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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes
Total income (loss) before income taxes summarized by region were as follows (in thousands):
Year Ended December 31,
202220212020
United States$248,918 $248,071 $130,427 
Foreign— 447 (1,125)
Net income before income taxes$248,918 $248,518 $129,302 
Significant components of our net deferred tax assets/(liabilities) were as follows (in thousands).
December 31,
20222021
Deferred tax assets:
Net operating loss carryforwards$32,887 $42,182 
Deferred revenue837 909 
Research and development and orphan drug credits96,133 109,041 
Share-based compensation6,353 1,814 
ASC 842 lease liability2,480 600 
Capitalized research expense10,168 — 
Transaction related expense2,354 — 
Inventory related reserves18,395 — 
Interest expense limitation— — 
Other, net3,054 3,449 
$172,661 $157,995 
Valuation allowance for deferred tax assets(707)(500)
Deferred tax assets, net of valuation allowance$171,954 $157,495 
Deferred tax liabilities:
Non-deductible book amortization (115,578)
Depreciation(2,559)(1,185)
Convertible note— (17)
ASC 842 right of use asset(9,061)(426)
Other, net(330)(433)
Total deferred tax liabilities$(127,528)$(2,061)
Net deferred tax asset $44,426 $155,434 
A valuation allowance of $0.7 million and $0.5 million has been established to offset the net deferred tax assets as of December 31, 2022 and 2021, respectively, as realization of such assets is uncertain.
On a periodic basis, we reassess the valuation allowance of our DTAs, weighing all positive and negative evidence, to assess if it is more-likely-than-not that some or all of our DTAs will be realized. In 2021, we have demonstrated profitability and cumulative pretax income and are forecasting income growth. After assessing both the positive and negative evidence, we determined that it was more likely than not that our DTAs would be realized and released the valuation allowance in 2021.
On May 24, 2022, we acquired the outstanding shares of Antares Pharma Inc. This transaction was treated as a non-taxable acquisition, we have increased our deferred tax liabilities by approximately $119.7 million related to acquired intellectual property and a step-up to the value of inventory the amortization of which will not be tax deductible.
Income tax (benefit) expense was comprised of the following components (in thousands):
Year Ended December 31,
202220212020
Current - federal$6,157 $(9)$(11)
Current - state2,525 1,251 228 
Deferred - federal44,757 (117,925)— 
Deferred - state(6,650)(37,509)— 
$46,789 $(154,192)$217 
The provision for income taxes on earnings subject to income taxes differs from the statutory federal income tax rate due to the following:
Year Ended December 31,
202220212020
Federal income tax expense (benefit) at 21% 21.00 %21.00 %21.00 %
State income tax expense (benefit), net of federal income tax impact0.82 %2.67 %(1.59)%
(Decrease) increase in valuation allowance(0.39)%(84.92)%34.59 %
Worthless stock deduction of international subsidiary— %— %(52.07)%
Foreign income subject to tax at other than federal statutory rate— %0.02 %0.16 %
Share-based compensation(0.66)%(2.50)%(1.89)%
Executive compensation limitation2.61 %2.32 %1.61 %
Non-deductible expenses and other(0.40)%0.54 %(1.64)%
Foreign-derived intangible income(5.06)%(1.18)%— %
Transaction costs0.88 %— %— %
18.80 %(62.05)%0.17 %
At December 31, 2022, our unrecognized tax benefit and uncertain tax positions were $19.5 million, which will impact the effective tax rate when resolved. Of the unrecognized tax benefits, we do not expect any significant changes to occur in the next 12 months. Interest and/or penalties related to uncertain income tax positions are recognized by us as a component of income tax expense. For the years ended December 31, 2022, 2021 and 2020, we recognized an immaterial amount of interest and penalties.
The following table summarizes the activity related to our unrecognized tax benefits (in thousands):
Year Ended December 31,
202220212020
Gross unrecognized tax benefits at beginning of period$17,692 $19,167 $21,483 
Increases in tax positions for prior years— 21 41 
Decreases in tax positions for prior years and lapse in statue of limitations(1,148)(1,496)(2,357)
Increases in tax positions related to business acquisition2,151 — — 
Increases in tax positions for current year 787 — — 
Gross unrecognized tax benefits at end of period$19,482 $17,692 $19,167 
At December 31, 2022, we had federal, California and other state tax net operating loss carryforwards of approximately $31.2 million, $237.4 million and $63.4 million, respectively. The California and Minnesota net operating loss carryforwards begin to expire in 2028 and 2022, respectively.
As a result of the acquisition of Antares, we acquired federal and Minnesota research and development credits of approximately $7.4 million and $0.72 million, respectively. We expect to be able to fully utilize these attributes without limitation.
At December 31, 2022, we had federal, California and Minnesota research and development tax credit carryforwards of approximately $30.8 million, $17.0 million and $0.7 million, respectively. The federal research and development tax credits will begin to expire in 2030 unless previously utilized. The California research and development tax credits will carryforward indefinitely until utilized. The Minnesota research and development credit will begin to expire in 2023 unless previously utilized. Additionally, we had Orphan Drug Credit carryforwards of $70.0 million which will begin to expire in 2034.
Pursuant to Internal Revenue Code Section 382, the annual use of the net operating loss carryforwards and research and development tax credits could be limited by any greater than 50% ownership change during any three year testing period. As a result of any such ownership change, portions of our net operating loss carryforwards and research and development tax credits are subject to annual limitations. We completed an updated Section 382 analysis regarding the limitation of the net operating losses and research and development credits as of December 31, 2020. Based upon the analysis, we determined that ownership changes occurred in prior years; however, the annual limitations on net operating loss and research and development tax credit carryforwards will not have a material impact on the future utilization of such carryforwards.
We do not provide for U.S. income taxes on the undistributed earnings of our foreign subsidiary as it is our intention to utilize those earnings in the foreign operations for an indefinite period of time. At December 31, 2022 and 2021, there were no undistributed earnings in foreign subsidiaries.
We are subject to taxation in the U.S. and in various state and foreign jurisdictions. Our tax years for 2008 and forward are subject to examination by the U.S. and California tax authorities due to the carryforward of unutilized net operating losses and research and development credits.