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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Taxes [Abstract] |
Income Taxes | 5. Income Taxes Income (loss) before income taxes is comprised of (in thousands):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  |  |  |  | (as revised*) |  |  | (as revised*) |
United States |  | $ | (29,966 | ) |  | $ | (137,222 | ) |  | $ | 336,277 |
Foreign |  |  | 818 |  |  |  | 2,670 |  |  |  | 2,489 |
Income (loss) before income taxes |  | $ | (29,148 | ) |  | $ | (134,552 | ) |  | $ | 338,766 |
Our income tax expense (benefit) was as follows (in thousands):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  |  |  |  | (as revised*) |  |  | (as revised*) |
Current: |  |  |  |  |  |  |  |  |
Federal |  | $ | (200 | ) |  | $ | (837 | ) |  | $ | 35,861 |
State |  |  | (690 | ) |  |  | 3,782 |  |  |  | 14,329 |
Foreign |  |  | 339 |  |  |  | 518 |  |  |  | 413 |
Total current income tax expense (benefit) |  |  | (551 | ) |  |  | 3,463 |  |  |  | 50,603 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | — |  |  |  | 341,728 |  |  |  | 904 |
State |  |  | — |  |  |  | — |  |  |  | — |
Total deferred income tax benefit |  |  | — |  |  |  | 341,728 |  |  |  | 904 |
Total income tax expense (benefit) |  | $ | (551 | ) |  | $ | 345,191 |  |  | $ | 51,507 |
Our expense (benefit) for income taxes differs from the amount computed by applying the U.S. federal statutory rate to income (loss) before taxes. The sources and tax effects of the differences are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
|  |  |  |  | (as revised*) |  |  | (as revised*) |
Pre-tax income (loss) |  | $ | (29,148 | ) |  |  |  |  | $ | (134,552 | ) |  |  |  |  | $ | 338,766 |  |  |  |
Statutory rate |  |  | (6,121 | ) |  |  | 21.0 | % |  |  | (28,256 | ) |  |  | 21.0 | % |  |  | 71,141 |  |  |  | 21.0 | %
State income tax net of federal benefit |  |  | 4,278 |  |  |  | (14.7 | )% |  |  | (37,705 | ) |  |  | 28.0 | % |  |  | 49,000 |  |  |  | 14.5 | %
Foreign |  |  | 143 |  |  |  | (0.5 | )% |  |  | 49 |  |  |  | 0.0 | % |  |  | 340 |  |  |  | 0.1 | %
Net change in valuation allowance |  |  | 2,885 |  |  |  | (9.9 | )% |  |  | 460,898 |  |  |  | (342.5 | )% |  |  | (37,314 | ) |  |  | (11.0 | )%
Loss on debt transactions |  |  | 262 |  |  |  | (0.9 | )% |  |  | — |  |  |  | — |  |  |  | 9,911 |  |  |  | 2.9 | %
Impact from outside basis differences |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (16,344 | ) |  |  | (4.8 | )%
Tax credits |  |  | (23,198 | ) |  |  | 79.6 | % |  |  | (18,774 | ) |  |  | 14.0 | % |  |  | (22,296 | ) |  |  | (6.6 | )%
Deferred tax true-up |  |  | (24 | ) |  |  | 0.1 | % |  |  | (206 | ) |  |  | 0.2 | % |  |  | 646 |  |  |  | 0.2 | %
Tax rate change |  |  | 12,838 |  |  |  | (44.0 | )% |  |  | (32,951 | ) |  |  | 24.5 | % |  |  | 1,248 |  |  |  | 0.4 | %
Non-deductible compensation |  |  | 5,085 |  |  |  | (17.4 | )% |  |  | 7,931 |  |  |  | (5.9 | )% |  |  | 3,361 |  |  |  | 1.0 | %
Other non-deductible items |  |  | 84 |  |  |  | (0.3 | )% |  |  | 193 |  |  |  | (0.1 | )% |  |  | 329 |  |  |  | 0.1 | %
Stock-based compensation |  |  | 4,720 |  |  |  | (16.2 | )% |  |  | 17,435 |  |  |  | (13.0 | )% |  |  | (4,837 | ) |  |  | (1.4 | )%
Foreign-derived intangible income benefit |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (2,071 | ) |  |  | (0.6 | )%
Impacts from Akcea Merger |  |  | — |  |  |  | — |  |  |  | (22,032 | ) |  |  | 16.4 | % |  |  | — |  |  |  | — |
Other |  |  | (1,503 | ) |  |  | 5.1 | % |  |  | (1,391 | ) |  |  | 0.9 | % |  |  | (1,607 | ) |  |  | (0.6 | )%
Effective rate |  | $ | (551 | ) |  |  | 1.9 | % |  | $ | 345,191 |  |  |  | (256.5 | )% |  | $ | 51,507 |  |  |  | 15.2 | %
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and liabilities as of December 31, 2021 and 2020 are as follows (in thousands):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |
|  |  |  |  | (as revised*) |
Deferred Tax Assets: |  |  |  |  |  |
Net operating loss carryovers |  | $ | 85,600 |  |  | $ | 83,681 |
Tax credits |  |  | 269,538 |  |  |  | 245,746 |
Deferred revenue |  |  | 104,330 |  |  |  | 124,452 |
Stock-based compensation |  |  | 86,611 |  |  |  | 80,055 |
Intangible and capital assets |  |  | 92,542 |  |  |  | 98,443 |
Convertible debt |  |  | 45,681 |  |  |  | 22,395 |
Interest expense limitation |  |  | 6,996 |  |  |  | — |
Other |  |  | 15,048 |  |  |  | 13,402 |
Total deferred tax assets |  | $ | 706,346 |  |  | $ | 668,174 |
Deferred Tax Liabilities: |  |  |  |  |  |  |  |
Fixed assets |  |  | (3,303 | ) |  |  | (3,611 | )
Other |  |  | (5,270 | ) |  |  | (5,808 | )
Net deferred tax asset |  | $ | 697,773 |  |  | $ | 658,755 |
Valuation allowance |  |  | (697,773 | ) |  |  | (658,755 | )
Total net deferred tax assets and liabilities |  | $ | — |  |  | $ | — |
* | We revised our 2020 and 2019 amounts to reflect the simplified convertible instruments accounting guidance, which we adopted retrospectively. Refer to Note 1, Organization and Significant Accounting Policies, for further information.
We evaluate our deferred tax assets regularly to determine whether adjustments to the valuation allowance are appropriate due to changes in facts or circumstances, such as changes in expected future pre-tax earnings, tax law, interactions with taxing authorities and developments in case law. In making this evaluation, we rely on our recent history of pre-tax earnings. Our material assumptions are our forecasts of future pre-tax earnings and the nature and timing of future deductions and income represented by the deferred tax assets and liabilities, all of which involve the exercise of significant judgment. Although we believe our estimates are reasonable, we are required to use significant judgment in determining the appropriate amount of valuation allowance recorded against our deferred tax assets. Ionis and Akcea filed separate U.S. federal income tax returns from the date of Akcea’s IPO in 2017 through October 12, 2020, the date on which we completed the Akcea Merger. As a result of the Akcea Merger, Ionis and Akcea now file a consolidated U.S. federal income tax return, and we now assess our U.S. federal and state valuation allowance requirements on a consolidated basis. We assessed our valuation allowance requirements and recorded a valuation allowance of $341 million against all of Ionis’ U.S. federal net deferred tax assets in the fourth quarter of 2020, due to uncertainties related to our ability to realize the tax benefits associated with these assets. We based this determination largely on Akcea rejoining the Ionis consolidated U.S. federal tax group in the fourth quarter of 2020. Due to Akcea’s historical and projected financial statement losses, and the expected negative impact this will have on Ionis’ consolidated taxable income, we are uncertain if we will generate sufficient consolidated pre-tax income in future periods to realize the Ionis deferred tax benefits. We also expect that Ionis’ pre-tax income in future periods will be lower due to significant investments in research and development associated with our pipeline of wholly owned medicines. We now maintain a valuation allowance against all our consolidated U.S. federal and state net deferred tax assets. Our valuation allowance increased by $39 million from December 31, 2020 to December 31, 2021. The increase was primarily related to increases in our deferred tax assets for tax credits and convertible debt offset against a decrease in our deferred tax asset for deferred revenue. At December 31, 2021, we had federal and state, primarily California, tax net operating loss carryforwards of $271.5 million and $333.8 million, respectively. Our federal tax loss carryforwards are available indefinitely. Our California tax loss carryforwards will begin to expire in 2031. At December 31, 2021, we also had federal and California research and development tax credit carryforwards of $225.5 million and $99.7 million, respectively. Our federal research and development tax credit carryforwards will begin to expire in 2034. Our California research and development tax credit carryforwards are available indefinitely. Utilization of the net operating loss and tax credit carryforwards may be subject to an annual limitation due to the ownership change limitations provided by the Internal Revenue Code of 1986, as amended, and similar state provisions. The annual limitation may result in the expiration of net operating losses and credits before utilization. We analyze filing positions in all U.S. federal, state and foreign jurisdictions where we file income tax returns, and all open tax years in these jurisdictions to determine if we have any uncertain tax positions on any of our income tax returns. We recognize the impact of an uncertain tax position on an income tax return at the largest amount that the relevant taxing authority is more-likely-than not to sustain upon audit. We do not recognize uncertain income tax positions if they have less than 50 percent likelihood of the applicable tax authority sustaining our position. The following table summarizes our gross unrecognized tax benefits (in thousands):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Beginning balance of unrecognized tax benefits |  | $ | 54,163 |  |  | $ | 69,784 |  |  | $ | 68,301 |
Decrease for prior period tax positions |  |  | (695 | ) |  |  | (24,154 | ) |  |  | (867 | )
Increase for prior period tax positions |  |  | 263 |  |  |  | 7,023 |  |  |  | 736 |
Increase for current period tax positions |  |  | 1,354 |  |  |  | 1,510 |  |  |  | 1,614 |
Ending balance of unrecognized tax benefits |  | $ | 55,085 |  |  | $ | 54,163 |  |  | $ | 69,784 |
Included in the balance of unrecognized tax benefits at December 31, 2021, 2020 and 2019 was $6.2 million, $6.4 million and $0.4 million respectively, that if we recognized, could impact our effective tax rate, subject to our remaining valuation allowance. We do not foresee any material changes to our gross unrecognized tax benefits within the next twelve months. We recognize interest and/or penalties related to income tax matters in income tax expense. During the year ended December 31, 2021 and 2020, we recognized $0.5 million and $0.3 million, respectively, of accrued interest and penalties related to gross unrecognized tax benefits. We did not record any accrued interest and penalties for the years ended December 31, 2019. We are subject to taxation in the U.S. and various state and foreign jurisdictions. Our tax years for 1999 through 2020 are subject to examination by the U.S. federal, state and foreign tax authorities. We do not provide for a U.S. income tax liability and foreign withholding taxes on undistributed foreign earnings of our foreign subsidiaries as we consider those earnings to be permanently reinvested. It is not practicable for us to calculate the amount of unrecognized deferred tax liabilities associated with these earnings.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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