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Income Taxes

12 Months Ended

Dec. 31, 2021

Income Taxes

Income Taxes

Note 12. Income Taxes

We are subject to U.S. federal, state and foreign corporate income taxes. The (benefit) provision for income taxes is based on income (loss) before (benefit) provision for income taxes as follows (in thousands):

​

​	​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,								​
​		2021			2020			2019
U.S.	​	$	991,873	​	$	(16,609)	​	$	712,486	​
Non-U.S.	​		(421,429)	​		(215,609)	​		(225,695)	​
Income (loss) before (benefit) provision for income taxes	​	$	570,444	​	$	(232,218)	​	$	486,791	​

​

On a periodic basis, we reassess the valuation allowance on our deferred income tax assets. Valuation allowances require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction-by-jurisdiction basis. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible.

In the fourth quarter of 2021, we assessed the valuation allowance and considered positive evidence, including significant cumulative consolidated and U.S. income over the three years ended December 31, 2021, consistent growth in product revenues, and expectations regarding future profitability. We also assessed negative evidence, including the potential impact of competition, clinical failures and patent expirations on our projections. After assessing both the positive evidence and negative evidence, we determined it was more likely than not that the majority of our U.S. deferred tax assets would be realized in the future and released the associated valuation allowance as of December 31, 2021. This resulted in a benefit of $569.0 million. As of December 31, 2021, we maintained a valuation allowance of $408.2 million against a portion of our remaining U.S. deferred tax assets as well as select state and foreign deferred tax assets.  

Our (benefit) provision for income taxes consists of the following (in thousands):

​	​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,								​
​		2021			2020			2019		​
Current:	​	​	​	​	​	​	​	​	​	​
Federal	​	$	50,565	​	$	43,595	​	$	23,526	​
State	​	​	32,505	​	​	18,881	​	​	11,553	​
Foreign	​		4,397	​		1,353	​		5,183	​
​	​	​	87,467	​	​	63,829	​	​	40,262	​
Deferred:	​	​	​	​	​	​	​	​	​	​
Federal	​	​	(407,852)	​	​	—	​	​	—	​
State	​	​	(57,677)	​	​	—	​	​	(205)	​
Foreign	​	​	(75)	​	​	(350)	​	​	(172)	​
​	​	​	(465,604)	​	​	(350)	​	​	(377)	​
Total (benefit) provision for income taxes	​	$	(378,137)	​	$	63,479	​	$	39,885	​

​

A reconciliation of income taxes at the U.S. federal statutory rate to the (benefit) provision for income taxes is as follows (in thousands):

​	​	​	​	​	​	​	​	​	​	​
​	​	Year Ended December 31,								​
​		2021			2020			2019
Provision (benefit) at U.S. federal statutory rate	​	$	119,793	​	$	(48,766)	​	$	102,226	​
State and local income taxes	​	​	34,461	​	​	(21,637)	​	​	15,109	​
Foreign tax rate differential	​	​	55,171	​	​	30,839	​	​	57,351	​
Income tax credits	​	​	(55,139)	​	​	(38,221)	​	​	(60,072)	​
Change in valuation allowance	​	​	(523,279)	​	​	158,815	​	​	(70,264)	​
Foreign-derived intangible income	​	​	(28,259)	​	​	(22,830)	​	​	(9,153)	​
Stock based compensation	​	​	15,497	​	​	2,802	​	​	(414)	​
Other	​		3,618	​		2,477	​		5,102	​
(Benefit) provision for income taxes	​	$	(378,137)	​	$	63,479	​	$	39,885	​

​

The foreign tax rate differential in the table above reflects the impact of operations in jurisdictions with tax rates that differ from the U.S. federal statutory rate of 21%.

Significant components of our deferred tax assets and liabilities are as follows (in thousands):

​	​	​	​	​	​	​	​
​	​	December 31,					​
​		2021			2020
Deferred tax assets:	​	​	​	​	​	​	​
Net operating loss carry forwards	​	$	137,935	​	$	128,088	​
Federal and state research credits	​		206,184	​		305,099	​
Capitalized research and development	​		59,247	​		43,806	​
Deferred revenue and accruals	​		42,326	​		27,467	​
Non-cash compensation	​	​	83,002	​	​	75,867	​
Acquisition-related contingent consideration	​		31,450	​		32,658	​
Intangibles, net	​	​	305,228	​	​	289,848	​
Long term investments	​	​	34,733	​	​	25,968	​
Other	​		15,991	​		26,422	​
Total gross deferred tax assets	​		916,096	​		955,223	​
Less valuation allowance for deferred tax assets	​		(408,180)	​		(930,209)	​
Net deferred tax assets	​	$	507,916	​	$	25,014	​
​	​	​	​	​	​	​	​
Deferred tax liabilities:	​	​	​	​	​	​	​
Property and equipment	​	$	(33,259)	​	$	(19,880)	​
Other	​	​	(7,119)	​	​	(3,080)	​
Total gross deferred tax liabilities	​		(40,378)	​		(22,960)	​
Net deferred tax assets	​	$	467,538	​	$	2,054	​

​

The valuation allowance for deferred tax assets decreased by approximately $522.0 million during the year ended December 31, 2021, increased by approximately $159.7 million during the year ended December 31, 2020 and decreased by approximately $66.5 million during the year ended December 31, 2019.  The net valuation allowance decrease during 2021 was primarily due to the valuation allowance release on the majority of our U.S. deferred tax assets mentioned above.

As of December 31, 2021, we had net operating loss (“NOL”) carryforwards, research and development credit carryforwards and orphan drug tax credit carryforwards as follows (in thousands):

​	​	​	​	​	​	​
​	​	Amount		​	Expiring if not utilized	​
Net operating loss carryforwards	​	​	​	​	​	​
State	​	$	296,112	​	2022 through 2041; indefinite	​
Foreign	​	​	1,422,407	​	2022 through 2028	​
Research and development credit carryforwards	​	​	​	​	​	​
Federal	​	​	114,595	​	2037 through 2041	​
State	​	​	21,062	​	2021 through 2040; indefinite	​
Orphan drug tax credit carryforwards	​	​	121,389	​	2036 through 2041	​

​

The financial statement recognition of the benefit for a tax position is dependent upon the benefit being more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than 50% likely of being realized upon ultimate settlement. If such unrecognized tax benefits were realized, we would recognize a tax benefit of $50.1 million. The following table summarizes the gross amounts of unrecognized tax benefits (in thousands):

​

​	​	​	​	​	​	​	​
​	​	Year Ended December 31,					​
​	​	2021			2020		​
Balance at beginning of year	​	$	31,597	​	$	24,251	​
Additions related to prior periods tax positions	​	​	28,488	​		3,953	​
Reductions related to prior periods tax positions	​	​	(311)	​	​	(216)	​
Additions related to current period tax positions	​	​	3,042	​		4,119	​
Settlements	​	​	(95)	​	​	(201)	​
Reductions due to lapse of applicable statute of limitations	​	​	(288)	​	​	(397)	​
Currency translation adjustment	​	​	(74)	​	​	88	​
Balance at end of year	​	$	62,359	​	$	31,597	​

​

Our policy is to recognize interest and penalties related to uncertain tax positions, if any, as a component of income tax expense. During the year ending December 31, 2021, we recorded interest and penalties as a component of income tax expense of $0.6 million and during the year ended December 31, 2020, we recorded a negligible reduction to interest and penalties as a component of income tax expense. We do not anticipate any significant changes to our unrecognized tax benefits during the next twelve months.

We file U.S. federal, state and local income tax returns and income tax returns in various foreign jurisdictions, with statutes of limitation generally ranging from three to five years during which such tax returns may be audited by the relevant tax authorities. Those statutes could be extended due to NOL or tax credit carryforwards generated during these periods that are subsequently utilized in open tax periods.  In general, tax authorities have the ability to adjust the NOL carryforward or tax credits for three years after utilization of that year’s tax attribute carryforward.

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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.

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