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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following table presents income from continuing operations before provision for income taxes for domestic and international operations.
Year Ended December 31,
(in millions)202320222021
U.S.
$409.2 $218.0 $101.4 
Foreign(77.1)(4.1)— 
Income before provision for income taxes$332.1 $213.9 $101.4 
The following table presents the components of income tax expense (benefit) for continuing operations.
Year Ended December 31,
(in millions)202320222021
Current:
Federal$115.0 $17.1 $— 
State28.1 20.3 6.3 
Current income taxes143.1 37.4 6.3 
Deferred:
Federal(45.2)27.5 5.9 
State(15.5)(5.5)(0.4)
Deferred income taxes
(60.7)22.0 5.5 
Provision for income taxes$82.4 $59.4 $11.8 
The provision for income taxes on earnings subject to income taxes differs from the statutory federal rate due to the following:
Year Ended December 31,
(in millions)202320222021
Federal income taxes at 21%
$69.7 $44.9 $21.3 
State income tax, net of federal benefit17.5 11.8 6.2 
Branded prescription drug fee8.7 6.5 4.8 
Loss on extinguishment of convertible senior notes— 12.0 — 
Stock-based compensation expense(3.9)(2.5)(11.3)
Officer compensation9.6 9.2 7.0 
Change in tax rate(2.1)(1.3)0.2 
Expired tax attributes— — 0.6 
Research credits(42.2)(29.9)(22.0)
Change in valuation allowance22.0 7.4 5.0 
Other3.1 1.3 — 
Provision for income taxes$82.4 $59.4 $11.8 
The following table presents the significant components of our deferred tax assets.
 December 31,
(in millions)20232022
Deferred tax assets:
Net operating losses$36.4 $27.4 
Research and development credits55.3 108.9 
Capitalized research and development178.7 91.1 
Stock-based compensation expense52.7 45.9 
Operating lease assets72.0 26.8 
Intangible assets110.0 80.7 
Other25.0 24.9 
Total deferred tax assets530.1 405.7 
Deferred tax liabilities:
Operating lease liabilities(66.3)(21.0)
Other(12.3)(11.8)
Total deferred tax liabilities(78.6)(32.8)
Net of deferred tax assets and liabilities451.5 372.9 
Valuation allowance(88.9)(67.0)
Net deferred tax assets$362.6 $305.9 
As of December 31, 2023, 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, 2023 and 2022, we recorded a valuation allowance of $88.9 million and $67.0 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, 2023, management determined there was sufficient positive evidence to conclude that it is more likely than not deferred tax assets of $362.6 million are realizable. The recorded valuation allowance of $88.9 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, 2023, we had state and foreign income tax net operating loss carryforwards of $286.0 million and $134.3 million, respectively. We had no federal income tax operating loss carryforwards as of December 31, 2023. California net operating losses will begin to expire in 2029 unless previously utilized and the net operating losses related to other states will begin to expire in 2026. Swiss net operating losses will begin to expire in 2030 unless previously utilized. UK net operating losses will carry forward indefinitely.
As of December 31, 2023, we had state R&D tax credit carryforwards of $85.6 million. 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, 2023.
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. We had accruals for interest related to income tax matters of $3.1 million and $1.2 million, respectively, as of December 31, 2023 and 2022. We had accruals for penalties relates to income tax matters of $2.2 million and $0.4 million, respectively, as of December 31, 2023 and 2022. Accruals for interest and penalties related to income tax matters were not material as of December 31, 2021.
We are subject to taxation in the U.S. and various state and foreign jurisdictions. Tax years for 2020 for federal, inception for California, 2016 to 2020 for other significant state jurisdictions, and 2021 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)202320222021
Balance at January 1$84.5 $64.6 $60.8 
Increase related to prior year tax positions3.4 4.7 0.6 
Increase related to current year tax positions36.7 15.2 4.9 
Decrease related to prior year tax positions
(3.6)— — 
Expiration of the statute of limitations for the assessment of taxes— — (1.7)
Balance at December 31$121.0 $84.5 $64.6 
As of December 31, 2023, we had $105.3 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.
In 2021, the OECD announced an Inclusive Framework on Base Erosion and Profit Shifting including Pillar Two Model Rules defining the global minimum tax, which calls for the taxation of large multinational corporations at a minimum rate of 15%. Subsequently, multiple sets of administrative guidance have been issued. Many non-U.S. tax jurisdictions have either recently enacted legislation to adopt certain components of the Pillar Two Model Rules beginning in 2024 (including EU Member States) with the adoption of additional components in later years or announced their plans to enact legislation in future years. We are continuing to evaluate the impacts of enacted legislation and pending legislation to enact Pillar Two Model Rules in the non-U.S. tax jurisdictions we operate in.