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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | 17. INCOME TAXES The Company’s (benefit) provision for income taxes from continuing operations consists of the following:
|  | Year Ended December 31, |
(In thousands) |  | 2023 |  |  | 2022 (1) |  |  | 2021 (1) |
Current income tax (benefit) provision: |  |  |  |  |  |  |  |  |
U.S. federal |  | $ | (981 | ) |  | $ | 11,169 |  |  | $ | 2,251 |
U.S. state |  |  | 722 |  |  |  | 4,401 |  |  |  | 797 |
Rest of world |  |  | — |  |  |  | — |  |  |  | 3 |
Deferred income tax (benefit) provision: |  |  |  |  |  |  |  |  |
U.S. federal |  |  | 10,192 |  |  |  | (10,536 | ) |  |  | 9,372 |
U.S. state |  |  | (507 | ) |  |  | (3,010 | ) |  |  | (1,097 | )
Ireland |  |  | (107,064 | ) |  |  | — |  |  |  | — |
Total tax (benefit) provision |  | $ | (97,638 | ) |  | $ | 2,024 |  |  | $ | 11,326 |
(1) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation. The income tax benefit in 2023 was primarily due to the partial release of the valuation allowance maintained against certain Irish deferred tax assets, partially offset by taxes on income earned in the U.S. and Ireland. The income tax provisions in 2022 and 2021 were primarily due to U.S. federal and state taxes on income earned in the U.S. and the tax impact of employee equity activity. In December 2023, the IRS issued Notice 2024-12 that provided clarity on the application of Section 174. On this basis, the Company adjusted its estimate of expenses that should be capitalized and amortized, resulting in lower taxable income and an elimination of the foreign derived intangible income (“FDII”) deduction for the year ended December 31, 2023. The income tax benefit associated with the Company’s oncology business, and the tax impact of the Separation, are discussed in further detail in Note 3, Discontinued Operations, in these “Notes to Consolidated Financial Statements” in this Annual Report. The tax benefits included within discontinued operations were $1.4 million, $11.1 million, and $2.5 million for the years ended December 31, 2023, 2022, and 2021, respectively. No provision for income tax has been provided on undistributed earnings of the Company’s foreign subsidiaries because such earnings are indefinitely reinvested in the foreign operations. Cumulative unremitted earnings of U.S. subsidiaries totaled approximately $797.0 million at December 31, 2023. In the event of a repatriation of those earnings in the form of dividends or otherwise, the Company may be liable for income taxes, subject to adjustment, if any, for foreign tax credits and foreign withholding taxes payable to foreign tax authorities. The Company estimates that approximately $70.8 million of income taxes would be payable on the repatriation of the unremitted earnings to Ireland. The distribution of the Company’s income (loss) before the (benefit) provision for income taxes by geographical area consists of the following:
|  | Year Ended December 31, |
(In thousands) |  | 2023 |  |  | 2022 (1) |  |  | 2021 (1) |
Ireland |  | $ | 411,767 |  |  | $ | (32,198 | ) |  | $ | 85,415 |
U.S. |  |  | 9,752 |  |  |  | 1,070 |  |  |  | 2,312 |
Income (loss) from continuing operations before (benefit) provision for income taxes |  | $ | 421,519 |  |  | $ | (31,128 | ) |  | $ | 87,727 |
(1) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation. The components of the Company’s net deferred tax assets consist of the following:
|  | December 31, |  |  | December 31, |
(In thousands) |  | 2023 |  |  | 2022 (1) |
Deferred tax assets: |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 195,658 |  |  | $ | 238,128 |
Research and development expenses |  |  | 49,206 |  |  |  | 66,464 |
Accrued expenses and reserves |  |  | 56,083 |  |  |  | 51,362 |
Share-based compensation |  |  | 37,727 |  |  |  | 39,333 |
Tax credits |  |  | 27,116 |  |  |  | 22,932 |
Other |  |  | 5,582 |  |  |  | 6,543 |
Less: valuation allowance |  |  | (129,296 | ) |  |  | (268,067 | )
Total deferred tax assets |  |  | 242,076 |  |  |  | 156,695 |
Deferred tax liabilities: |  |  |  |  |  |
Property, plant and equipment |  |  | (44,019 | ) |  |  | (41,169 | )
Other |  |  | (2,716 | ) |  |  | (1,502 | )
Total deferred tax liabilities |  |  | (46,735 | ) |  |  | (42,671 | )
Net deferred tax assets |  | $ | 195,341 |  |  | $ | 114,024 |
(1) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation. The activity in the valuation allowance associated with deferred taxes consists of the following:
(In thousands) |  | Balance at Beginning of Period (1) |  |  | (Additions) / Reductions (2) |  |  | Balance at End of Period (1) |
Deferred tax asset valuation allowance for the year ended December 31, 2021 |  | $ | (253,649 | ) |  | $ | 4,537 |  |  | $ | (249,112 | )
Deferred tax asset valuation allowance for the year ended December 31, 2022 |  | $ | (249,112 | ) |  | $ | (22,405 | ) |  | $ | (271,517 | )
Deferred tax asset valuation allowance for the year ended December 31, 2023 |  | $ | (271,517 | ) |  | $ | 142,221 |  |  | $ | (129,296 | )
(1) Inclusive of continuing and discontinued operations for all periods other than the balance at December 31, 2023. (2) (Additions) reductions represent continuing and discontinued operations. The reduction during the year ended December 31, 2023 primarily relates to the partial release of the valuation allowance maintained against certain Irish net deferred tax assets. The (additions) reductions in 2022 and 2021 relate primarily to Irish net operating losses (“NOLs”). The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making such assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more-likely-than-not that some or all of the deferred tax assets will not be realized. During the year ended December 31, 2023, the Company: (i) achieved a favorable outcome in its arbitration with Janssen (as described in Note 4, Revenue from Contracts with Customers in these “Notes to Consolidated Financial Statements” in this Annual Report); (ii) successfully completed the Separation; and (iii) recorded significant pre-tax income due to multiple factors, including the growth of its proprietary revenues and items (i) and (ii) above. As a result, the Company’s main operating subsidiary in Ireland recorded cumulative income during the year ended December 31, 2023 and the three-year period ended December 31, 2023. On this basis and other positive factors (such as anticipated future earnings) and negative factors (such as the potential decrease in certain manufacturing and royalty revenues), the Company has concluded that it is more-likely-than-not that certain Irish deferred tax assets will be realized. Of the $271.5 million valuation allowance maintained as of December 31, 2022, the Company released $143.9 million during the year ended December 31, 2023. At December 31, 2023, the Company maintained a valuation allowance of $27.3 million against certain U.S. state deferred tax assets and $102.0 million against certain Irish deferred tax assets, as the Company has determined that it is more-likely-than-not that these deferred tax assets will not be realized and some may be abandoned. If the Company incurs losses in the U.S. or in Ireland in the future, the evaluation of the recoverability of the deferred tax assets could change and a valuation allowance against such deferred tax assets may be required in part or in whole. The Company will continue to monitor the need for a valuation allowance against its deferred tax assets on a quarterly basis. As of December 31, 2023, the Company had $1.3 billion of Irish NOL carryforwards, $14.6 million of U.S. federal NOL carryforwards, $43.2 million of state NOL carryforwards, $9.7 million of federal R&D credits and $31.0 million of state tax credits which will either expire on various dates through 2043 or can be carried forward indefinitely. These loss and credit carryforwards are available to reduce certain future Irish and foreign taxable income and tax. These loss and credit carryforwards are subject to review and possible adjustment by the appropriate taxing authorities. These loss and credit carryforwards, which may be utilized in a future period, may be subject to limitations based upon changes in the ownership of the Company’s ordinary shares. Included within these loss and credit carryforwards are $14.6 million of U.S. federal NOL carryforwards and $6.3 million of state NOL carryforwards, acquired as part of the acquisition of Rodin Therapeutics, Inc. (“Rodin”), each of which are subject to a $0.5 million annual limitation. A reconciliation of the Company’s statutory tax rate to its effective tax rate is as follows:
|  | Year Ended December 31, |  |
(In thousands, except percentage amounts) |  | 2023 |  |  |  | 2022 (1) |  |  |  | 2021 (1) |  |
Statutory tax rate |  |  | 12.5 |  | % |  |  | 12.5 |  | % |  |  | 12.5 |  | %
Income (loss) from continuing operations before income taxes at statutory rate |  | $ | 52,690 |  |  |  | $ | (3,891 | ) |  |  | $ | 10,966 |  |
Share-based compensation |  |  | 4,177 |  |  |  |  | 4,347 |  |  |  |  | 7,716 |  |
Foreign rate differential(2) |  |  | 4,701 |  |  |  |  | 521 |  |  |  |  | 5,159 |  |
Change in valuation allowance |  |  | (142,424 | ) |  |  |  | 1,102 |  |  |  |  | (23,024 | ) |
Intercompany amounts(3) |  |  | (16,551 | ) |  |  |  | (1,694 | ) |  |  |  | 10,707 |  |
Irish rate differential(4) |  |  | 235 |  |  |  |  | 4,926 |  |  |  |  | 1,817 |  |
Uncertain tax positions |  |  | (234 | ) |  |  |  | 602 |  |  |  |  | 704 |  |
Non-deductible lobbying expenses |  |  | 705 |  |  |  |  | 775 |  |  |  |  | 637 |  |
U.S. state income taxes, net of U.S. federal benefit |  |  | 347 |  |  |  |  | 1,272 |  |  |  |  | (260 | ) |
In-process R&D(5) |  |  | — |  |  |  |  | — |  |  |  |  | 2,724 |  |
Foreign derived intangible income |  |  | — |  |  |  |  | (4,530 | ) |  |  |  | (3,125 | ) |
R&D credit |  |  | (2,823 | ) |  |  |  | (2,531 | ) |  |  |  | (2,871 | ) |
Other permanent items(6) |  |  | 1,539 |  |  |  |  | 1,125 |  |  |  |  | 176 |  |
Income tax (benefit) provision |  | $ | (97,638 | ) |  |  | $ | 2,024 |  |  |  | $ | 11,326 |  |
Effective tax rate |  |  | (23.2 | ) | % |  |  | (6.5 | ) | % |  |  | 12.9 |  | %
(1) Prior period amounts have been retrospectively adjusted to reflect the effects of the Separation. (2) Represents income or losses of U.S. subsidiaries, subject to tax at a rate other than the Irish statutory rate. (3) Intercompany amounts include cross-territory eliminations, the pre-tax effect of which has been eliminated in arriving at the Company's consolidated income (loss) before taxes from continuing operations. In 2023, this included a tax benefit of $15.7 million related to the intercompany transfer of inventory that was owned by the Company at December 31, 2023. (4) Represents income or losses of Irish companies subject to tax at a rate other than the Irish statutory rate. (5) Represents the tax effect of the research and development expense recorded in connection with the acquisition of Rodin. (6) Other permanent items include, but are not limited to, non-deductible meals and entertainment expenses and non-deductible compensation of senior officers of the Company. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
|  | Unrecognized |
(In thousands) |  | Tax Benefits |
Balance, December 31, 2020 |  | $ | 7,668 |
Reductions based on tax positions related to prior periods |  |  | (27 | )
Additions based on tax positions related to the current period |  |  | 731 |
Balance, December 31, 2021 |  | $ | 8,372 |
Reductions based on the lapse of applicable statutes of limitations |  |  | (438 | )
Additions based on tax positions related to prior periods |  |  | 449 |
Additions based on tax positions related to the current period |  |  | 590 |
Balance, December 31, 2022 |  | $ | 8,973 |
Reductions based on the lapse of applicable statutes of limitations |  |  | (1,073 | )
Additions based on tax positions related to the prior period |  |  | 281 |
Additions based on tax positions related to the current period |  |  | 558 |
Balance, December 31, 2023 |  | $ | 8,739 |
The unrecognized tax benefits at December 31, 2023, if recognized, would affect the Company’s effective tax rate. The Company does not anticipate that the amount of existing unrecognized tax benefits will materially increase or decrease within the next 12 months. The Company has elected to include interest and penalties related to uncertain tax positions as a component of its provision for taxes. For the years ended December 31, 2023, 2022 and 2021, the Company’s accrued interest and penalties related to uncertain tax positions were not material. The Company’s major taxing jurisdictions include Ireland and the U.S. (federal and state). These jurisdictions have varying statutes of limitations. In the U.S., the 2020 through 2023 fiscal years remain subject to examination by the respective tax authorities, however, some states have longer statutes of limitations and additional fiscal years remain subject to examination. In Ireland, the 2019 through 2023 fiscal years remain subject to examination by the Irish tax authorities. Additionally, because of the Company’s Irish and U.S. loss carryforwards and credit carryforwards, certain tax returns from fiscal years 2002 onward may also be examined. These years generally remain open for three to four years after the loss carryforwards and credit carryforwards have been utilized. The years ended December 31, 2018 and 2017 for Alkermes Finance S.à.r.l, a former indirect subsidiary of Alkermes plc that was liquidated during the year ended December 31, 2020, are currently under examination by the Tax Authorities in Luxembourg (the “LTA”). In February 2023, the Company submitted an appeal to the LTA against the notice of assessment received in 2022 for the year ended December 31, 2017. In the third quarter of 2023, the Company received confirmation that the LTA changed its position and agreed to the originally filed tax return, resulting in the closure of the examination of the year ended December 31, 2017. In connection with the closure, the Company received a refund of approximately €2.2 million from the LTA. As of December 31, 2023, the Company had no t received a notice of assessment from the LTA in relation to the year ended December 31, 2018.

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