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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes |
8. Income Taxes
Income (loss) before income taxes subject to taxes in the following jurisdictions is as follows:
| Twelve Months Ended December 31,
(In millions) | 2019 |  | 2018 |  | 2017
United States | $ | 119.1 |  |  | $ | (28.3 | ) |  | $ | 12.4 |
Outside of the United States | (14.9 | ) |  | (98.2 | ) |  | (61.0 | )
Total | $ | 104.2 |  |  | $ | (126.5 | ) |  | $ | (48.6 | )
Significant components of the provision for income taxes are as follows:
| Twelve Months Ended December 31, 2019
(In millions) | 2019 |  | 2018 |  | 2017
Current: |  |  |  |  |
Federal | $ | — |  |  | $ | — |  |  | $ | — |
State | 1.0 |  |  | 2.7 |  |  | 0.1 |
Foreign | 1.9 |  |  | 0.1 |  |  | 1.5 |
Total current income taxes | 2.9 |  |  | 2.8 |  |  | 1.6 |
Deferred: |  |  |  |  |
Federal | — |  |  | (1.7 | ) |  | — |
State | — |  |  | (0.5 | ) |  | — |
Foreign | 0.2 |  |  | — |  |  | — |
Total deferred income taxes | 0.2 |  |  | (2.2 | ) |  | — |
Total | $ | 3.1 |  |  | $ | 0.6 |  |  | $ | 1.6 |
At December 31, 2019, we had federal, state and foreign tax net operating loss carryforwards of approximately $438.8 million, $324.1 million, and $124.1 million, respectively. The federal and state tax loss carryforwards will begin to expire in 2027 and 2020, respectively, unless previously utilized. The foreign net operating losses carry forward indefinitely. At December 31, 2019, we also had federal and state research and development tax credit carryforwards of approximately $54.4 million and $52.7 million, respectively. $0.1 million of the federal research and development tax credit will begin to expire in 2020, unless previously utilized. The state research and development tax credit will carryforward indefinitely until utilized. Utilization of net operating losses and credit carryforwards is subject to an annual limitation due to ownership change limitations provided by Section 382 and 383 of the Internal Revenue Code of 1986, as amended, and similar state provisions. An ownership change limitation occurred as a result of the stock offering completed in February 2009. The limitation will likely result in approximately $2.1 million of U.S. income tax credits that will expire unused. The related deferred tax assets have been removed from the components of our deferred tax assets as summarized in the table below. We performed a Section 382 study on the remaining federal and state net operating losses and tax credit carryforwards and have determined that there is no annual limitation on them as of December 31, 2019. Significant components of our deferred tax assets as of December 31, 2019 and 2018 are shown below. A valuation allowance of approximately $332.2 million has been established as of December 31, 2019 to offset the deferred tax assets, as realization of such assets is uncertain. We maintain a deferred tax liability related to indefinite-lived intangible assets that is not netted against the deferred tax assets. Reversal of the taxable temporary difference for these intangible assets cannot serve as a source of income for realization of the deferred tax assets because the deferred tax liability will not reverse until the intangible assets are sold or written down due to impairment.
| December 31,
(In millions) | 2019 |  | 2018
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 127.4 |  |  | $ | 162.0 |
Capitalized research and development expenses | 57.1 |  |  | 62.1 |
Tax credits | 78.6 |  |  | 59.0 |
Share-based compensation | 10.9 |  |  | 12.5 |
Fixed and intangible assets | 14.0 |  |  | 16.0 |
Accrued liabilities and reserves | 62.0 |  |  | 22.5 |
Convertible Debt | 1.7 |  |  | — |
Total gross deferred tax assets | 351.7 |  |  | 334.1 |
Less: valuation allowance | (332.2 | ) |  | (330.1 | )
Total net deferred tax assets | 19.5 |  |  | 4.0 |
Deferred tax liabilities: |  |  |
Fixed assets and acquired intangibles assets | (19.6 | ) |  | (3.8 | )
Convertible debt discount | — |  |  | (0.1 | )
Total deferred tax liabilities | (19.6 | ) |  | (3.9 | )
Net deferred tax assets (liabilities) | $ | (0.1 | ) |  | $ | 0.1 |
Significant judgment is required to evaluate the need for a valuation allowance against deferred tax assets. We review all available positive and negative evidence, including projections of pre-tax book income, earnings history, and reliability of forecasting. A valuation allowance is established when it is more likely than not that some or all of the deferred tax assets will not be realized. As of December 31, 2019, we have maintained a full valuation allowance on our deferred tax assets since inception based on our historical losses and the uncertainty of generating future taxable income to utilize our loss and credit carryforwards. A future release of our valuation allowance will result in a material tax benefit recognized in the quarter of the release. As of December 31, 2019, deferred tax assets for which any subsequently recognized tax benefits will be credited to additional paid-in capital rather than to income tax benefit totaled $55.7 million. The reconciliation between our effective tax rate on income (loss) from continuing operations and the statutory rate is as follows:
| Twelve Months Ended December 31,
(In millions) | 2019 |  | 2018 |  | 2017
Income taxes at statutory rates | $ | 21.9 |  |  | $ | (26.6 | ) |  | $ | (17.0 | )
State income tax, net of federal benefit | (2.3 | ) |  | (5.5 | ) |  | (0.7 | )
Permanent items | 1.0 |  |  | 1.3 |  |  | 0.7 |
Research and development credits | (10.8 | ) |  | (11.7 | ) |  | (13.3 | )
Foreign rate differential | 5.6 |  |  | 3.7 |  |  | 5.4 |
Stock and officers compensation | (14.7 | ) |  | (5.1 | ) |  | (10.4 | )
Rate change | — |  |  | — |  |  | (0.1 | )
Unrecognized tax benefits | — |  |  | — |  |  | (15.4 | )
Impact of adoption of ASU 2016-16 | — |  |  | (13.3 | ) |  | — |
Impact of Tax Cuts and Jobs Act of 2017 | — |  |  | (0.4 | ) |  | 105.7 |
Other | (1.0 | ) |  | 1.3 |  |  | (2.2 | )
Change in valuation allowance | 3.4 |  |  | 56.9 |  |  | (51.1 | )
Income taxes at effective rates | $ | 3.1 |  |  | $ | 0.6 |  |  | $ | 1.6 |
The following table summarizes the activity related to our gross unrecognized tax benefits:
(In millions) |
Balance at January 1, 2017 | $ | 39.8 |
Decreases related to prior year tax positions | (14.9 | )
Increases related to current year tax positions | 3.3 |
Decrease related to Tax Cuts and Jobs Act of 2017 | (5.4 | )
Balance at December 31, 2017 | 22.8 |
Decreases related to prior year tax positions | (0.3 | )
Increases related to current year tax positions | 3.4 |
Balance at December 31, 2018 | 25.9 |
Decreases related to prior year tax positions | (0.9 | )
Increases related to current year tax positions | 4.5 |
Balance at December 31, 2019 | $ | 29.5 |
Due to the valuation allowance recorded against our deferred tax assets, none of the total unrecognized tax benefits as of December 31, 2019 would reduce our annual effective tax rate if recognized. Interest and penalties are classified as a component of income tax expense and were not material for any period presented. Due to net operating losses incurred, tax years from 1999 and forward for federal and state purposes and from 2016 and forward for foreign jurisdictions remain open to examination by the major taxing jurisdictions to which we are subject. The IRS commenced an audit of our 2015 and 2016 federal income tax returns in February 2018. The audit closed in June 2019 with no significant changes to our unrecognized tax benefits. We operate under a tax holiday in the Philippines, which is effective through December 31, 2023, and may be extended for another three years if certain additional requirements are satisfied. The tax holiday is conditional upon remaining in good standing, committing no violation of PEZA Rules and Regulations, pertinent circulars and directives. The impact of this tax holiday decreased foreign taxes by $0.2 million in 2019.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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