Non-deductible IPR&D charges

  
12.    NET INCOME PER SHARE ATTRIBUTABLE TO GILEAD COMMON STOCKHOLDERSBasic net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock outstanding during the period. Diluted net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock and other dilutive securities outstanding during the period. The potentially dilutive shares of our common stock resulting from the assumed exercise of outstanding stock options and equivalents were determined under the treasury stock method. The following table shows the calculation of basic and diluted net income per share attributable to Gilead common stockholders:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   |  | Three Months Ended |  | Nine Months Ended |
|  |  | September 30, |  | September 30, |
| (in millions, except per share amounts) |  | 2022 |  | 2021 |  | 2022 |  | 2021 |
| Net income attributable to Gilead |  | $ | 1,789  |  |  | $ | 2,592  |  |  | $ | 2,952  |  |  | $ | 5,843  |  |
| Shares used in per share calculation - basic |  | 1,255  |  |  | 1,256  |  |  | 1,255  |  |  | 1,256  |  |
| Dilutive effect of stock options and equivalents |  | 6  |  |  | 6  |  |  | 5  |  |  | 6  |  |
| Shares used in per share calculation - diluted |  | 1,261  |  |  | 1,262  |  |  | 1,261  |  |  | 1,262  |  |
|  |  |  |  |  |  |  |  |  |
| Net income per share attributable to Gilead common stockholders - basic |  | $ | 1.43  |  |  | $ | 2.06  |  |  | $ | 2.35  |  |  | $ | 4.65  |  |
| Net income per share attributable to Gilead common stockholders - diluted |  | $ | 1.42  |  |  | $ | 2.05  |  |  | $ | 2.34  |  |  | $ | 4.63  |  |

Potential shares of common stock excluded from the computation of diluted net income per share attributable to Gilead common stockholders because their effect would have been antidilutive were 17 million for both the three and nine months ended September 30, 2022, and 14 million and 15 million for the three and nine months ended September 30, 2021, respectively. 13.    INCOME TAXES The following table summarizes our Income tax expense:

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  | Three Months Ended |  | Nine Months Ended |
|  |  | September 30, |  | September 30, |
| (in millions, except percentages) |  | 2022 |  | 2021 |  | 2022 |  | 2021 |
| Income before income taxes |  | $ | 2,432  |  |  | $ | 3,438  |  |  | $ | 3,783  |  |  | $ | 7,519  |  |
| Income tax expense |  | $ | (646) |  |  | $ | (852) |  |  | $ | (850) |  |  | $ | (1,694) |  |
| Effective tax rate |  | 26.6  | % |  | 24.8  | % |  | 22.5  | % |  | 22.5  | % |

Our effective income tax rate of 26.6% and 22.5% for the three and nine months ended September 30, 2022, respectively, was higher than the U.S. federal statutory rate of 21% primarily due to $389 million of non-deductible Acquired in-process research and development expenses recorded in connection with our acquisition of MiroBio.Our effective income tax rate of 24.8% for the three months ended September 30, 2021 was higher than the U.S. federal statutory rate of 21% primarily due to remeasurement of certain deferred tax liabilities related to acquired intangible assets, partially offset by provision to return adjustments.Our effective income tax rate of 22.5% for the nine months ended September 30, 2021 was higher than the U.S. federal statutory rate of 21% primarily due to remeasurement of certain deferred tax liabilities related to acquired intangible assets and unfavorable changes in the fair value of our equity investment in Galapagos that are non-deductible for income tax purposes, partially offset by provision to return adjustments.Our income tax returns are subject to audit by federal, state and foreign tax authorities. We are currently under examination by the Internal Revenue Service and Irish tax authorities for our 2016 to 2018 tax years. 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.28
