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v3.22.4

Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The following table presents income before the provision for income taxes from continuing domestic and foreign operations.
| Year Ended December 31,
(in millions) | 2022 |  | 2021 |  | 2020
Domestic | $ | 218.0 |  |  | $ | 101.4 |  |  | $ | 106.7 |
Foreign | (4.1) |  |  | — |  |  | — |
Income before provision for income taxes | $ | 213.9 |  |  | $ | 101.4 |  |  | $ | 106.7 |
The following table presents the components of the provision for (benefit from) income taxes for continuing operations.
| Year Ended December 31,
(in millions) | 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |
Federal | $ | 17.1 |  |  | $ | — |  |  | $ | — |
State | 20.3 |  |  | 6.3 |  |  | 10.1 |
Total current taxes | 37.4 |  |  | 6.3 |  |  | 10.1 |
Deferred: |  |  |  |  |
Federal | 27.5 |  |  | 5.9 |  |  | (287.5) |
State | (5.5) |  |  | (0.4) |  |  | (23.2) |
Total deferred taxes | 22.0 |  |  | 5.5 |  |  | (310.7) |
Provision for (benefit from) income taxes | $ | 59.4 |  |  | $ | 11.8 |  |  | $ | (300.6) |
The provision for (benefit from) income taxes on earnings subject to income taxes differs from the statutory federal rate due to the following:
| Year Ended December 31,
(in millions) | 2022 |  | 2021 |  | 2020
Federal income taxes at 21% | $ | 44.9 |  |  | $ | 21.3 |  |  | $ | 22.4 |
State income tax, net of federal benefit | 11.8 |  |  | 6.2 |  |  | 5.5 |
Branded prescription drug fee | 6.5 |  |  | 4.8 |  |  | 4.9 |
Loss on extinguishment of convertible senior notes | 12.0 |  |  | — |  |  | — |
Stock-based compensation expense | (2.5) |  |  | (11.3) |  |  | (6.7) |
Officer compensation | 9.2 |  |  | 7.0 |  |  | 3.7 |
Change in tax rate | (1.3) |  |  | 0.2 |  |  | 3.3 |
Expired tax attributes | — |  |  | 0.6 |  |  | 1.1 |
Research credits | (29.9) |  |  | (22.0) |  |  | (39.0) |
Change in valuation allowance | 7.4 |  |  | 5.0 |  |  | (296.3) |
Other | 1.3 |  |  | — |  |  | 0.5 |
Provision for (benefit from) income taxes | $ | 59.4 |  |  | $ | 11.8 |  |  | $ | (300.6) |
The following table presents the significant components of our deferred tax assets.
| December 31,
(in millions) | 2022 |  | 2021
Deferred tax assets: |  |  |
Net operating losses | $ | 27.4 |  |  | $ | 90.3 |
Research and development credits | 108.9 |  |  | 129.7 |
Capitalized research and development | 91.1 |  |  | 17.9 |
Stock-based compensation expense | 45.9 |  |  | 38.9 |
Operating lease assets | 26.8 |  |  | 29.3 |
Intangible assets | 80.7 |  |  | 86.1 |
Other | 24.9 |  |  | 21.6 |
Total deferred tax assets | 405.7 |  |  | 413.8 |
Deferred tax liabilities: |  |  |
Convertible senior notes | — |  |  | (9.9) |
Operating lease liabilities | (21.0) |  |  | (23.3) |
Other | (11.8) |  |  | (10.7) |
Total deferred tax liabilities | (32.8) |  |  | (43.9) |
Net of deferred tax assets and liabilities | 372.9 |  |  | 369.9 |
Valuation allowance | (67.0) |  |  | (54.8) |
Net deferred tax assets | $ | 305.9 |  |  | $ | 315.1 |
As of December 31, 2022, our deferred tax assets were primarily the result of net operating loss carry forwards, capitalized research costs, acquired intangible assets and tax credit carryforwards. As of December 31, 2022 and 2021, we recorded a valuation allowance of $67.0 million and $54.8 million, respectively, against our gross deferred tax asset balance. As of each reporting date, management considers new evidence, both positive and negative, that could affect its assessment of the future realizability of our deferred tax assets. As of December 31, 2022, management determined there was sufficient positive evidence to conclude that it is more likely than not deferred tax assets of $305.9 million are realizable. The recorded valuation allowance of $67.0 million consisted primarily of state and foreign net operating loss carryforwards and state credit carryforwards for which management cannot conclude it is more likely than not to be realized. As of December 31, 2022, we had state and foreign income tax net operating loss carryforwards of $324.6 million and $60.1 million, respectively. We had no federal income tax operating loss carryforwards as of December 31, 2022. California net operating losses will begin to expire in 2031 unless previously utilized and the net operating losses related to other states will begin to expire in 2026. Foreign net operating losses will carry forward indefinitely unless previously utilized. As of December 31, 2022, we had federal and state R&D tax credit carryforwards of $98.2 million and $72.5 million, respectively. Federal R&D tax credits will begin to expire in 2037 unless previously utilized. California R&D tax credits carry forward indefinitely, while R&D tax credits related to other states will begin to expire in 2033 unless previously utilized. Additionally, the future utilization of our net operating loss and R&D tax credit carryforwards to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code Sections 382 and 383, as a result of ownership changes that could occur in the future. No ownership changes have occurred through December 31, 2022. The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. We recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2022, we had accruals for interest and penalties related to income tax matters of $0.5 million and $0.4 million, respectively. Interest and penalties related to income tax matters were not material for 2021 or 2020. We are subject to taxation in the United States and various state and foreign jurisdictions. Tax years for 2002 for federal, inception for California, 2015 to 2019 for other significant state jurisdictions, and 2019 and forward for foreign are subject to examination by tax authorities due to the carryforward of unutilized net operating losses and R&D tax credits. The following table presents a summary of activity related to unrecognized tax benefits.
| Year Ended December 31,
(in millions) | 2022 |  | 2021 |  | 2020
Balance at January 1 | $ | 64.6 |  |  | $ | 60.8 |  |  | $ | 63.9 |
Increase (decrease) related to prior year tax positions | 4.7 |  |  | 0.6 |  |  | (5.7) |
Increase related to current year tax positions | 15.2 |  |  | 4.9 |  |  | 3.9 |
Settlements related to prior year tax positions | — |  |  | — |  |  | (0.2) |
Expiration of the statute of limitations for the assessment of taxes | — |  |  | (1.7) |  |  | (1.1) |
Balance at December 31 | $ | 84.5 |  |  | $ | 64.6 |  |  | $ | 60.8 |
As of December 31, 2022, we had $74.8 million of unrecognized tax benefits that, if recognized and realized, would affect the effective tax rate, subject to changes in the valuation allowance. We do not expect a significant change in our unrecognized tax benefits in the next 12 months.

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