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Income Taxes | 12 Months Ended
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Dec. 31, 2013
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes At December 31, 2013, the Company had federal net operating loss carryforwards set to expire through 2032 of $555.5 million and $173.3 million of state net operating loss carryforwards. The Company also has $18.6 million of federal research and development credit carryforwards, which expire through 2033. The Company has $13.9 million of California and New Jersey research and development credit carryforwards that have no expiration date. Sections 382 and 383 of the U.S. tax code imposes limitations (“382 and 383 limitations”) on the annual utilization of operating loss and credit carryforwards whenever a greater than fifty percent change in the ownership of a company occurs within a three year period. In addition to the annual limitations on operating loss and credit carryforwards, Section 382 can also restrict the utilization of certain post change losses if the tax basis in assets exceeds the fair value of assets (“net unrealized built in loss”) at the date of an ownership change. Companies with operating loss and credit carryforwards are required to test the cumulative three year change whenever there is an equity transaction that impacts the ownership of holders of more than five percent of the Company’s stock. During 2012, the Company completed an analysis through December 31, 2011 of both its prior ownership changes as well as the ownerships changes that occurred with respect to the majority of its acquired subsidiaries. As a result of the analysis, it was determined that the Company had larger available net operating losses and credit carryforwards than previously estimated and that no net unrealized built in losses existed at any of the ownership change dates. Based upon these findings, the Company was able to recognize additional operating loss carryforwards and other deferred tax assets that previously were thought to be limited. The additional deferred tax assets were recognized up to the extent of allowable 382 and 383 limitations prior to being subject to valuation allowance considerations. Any deferred tax assets which would have expired solely as a result of the 382 and 383 limitations were removed from the Company’s deferred tax assets. Future changes in the ownership of the Company could place additional restrictions on the Company’s ability to utilize operating loss and credit carryforwards arising through December 31, 2013. The components of the income tax benefit for continuing operations are as follows (in thousands):
| Year Ended December 31,
| 2013 |  | 2012 |  | 2011
Current expense (benefit): |  |  |  |  |
Federal | $ | — |  |  | $ | 3 |  |  | $ | 520 |
State | 33 |  |  | 16 |  |  | 139 |
| 33 |  |  | 19 |  |  | 659 |
Deferred expense (benefit): |  |  |  |  |
Federal | 404 |  |  | (913 | ) |  | (10,803 | )
State | (63 | ) |  | (297 | ) |  | (3,126 | )
| $ | 374 |  |  | $ | (1,191 | ) |  | $ | (13,270 | )
Significant components of the Company’s deferred tax assets and liabilities as of December 31, 2013 and 2012 are shown below. A valuation allowance has been recognized to offset the net deferred tax assets as management believes realization of such assets is uncertain as of December 31, 2013, 2012 and 2011. The change in valuation allowance decreased $5.4 million in 2013, increased $41.8 million in 2012 and decreased $15.4 million in 2011.
| December 31,
| 2013 |  | 2012
| (in thousands)
Deferred assets: |  |  |
Net operating loss carryforwards | $ | 196,421 |  |  | $ | 198,445 |
Research and AMT credit carryforwards | 30,092 |  |  | 27,169 |
Fixed assets and intangibles | 17,293 |  |  | 23,763 |
Accrued expenses | 1,474 |  |  | 1,366 |
Contingent liabilities | 582 |  |  | 1,779 |
Deferred revenue | 760 |  |  | 1,013 |
Present value of royalties | 12,175 |  |  | 10,836 |
Organon termination asset | (4,073 | ) |  | (4,503 | )
Organon termination liability | 4,073 |  |  | 4,503 |
Royalty obligation | — |  |  | 861 |
Deferred rent | 1,634 |  |  | 2,635 |
Lease termination costs | — |  |  | — |
Capital loss carryforwards | 148 |  |  | 298 |
Other | 3,701 |  |  | 1,844 |
| 264,280 |  |  | 270,009 |
Valuation allowance for deferred tax assets | (249,470 | ) |  | (254,870 | )
Net deferred tax assets | $ | 14,810 |  |  | $ | 15,139 |
Deferred tax liabilities: |  |  |
Retrophin fair value adjustment | $ | (859 | ) |  | $ | — |
Identified intangibles | (13,984 | ) |  | (15,139 | )
Identified indefinite lived intangibles | (2,639 | ) |  | (2,298 | )
Total | $ | (2,672 | ) |  | $ | (2,298 | )
As of December 31, 2013 and 2012, the Company had not recognized as a deferred tax asset $2.4 million and $0.9 million, respectively of unrealized excess tax benefits from share based compensation. When realized and the valuation allowance is reversed, such benefits will be credited directly to additional paid in capital. Changes to the valuation allowance allocated directly to other comprehensive income were $1.0 million, $0 and $0.1 million for 2013, 2012 and 2011, respectively. A reconciliation of income taxes from continuing operations to the amount computed by applying the statutory federal income tax rate to the net loss from continuing operations is summarized as follows:
| Years Ended December 31,
| 2013 |  | 2012 |  | 2011
Amounts computed at statutory federal rate | $ | (3,131 | ) |  | $ | 1,317 |  |  | $ | 1,204 |
State taxes net of federal benefit | (293 | ) |  | 196 |  |  | (2 | )
Meals & entertainment | (10 | ) |  | (8 | ) |  | (9 | )
Acquisition related transaction costs | — |  |  | — |  |  | (37 | )
Imputed interest | (285 | ) |  | (259 | ) |  | (255 | )
CVRs | (2,027 | ) |  | 695 |  |  | (601 | )
Stock-based compensation | 556 |  |  | 581 |  |  | (597 | )
Expired NOLs | — |  |  | (6,847 | ) |  | (678 | )
Expired research and development credits | 641 |  |  | (1,984 | ) |  | (1,200 | )
R&D credit study | 3,940 |  |  | — |  |  | — |
Change in uncertain tax positions | (364 | ) |  | 830 |  |  | — |
Rate change for changes in state law | (901 | ) |  | (3,388 | ) |  | — |
Increase in deferred tax assets from completion of 382 analysis | (786 | ) |  | 53,257 |  |  | — |
Change in valuation allowance | 3,509 |  |  | (41,768 | ) |  | 15,486 |
Other | (1,223 | ) |  | (1,431 | ) |  | (41 | )
| $ | (374 | ) |  | $ | 1,191 |  |  | $ | 13,270 |
The Company accounts for income taxes by evaluating a probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is a tax position that is more likely than not to be sustained upon examination by the applicable taxing authority, including resolution of any related appeals or litigation processes, based on the technical merits of the position. The Company’s remaining liabilities for uncertain tax positions are presented net of the deferred tax asset balances on the accompanying consolidated balance sheet. A reconciliation of the amount of unrecognized tax benefits at December 31, 2013 and 2012 is as follows (in thousands):
Balance at December 31, 2011 | $ | 8,906 |
Additions based on tax positions related to the current year | 38 |
Reductions for tax positions of prior years | (877 | )
Balance at December 31, 2012 | 8,067 |
Additions based on tax positions related to the current year | 417 |
Additions for tax positions of prior years | 20 |
Balance at December 31, 2013 | $ | 8,504 |
Included in the balance of unrecognized tax benefits at December 31, 2013 is $8.5 million of tax benefits that, if recognized would result in adjustments to the related deferred tax assets and valuation allowance and not affect the Company’s effective tax. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2013, there was no accrual related to uncertain tax positions. The Company files income tax returns in the United States and in various state jurisdictions with varying statutes of limitations. The federal statute of limitation remains open for the 2010 tax year to present. The state income tax returns generally remain open for the 2009 tax years through present.

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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/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 15 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(h)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Regulation S-X (SX) -Number 210 -Section 08 -Paragraph h -Article 4 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 9 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32639-109319 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32537-109319 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32559-109319 + Details
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