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Income Taxes
 12 Months Ended
Dec. 31, 2024
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)202420232022
United States$659.8 $732.4 $463.5 
Outside of the United States49.2 (22.0)(72.7)
Total$709.0 $710.4 $390.8 
Significant components of the provision for income taxes are as follows:
Twelve Months Ended
December 31,
(In millions)202420232022
Current:
Federal$157.4 $149.1 $32.6 
State16.5 18.1 26.1 
Foreign2.7 56.7 12.5 
Total current income taxes176.6 223.9 71.2 
Deferred:
Federal(55.2)(93.7)(4.3)
State(2.0)14.6 (17.6)
Foreign13.4 24.1 0.3 
Total deferred income taxes(43.8)(55.0)(21.6)
Total$132.8 $168.9 $49.6 
Significant loss and tax credit carryforwards and years of expiration are as follows:
December 31,Year of Expiration
(In millions)20242023
Net operating loss:
Federal$12.1 $20.4 2028
California162.0 167.7 2035
Other states5.8 7.8 2028
UK— — Indefinite
Other foreign— 6.0 
2027
Tax credits:
Federal
R&D credits— — 
Foreign tax credits0.1 0.1 2032
California R&D credits124.9 111.9 Indefinite
California AMT Credits$0.5 $0.5 Indefinite
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 result in approximately $1.1 million of U.S. research and development tax credits that will expire unused, and is therefore, not reflected in the tax credit carryforwards above. In addition, the related deferred tax assets have been removed from the components of our deferred tax assets as summarized in the table below. The tax benefits related to the remaining federal and state net operating losses and tax credit carryforwards may be further limited or lost if future cumulative changes in ownership exceed 50% within any three-year period.
Significant components of our deferred tax assets and liabilities as of December 31, 2024 and 2023 are shown below. 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, reliability of forecasting, and reversal of temporary differences. 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. Realization of deferred tax assets is dependent upon future earnings in applicable tax jurisdictions.
December 31,
(In millions)20242023
Deferred tax assets:
Net operating loss carryforwards$14.4 $18.1 
Capitalized research and development expenses265.0 233.4 
Tax credits79.2 71.4 
Share-based compensation22.5 27.0 
Fixed and intangible assets263.6 279.8 
Accrued liabilities and reserves87.4 91.0 
Convertible debt16.0 20.6 
Total gross deferred tax assets748.1 741.3 
Less: valuation allowance(221.9)(264.3)
Total net deferred tax assets526.2 477.0 
Deferred tax liabilities:
Fixed assets and acquired intangibles assets(59.3)(60.4)
Other(0.3)— 
Total deferred tax liabilities(59.6)(60.4)
Net deferred tax assets (liabilities)$466.6 $416.6 
In 2024, we further analyzed the prior year intra-entity asset transfer of certain intellectual property between two of our wholly owned foreign subsidiaries. As a result, we reclassified the specific intellectual property from a patent to patent rights according to Irish law. This changed the applicable enacted statutory tax rate from capital gains to passive at 25%.There was no impact to the income statement as the change in rate was fully offset by a change in valuation allowance. The total ending deferred tax asset as of December 31, 2024 is $142.4 million, which remains fully offset by a valuation allowance.
We maintain a valuation allowance of $221.9 million against our California research and development tax credits, foreign tax credits, and certain foreign intangible assets. During the year ended December 31, 2024, the valuation allowance decreased by $42.4 million primarily due to the change in tax rate applied to the fair value of certain intellectual property located in Ireland in connection with the intra-entity transfer of this property, partially offset by the generation of California research and development tax credits.
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)202420232022
U.S. federal statutory tax rate$148.9 $149.2 $82.1 
State income tax, net of federal benefit10.2 7.8 5.4 
Permanent items10.5 (2.7)0.6 
Research and development credits(24.6)(28.3)(23.3)
Foreign tax credit(1.2)— — 
Foreign rate differential1.6 15.8 27.7 
Stock and officers compensation3.8 5.6 (1.2)
Collaboration agreement milestone share-based payment(32.2)(72.1)(52.9)
Change in statutory tax rates51.5 19.4 1.0 
Intellectual property transfer— 63.9 — 
Other6.7 0.3 1.3 
Change in valuation allowance(42.4)10.0 8.9 
Income taxes at effective rates$132.8 $168.9 $49.6 
The following table summarizes the activity related to our gross unrecognized tax benefits:
(In millions)
Balance at January 1, 2022
$46.8 
Decreases related to prior year tax positions
(0.9)
Increases related to current year tax positions
6.1 
Balance at December 31, 202252.0 
Increases related to prior year tax positions
0.8 
Increases related to current year tax positions
6.6 
Balance at December 31, 202359.4 
Increases related to prior year tax positions
0.1 
Increases related to current year tax positions
6.7 
Balance at December 31, 2024$66.2 
Of the total unrecognized tax benefits at December 31, 2024, 2023, and 2022, $40.7 million, $37.0 million and $32.5 million, respectively, would affect our annual effective tax rate if recognized. The indirect effect of the unrecognized tax benefits that, if recognized, would affect our annual effective tax rate is not material for all years presented. Also, the amount of unrecognized tax benefits that, if recognized, would result in adjustments to other tax accounts, is not material for all years presented. Interest and penalties are classified as a component of income tax expense and are not material for all years presented. Although the timing and outcome of audit settlements are uncertain, we do not anticipate a significant change to the unrecognized tax benefits in the next twelve months.
Due to our global business activities, we file income tax returns and are subject to routine compliance audits in numerous jurisdictions, including those material jurisdictions listed in the following table. The U.S. net operating losses generated since 1999 and utilized in recent years are open for examination. The years remaining subject to audit, by major jurisdiction, are as follows:
JurisdictionFiscal Year
United States (Federal and state)1999 - 2024
United Kingdom2021 - 2024
Malaysia2021 - 2024
Ireland2023 - 2024
We currently operate under a Special Corporate Income Tax Preferential rate in the Philippines, which is in effect for the next 10 years. The prior tax holiday ended in 2023. The impact of the both the tax holiday and preferential rate is immaterial for all years presented. We have been granted a tax incentive by the Malaysian Investment Development Authority (MIDA) in Malaysia, which provides for a tax holiday of up to 15 years, which will not be triggered until we meet certain milestones related to the commencement of operations. The tax incentive had no effect on foreign taxes during 2024, 2023, or 2022. As of December 31, 2024, the tax holiday in Malaysia has not yet been triggered, therefore we are subject to the statutory rate and the related tax expense has been included in total tax expense for 2024.
We have approximately $89.3 million of undistributed earnings attributable to operations in our controlled foreign corporations as of December 31, 2024. We assert that any foreign earnings will be indefinitely reinvested. Accordingly, we have not recorded a liability for taxes associated with these undistributed earnings. If we determine that all or a portion of such foreign earnings are no longer indefinitely reinvested, we may be subject to additional foreign withholding taxes and U.S. state income taxes. Determination of the amount of unrecognized deferred tax liability on these unremitted earnings is not practicable.
The Organization for Economic Co-operation and Development has a framework to implement a global minimum corporate tax of 15% for companies with global revenues and profits above certain thresholds (referred to as Pillar 2), with certain aspects of Pillar 2 effective January 1, 2024 and other aspects effective January 1, 2025. While it is uncertain whether the United States will enact legislation to adopt Pillar 2, certain countries in which we operate have adopted legislation, and other countries in which we operate are in the process of introducing legislation to implement Pillar 2. We have assessed the impact of Pillar 2 on our financial statements and the impact is immaterial.
In June 2024, the State of California enacted S.B. 167, which suspends the use of net operating losses (“NOLs”) for the tax period from January 1, 2024 to December 31, 2026 for net business income of $1.0 million or more, as well as limits the utilization of research and development tax credits to $5.0 million each year. The State of California also passed S.B. 175 to provide for a potential early sunset of NOLs in either 2025 or 2026 if necessary. We have analyzed the effect of both these laws on our financial statements. We are estimating $2.8 million utilization of our California research and development tax credits for tax year ending December 31, 2024, resulting in a corresponding valuation allowance release of the same amount.