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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Provision for (Benefit from) Income Taxes was based on Income (Loss) before Income Taxes as follows:
Years Ended December 31,
20232022
2021
U.S. Source$(453,840)$(299,403)$(259,258)
Non-U.S. Source642,403 448,979 183,908 
Income (loss) before income taxes$188,563 $149,576 $(75,350)
The U.S. and foreign components of the Provision for (Benefit from) Income Taxes were as follows:
Years Ended December 31,
20232022
2021
Provision for (benefit from) income taxes
Federal$25,120 $12,798 $(2,038)
State and local5,098 5,058 1,339 
Foreign35,681 42,246 5,037 
65,899 60,102 4,338 
Provision for (benefit from) deferred income taxes:
Federal(70,754)(79,270)(29,895)
State and local(8,030)(5,143)(1,230)
Foreign33,803 32,326 15,517 
(44,981)(52,087)(15,608)
Provision for (benefit from) income taxes$20,918 $8,015 $(11,270)
The following is a reconciliation of the statutory federal income tax benefit to the Company’s effective tax rate:
December 31,
20232022
2021
Federal statutory income tax rate$39,598 $31,412 $(15,824)
State and local taxes(3,614)(1,017)509 
Orphan Drug & General Business Credit(39,535)(35,674)(29,363)
Stock compensation expense2,209 6,433 7,859 
Foreign Source Income Subject to US Tax47,721 (5,644)16,878 
Foreign tax rate differential (1)
(69,987)(4,051)(16,971)
Section 162(m) limitation9,699 6,577 6,304 
Tax Reserves27,296 18,043 15,530 
Intra-entity transfer of assets5,019 (18,752)(3,920)
Valuation allowance/deferred benefit3,723 7,851 6,821 
Other(1,211)2,837 907 
Effective income tax rate$20,918 $8,015 $(11,270)
(1)For the year ended December 31, 2023, the foreign rate differential included foreign local tax expense which was at an effective rate lower than the U.S. statutory rate. For the year ended December 31, 2022, the foreign rate differential included foreign local tax expense which was at an effective rate lower than the U.S. statutory rate and was offset by the income from the sale of a priority review voucher that was taxed at a higher tax rate. For the year ended December 31, 2021, the foreign rate differential included foreign local tax expense which was at an effective rate lower than the U.S. statutory rate and includes the recognition of the valuation allowance against a portion of the deferred tax assets of the Company’s Dutch subsidiary of $9.3 million.
The significant components of the Company’s net deferred tax assets were as follows:
December 31,
20232022
Net deferred tax assets:
Net operating loss carryforwards$19,025 $20,657 
Tax credit carryforwards
524,652 555,319 
Accrued expenses, reserves, and prepaids107,485 88,697 
Intangible assets789,479 836,402 
Capitalized research and development expenses216,975 103,212 
Stock-based compensation48,744 49,472 
Lease liabilities7,857 5,757 
Inventory18,914 22,726 
Other1,113 5,596 
Valuation allowance(119,230)(116,299)
Total deferred tax assets1,615,014 1,571,539 
Joint venture basis difference(1,111)(745)
Acquired intangibles(1,026)(1,138)
ROU Assets(6,917)(5,347)
Property, plant and equipment(60,151)(58,897)
Total deferred tax liabilities(69,205)(66,127)
Net deferred tax assets$1,545,809 $1,505,412 
The increase in net deferred tax assets is primarily related to capitalization of research and development expenses offset by a decrease in intangible assets and tax credits utilized.
Valuation allowances are provided to reduce the amounts of the Company's deferred tax assets to an amount that is more likely than not to be realized based on an assessment of positive and negative evidence, including estimates of future taxable income necessary to realize future deductible amounts. At the end of each period, the Company will reassess the ability to realize its deferred tax benefits. If it is more likely than not that the Company would not realize the deferred tax benefits, a valuation allowance may need to be established against all or a portion of the deferred tax assets, which will result in a charge to tax expense.
In the third quarter of 2023, the Company determined that it is more likely than not that the deferred tax assets related to a future royalty stream will be realized. In making this determination, the Company analyzed both the consistent historical royalty earnings and the forecast of future royalty earnings and reached the conclusion that it was appropriate to release the valuation allowance reserve. The release is offset by an increase due to the Company’s expectation that state R&D credits generated will not be utilized.
As of December 31, 2023, the Company had the following net operating loss and tax credit carryforwards, which if not utilized, will expire as follows:
TypeAmountYear
Federal net operating loss carryforwards$3,296  2030-2033
Federal R&D and orphan drug credit carryforwards$555,074  2024-2043
State net operating loss carryforwards$208,592  2024-2043
Dutch net operating loss carryforwards$31,361  Indefinite
Not included in the table above are $169.6 million of state research credit carryovers that will carry forward indefinitely.
The Company’s net operating losses and credits could be subject to annual limitations due to ownership change limitations provided by Internal Revenue Code Section 382 and similar state provisions. An annual limitation could result in the expiration of net operating losses and tax credit carryforward before utilization. There are limitations on the tax attributes of acquired entities however, the Company does not believe the limitations will have a material impact on the utilization of the net operating losses or tax credits.
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.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2023 and 2022, is as follows:
December 31,
20232022
Balance at beginning of period$232,856 $205,095 
Additions based on tax positions related to the current year41,473 26,762 
Additions for tax positions of prior years
3,127 1,017 
Lapse of statute of limitations— (18)
Balance at end of period$277,456 $232,856 
Included in the balance of unrecognized tax benefits as of December 31, 2023 were potential benefits of $266.5 million that, if recognized, would affect the effective tax rate. The Company’s policy for classifying interest and penalties associated with unrecognized income tax benefits is to include such items in the income tax expense. The total amount of accrued interest and penalties was not significant as of December 31, 2023. The Company believes it will not have any material decreases in its previously unrecognized tax benefits within the next twelve months.
The Company files income tax returns in the U.S., Ireland and various foreign jurisdictions. The U.S. and foreign jurisdictions have statute of limitations ranging from three to five years. However, carryforward tax attributes that were generated in 2020 and earlier may still be adjusted upon examination by tax authorities.
U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration. This excess totaled approximately $15.1 million as of December 31, 2023, which will be indefinitely reinvested; deferred income taxes have not been provided on such foreign earnings.