is uncertain whether some of our tax positions will be sustained upon audit. As of December 31, 2017, 2016 and 2015, we had approximately $161 million, $65 million and $60 million, respectively, in net liabilities associated with uncertain tax positions, excluding associated interest:
•
Tax assets associated with uncertain tax positions primarily represent our estimate of the potential tax benefits in one tax jurisdiction that could result from the payment of income taxes in another tax jurisdiction. These potential benefits generally result from cooperative efforts among taxing authorities, as required by tax treaties to minimize double taxation, commonly referred to as the competent authority process. The recoverability of these assets, which we believe to be more likely than not, is dependent upon the actual payment of taxes in one tax jurisdiction and, in some cases, the successful petition for recovery in another tax jurisdiction. As of December 31, 2017, 2016 and 2015, we had approximately $3 million, $3 million and $1 million, respectively, in assets associated with uncertain tax positions recorded in Other noncurrent assets.
•
Tax liabilities associated with uncertain tax positions represent unrecognized tax benefits, which arise when the estimated benefit recorded in our financial statements differs from the amounts taken or expected to be taken in a tax return because of the uncertainties described above. These unrecognized tax benefits relate primarily to issues common among multinational corporations. Substantially all of these unrecognized tax benefits, if recognized, would impact our effective income tax rate.
The reconciliation of the beginning and ending amounts of gross unrecognized tax benefits follows:
(MILLIONS OF DOLLARS)
 
2017

 
2016

 
2015

Balance, January 1
 
$
(68
)
 
$
(61
)
 
$
(54
)
Increases based on tax positions taken during a prior period(a)(b)
 
(4
)
 
(48
)
 
—

Decreases based on tax positions taken during a prior period(a)(c)
 
12

 
2

 
6

Increases based on tax positions taken during the current period(a)(d)
 
(107
)
 
(9
)
 
(14
)
Settlements(e)
 
—

 
46

 
—

Lapse in statute of limitations
 
3

 
2

 
1

Balance, December 31(f)
 
$
(164
)
 
$
(68
)
 
$
(61
)
(a) 
Primarily included in Provision for taxes on income.
(b) 
In 2017, the increases are primarily related to movements on prior year positions, including movements in foreign translation adjustments on prior year positions. In 2016, the increases are primarily related to the impact of the European Commission’s negative decision on the excess profits rulings in Belgium. See A. Taxes on Income.
(c) 
In 2017, the decreases are primarily related to movements on prior year positions and effective settlement of certain issues with U.S. and non-U.S. tax authorities. In 2016, the decreases are primarily related to movements on prior year positions. In 2015, the decreases are primarily related to movements in foreign translation adjustments on prior year positions and effective settlement of certain issues with U.S. tax authorities and non-U.S. tax authorities. See A. Taxes on Income.
(d) 
In 2017, the increases are primarily related to the impact of the newly enacted Tax Act. See A. Taxes on Income.
(e) 
In 2016, the decreases are due to cash payments related to the impact of the European Commission’s negative decision on the excess profits rulings in Belgium. See A. Taxes on Income.
(f)
In 2017, included in Noncurrent deferred tax assets ($3 million) and Other taxes payable ($161 million). In 2016, included in Noncurrent deferred tax assets ($3 million) and Other taxes payable ($65 million). In 2015, included in Noncurrent deferred tax assets ($6 million) and Other taxes payable ($55 million).
•
Interest related to our unrecognized tax benefits is recorded in accordance with the laws of each jurisdiction and is recorded in Provision for taxes on income in our consolidated statements of income. In 2017, we recorded a net interest expense of $1 million; in 2016, we recorded a net interest expense of $2 million; and in 2015, we recorded a net interest expense of $1 million. Gross accrued interest totaled $7 million, $6 million and $4 million as of December 31, 2017, 2016 and 2015, respectively, and were included in Other taxes payable. Gross accrued penalties totaled $4 million, $4 million and $3 million as of December 31, 2017, 2016 and 2015, respectively, and were included in Other taxes payable.
Status of Tax Audits and Potential Impact on Accruals for Uncertain Tax Positions
We are subject to taxation in the United States including various states, and foreign jurisdictions. The United States is one of our major tax jurisdictions, and we are currently under audit for tax years 2013 and 2014. For U.S. Federal and state tax purposes, the tax years 2013 through 2017 are open for examination (see B. Tax Matters Agreement for years prior to 2013).
In addition to the open audit years in the United States, we have open audit years in other major foreign tax jurisdictions, such as Canada (2013-2017), Asia-Pacific (2011-2017 primarily reflecting Australia, China and Japan), Europe (2012-2017, primarily reflecting France, Germany, Italy, Spain and the United Kingdom) and Latin America (2005-2017, primarily reflecting Brazil and Mexico).
Any settlements or statute of limitations expirations could result in a significant decrease in our uncertain tax positions. We do not expect that within the next twelve months any of our gross unrecognized tax benefits, exclusive of interest, could significantly decrease as a result of settlements with taxing authorities or the expiration of the statutes of limitations. Our assessments are based on estimates and assumptions that have been deemed reasonable by management, but our estimates of unrecognized tax benefits and potential tax benefits may not be representative of actual outcomes, and any variation from such estimates could materially affect our financial statements in the period of settlement or when the statutes of limitations expire, as we treat these events as discrete items in the period of resolution. Finalizing audits with the relevant taxing authorities can include formal administrative and legal proceedings, and, as a result, it is difficult to estimate the timing and range of possible change related to our uncertain tax positions, and such changes could be significant.