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Income Taxes | 3 Months Ended
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Mar. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | TECFIDERA In June 2020 and September 2020 judgments were entered in favor of the defendants in the patent infringement proceedings relating to TECFIDERA Orange-Book listed patents pursuant to the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act, in West Virginia and Delaware. We have appealed the judgments in both actions. For additional information, please read Note 18, Litigation, to these condensed consolidated financial statements. Multiple TECFIDERA generic entrants are now in the U.S. market and have deeply discounted prices compared to TECFIDERA. The generic competition for TECFIDERA has significantly reduced our TECFIDERA revenue and is expected to have a substantial negative impact on our TECFIDERA revenue for as long as there is generic competition. As of December 31, 2020, we assessed the realizability of our deferred tax assets that are dependent on future expected sales of TECFIDERA in the U.S. and reduced the value of certain deferred tax assets by approximately $1.7 billion and reduced the value of deferred tax liabilities associated with global intangible low-taxed income (GILTI) and tax credits by approximately $1.6 billion. We continue to assess the realizability of these deferred tax assets and have not recorded a change to these deferred assets for the three months ended March 31, 2021. Tax Rate A reconciliation between the U.S. federal statutory tax rate and our effective tax rate is summarized as follows:
| For the Three Months Ended March 31, |  |
| 2021 |  | 2020 |  |  |  |
Statutory rate | 21.0 | % |  | 21.0 | % |  |  |  |
State taxes | 0.8 |  |  | 0.6 |  |  |  |  |
Taxes on foreign earnings | (10.9) |  |  | (4.1) |  |  |  |  |
Tax credits | (3.7) |  |  | (1.0) |  |  |  |  |
Purchased intangible assets | 0.8 |  |  | 0.2 |  |  |  |  |
GILTI | 0.9 |  |  | 0.6 |  |  |  |  |
Other | 0.6 |  |  | (0.1) |  |  |  |  |
Effective tax rate | 9.5 | % |  | 17.2 | % |  |  |  |
Changes in Tax Rate For the three months ended March 31, 2021, compared to the same period in 2020, the decrease in our effective tax rate was primarily due to the change in the territorial mix of our profitability, which included the effect of generic competition for TECFIDERA in the U.S. market, and the non-cash tax effects of changes in the value of our equity investments, where we recorded a reduction of value in the first quarter of 2021. The tax effects of this change in value of our equity investments were recorded discretely, since changes in value of equity investments cannot be forecasted. Accounting for Uncertainty in Income Taxes We and our subsidiaries are routinely examined by various taxing authorities. We file income tax returns in various U.S. states and in U.S. federal and other foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal tax examination for years before 2017 or state, local or non-U.S. income tax examinations for years before 2012. The U.S. Internal Revenue Service and other national tax authorities routinely examine our intercompany transfer pricing with respect to intellectual property related transactions and it is possible that they may disagree with one or more positions we have taken with respect to such valuations. It is reasonably possible that we will adjust the value of our uncertain tax positions related to certain transfer pricing, collaboration matters and other issues as we receive additional information from various taxing authorities, including reaching settlements with such authorities. We estimate that it is reasonably possible that our gross unrecognized tax benefits, exclusive of interest, could decrease by up to approximately $25.0 million in the next 12 months as a result of various audit closures, settlements and expiration of the statute of limitations.

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