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Provision For Income Taxes | 12 Months Ended
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Jan. 03, 2025
Income Tax Disclosure [Abstract] |
PROVISION FOR INCOME TAXES | PROVISION FOR INCOME TAXES Our income before income taxes is derived solely from within the U.S. Our provision for income taxes was as follows (in thousands):
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
Current: |  |  |  |  |
Federal | $ | 201,890 |  |  | $ | 167,954 |  |  | $ | 100,525 |
State | 17,941 |  |  | 15,011 |  |  | 11,903 |
Total current tax expense | $ | 219,831 |  |  | $ | 182,965 |  |  | $ | 112,428 |
Deferred: |  |  |  |  |
Federal | $ | (52,433) |  |  | $ | (123,486) |  |  | $ | (54,223) |
State | (7,025) |  |  | (9,723) |  |  | (6,135) |
Total deferred tax expense | (59,458) |  |  | (133,209) |  |  | (60,358) |
Provision for income taxes | $ | 160,373 |  |  | $ | 49,756 |  |  | $ | 52,070 |
The reconciliation of the U.S. federal income tax provision at the statutory federal income tax rate of 21% for each of the years ended December 31, 2024, 2023 and 2022, respectively, to our provision for income taxes was as follows (in thousands):
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
U.S. federal income tax provision at statutory rate | $ | 143,144 |  |  | $ | 54,080 |  |  | $ | 49,213 |
State tax expense | 12,240 |  |  | (1,487) |  |  | (2,632) |
Change in valuation allowance | (3,617) |  |  | 5,770 |  |  | 7,162 |
Research credits | (10,997) |  |  | (23,714) |  |  | (14,130) |
Stock-based compensation | 665 |  |  | 1,066 |  |  | (2,864) |
Non-deductible executive compensation | 7,094 |  |  | 7,019 |  |  | 4,549 |
Branded prescription drug fee | 4,633 |  |  | 4,968 |  |  | 3,855 |
Non-deductible warrant purchase | — |  |  | — |  |  | 6,300 |
Other | 7,211 |  |  | 2,054 |  |  | 617 |
Provision for income taxes | $ | 160,373 |  |  | $ | 49,756 |  |  | $ | 52,070 |
Deferred tax assets and liabilities reflect the net tax effects of net operating loss and tax credit carryforwards and temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. Our deferred tax assets and liabilities were as follows (in thousands):
| December 31,
| 2024 |  | 2023
Deferred tax assets: |  |  |
Net operating loss and capital loss carryforwards | $ | 39,877 |  |  | $ | 29,512 |
Tax credit carryforwards | 39,572 |  |  | 39,640 |
Depreciation and amortization | 349,058 |  |  | 313,679 |
Stock-based compensation | 17,791 |  |  | 24,592 |
Lease liabilities | 49,137 |  |  | 49,971 |
Accruals and reserves not currently deductible | 40,858 |  |  | 30,068 |
Other assets | 9,049 |  |  | 10,730 |
Total deferred tax assets | 545,342 |  |  | 498,192 |
Valuation allowance | (86,029) |  |  | (83,001) |
Net deferred tax assets | 459,313 |  |  | 415,191 |
Deferred tax liabilities: |  |  |
Lease right-of-use assets | (39,286) |  |  | (54,046) |
Net deferred taxes | $ | 420,027 |  |  | $ | 361,145 |
As of December 31, 2024 and 2023, we continue to carry a valuation allowance of $86.0 million and $83.0 million, respectively, against our California state deferred tax assets and federal and state capital loss carryforwards. The valuation allowance increased by $3.0 million and $5.8 million during the years ended December 31, 2024 and 2023, respectively. At December 31, 2024, we had state net operating loss carryforwards of approximately $407.0 million, which expire in the years 2025 through 2036, and California research and development tax credits of approximately $55.0 million, which do not expire. Under the Internal Revenue Code and similar state provisions, certain substantial changes in our ownership could result in an annual limitation on the amount of net operating loss and credit carryforwards that can be utilized in future years to offset future taxable income. The annual limitation may result in the expiration of net operating losses and credit carryforwards before utilization. We completed a Section 382 analysis through December 31, 2024, and concluded that an ownership change, as defined under Section 382, had not occurred. The following table summarizes the activity related to our unrecognized tax benefits (in thousands):
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
Beginning balance | $ | 115,766 |  |  | $ | 87,706 |  |  | $ | 83,583 |
Change relating to prior year provision | (1,994) |  |  | 631 |  |  | 715 |
Change relating to current year provision | 13,796 |  |  | 32,137 |  |  | 4,129 |
Reductions based on the lapse of the applicable statutes of limitations | (68) |  |  | (4,708) |  |  | (721) |
Ending balance | $ | 127,500 |  |  | $ | 115,766 |  |  | $ | 87,706 |
As of December 31, 2024, we had $127.5 million in unrecognized tax benefits, of which $61.5 million would reduce our income tax provision and effective tax rate, if recognized. We have elected to record interest and penalties in the accompanying Consolidated Statements of Income as a component of provision for income taxes. In the year ended December 31, 2024, the total amount of gross interest and penalties accrued was $8.1 million. In the year ended December 31, 2023 and 2022, interest and penalties were nominal or zero. Both the unrecognized tax benefits and the associated interest and penalties are not expected to result in payment or receipt of cash within one year and are therefore classified as other non-current liabilities in the Consolidated Balance Sheets. We file U.S. and state income tax returns in jurisdictions with varying statues of limitations during which such tax returns may be audited and adjusted by the relevant tax authorities. The tax years 2002 and onwards generally remain subject to examination by federal and most state tax authorities to the extent net operating losses and credits generated during these periods are being utilized in the open tax periods. We estimate that it is reasonably possible that our gross unrecognized tax benefits, exclusive of interest, could decrease by up to approximately $10.7 million in the next 12 months, as a result of various audit closures, settlements, and expiration of statute of limitations.

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