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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The Provision for Income Taxes was based on Income before Income Taxes as follows:
Years Ended December 31,
20242023
2022
U.S. Source$130,503 $(453,840)$(299,403)
Non-U.S. Source411,260 642,403 448,979 
Income before income taxes
$541,763 $188,563 $149,576 
The U.S. and foreign components of the Provision for (Benefit from) Income Taxes were as follows:
Years Ended December 31,
20242023
2022
Provision for income taxes
Federal$32,344 $25,120 $12,798 
State and local8,813 5,098 5,058 
Foreign17,651 35,681 42,246 
58,808 65,899 60,102 
Provision for deferred income taxes:
Federal(2,117)(70,754)(79,270)
State and local(5,166)(8,030)(5,143)
Foreign63,379 33,803 32,326 
56,096 (44,981)(52,087)
Provision for income taxes
$114,904 $20,918 $8,015 
The following is a reconciliation of the statutory federal income tax benefit to the Company’s effective tax rate:
December 31,
20242023
2022
Federal statutory income tax rate$113,770 $39,598 $31,412 
State and local taxes4,756 (3,614)(1,017)
Orphan Drug & General Business Credit(35,486)(39,535)(35,674)
Stock compensation expense7,467 2,209 6,433 
Foreign Source Income Subject to US Tax44,492 47,721 (5,644)
Foreign tax rate differential (1)
(34,905)(69,987)(4,051)
Section 162(m) limitation9,278 9,699 6,577 
Tax Reserves32,560 27,296 18,043 
Intra-entity transfer of assets(33,432)5,019 (18,752)
Valuation allowance/deferred benefit7,175 3,723 7,851 
Other(771)(1,211)2,837 
Effective income tax rate$114,904 $20,918 $8,015 
(1)For the year ended December 31, 2024, the foreign rate differential included foreign local tax expense which was at an effective rate lower than the U.S. statutory rate offset by elimination of intercompany sales. 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 and elimination of intercompany sales.
The significant components of the Company’s net deferred tax assets were as follows:
December 31,
20242023
Net deferred tax assets:
Net operating loss carryforwards$18,585 $19,025 
Tax credit carryforwards
462,925 524,652 
Accrued expenses, reserves, and prepaids119,986 107,485 
Intangible assets696,096 789,479 
Capitalized R&D expenses
310,081 216,975 
Stock-based compensation42,609 48,744 
Lease liabilities7,209 7,857 
Inventory19,119 18,914 
Other1,168 1,113 
Valuation allowance(126,311)(119,230)
Total deferred tax assets1,551,467 1,615,014 
Joint venture basis difference(1,037)(1,111)
Acquired intangibles(915)(1,026)
ROU Assets(4,684)(6,917)
Property, plant and equipment(55,923)(60,151)
Total deferred tax liabilities(62,559)(69,205)
Net deferred tax assets$1,488,908 $1,545,809 
The decrease in net deferred tax assets is primarily related to utilization of tax credits and a decrease in intangible assets partially offset by additional capitalization of research and development expenses.
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, 2024, 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$2,964  2030-2034
Federal R&D and orphan drug credit carryforwards$496,532  2028-2044
State net operating loss carryforwards$200,696  2025-2044
Dutch net operating loss carryforwards$27,994  Indefinite
Not included in the table above are $182.5 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, 2024 and 2023, is as follows:
December 31,
20242023
Balance at beginning of period$277,456 $232,856 
Additions based on tax positions related to the current year47,682 41,473 
Additions (reductions) for tax positions of prior years
(103)3,127 
Lapse of statute of limitations— — 
Balance at end of period$325,035 $277,456 
Included in the balance of unrecognized tax benefits as of December 31, 2024 were potential benefits of $312.6 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, 2024. 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 2021 and earlier may still be adjusted upon examination by tax authorities. The Company's 2022 federal income tax return is currently under audit by the IRS.
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 $15.6 million as of December 31, 2024, which will be indefinitely reinvested; deferred income taxes have not been provided on such foreign earnings.