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Income Taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For financial reporting purposes, loss before income taxes includes the following components:
Years Ended December 31,
(in thousands)202020192018
United States$(365,332)$(393,955)$(309,183)
Foreign91,078 38,045 (39,906)
Total$(274,254)$(355,910)$(349,089)
Following were the components of income tax expense (benefit) for the years ended December 31, 2020, 2019, and 2018:
(in thousands)202020192018
Current
Federal$— $— $— 
State— — 6 
Foreign4,163 2,877 (100)
Deferred
Federal(1,410)(984)— 
State(155)(1,415)— 
Foreign— — — 
Total$2,598 $478 $(94)
A reconciliation of the statutory tax rates and the effective tax rates for the years ended December 31, 2020, 2019, and 2018 are as follows:
Years Ended
December 31,
202020192018
Statutory rate(21)%(21)%(21)%
State taxes, net of federal benefit— — (4)
Nondeductible IPR&D— — 6 
Contingent consideration— — 1 
Tax credits(7)(16)(10)
Impact of foreign operations4 9 2 
Nondeductible executive compensation2 1 — 
Nondeductible debt conversion— (1)— 
Other— (1)— 
Valuation allowance23 29 26 
Net1 %— %— %
On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act ("Tax Act"). The Tax Act significantly revises U.S. tax law by, among other provisions, lowering the U.S. federal statutory income tax rate to 21%, imposing a mandatory one-time transition tax on previously deferred foreign earnings, and eliminating or reducing certain income tax deductions. The Tax Act also introduced an additional U.S. tax on certain non-U.S. subsidiaries’ earnings which are considered to be Global Intangible Low Taxed Income (referred to as "GILTI"). After consideration of the relevant guidance and completing the accounting for the tax effects of the Tax Act, the Company has elected to treat GILTI as a period cost.
The Company recorded an income tax expense of $4.2 million in 2020 for taxes in foreign jurisdictions and a $1.6 million tax benefit in 2020 for taxes in U.S. federal and state jurisdictions.
The Company did not recognize interest or penalties related to income tax during the period ended December 31, 2020 and did not accrue for interest or penalties as of December 31, 2020. The Company does not have an accrual for uncertain tax positions as of December 31, 2020. Tax returns for years 2015 through 2019 are open to examination by tax authorities. The Company is also subject to examination in any period for which it has net operating losses.
Deferred income taxes reflect the net effect of temporary difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the deferred tax assets and liabilities are as follows:
Years Ended
December 31,
(in thousands)20202019
Deferred tax assets
Intellectual property$68,209 $46,521 
Amortization/depreciation489 2,329 
Research tax credit182,651 141,669 
Net operating loss carry forwards305,876 286,850 
Deferred reimbursements1,912 2,230 
Non-cash stock issue17,553 19,058 
Interest carry forward limitation5,655 2,224 
Lease liability9,235 6,983 
Other10,855 13,921 
Gross deferred tax assets602,435 521,785 
Deferred tax liabilities
Business acquisition(4,937)(5,051)
Royalty payable(68,209)(46,521)
Convertible notes(94)(653)
Advanced R&D payments(1,776)(2,611)
Right of use asset(3,420)(5,643)
Total net deferred tax assets523,999 461,306 
Less: valuation allowance(528,895)(466,357)
Net deferred tax liability$(4,896)$(5,051)
The Company records a valuation allowance for temporary differences for which it is more likely than not that the Company will not receive future tax benefits. At December 31, 2020 and 2019, the Company recorded valuation allowances of $528.9 million and $466.4 million, respectively, representing an increase in the valuation allowance of $62.5 million in 2020, due to the uncertainty regarding the realization of such deferred tax assets, to offset the benefits of net operating losses generated during those years. The deferred tax liability related to business acquisitions pertains to the basis difference in IPR&D acquired by the Company. The Company's policy is to record a deferred tax liability related to acquired IPR&D that may eventually be realized either upon amortization of the asset when the research is completed, and a product is successfully launched or the write-off of the asset if it is abandoned or unsuccessful.
As of December 31, 2020, the Company had federal and state net operating loss carry forwards ("NOLs") of approximately $1,156 million and $889.4 million, respectively. The federal carry forward for losses generated prior to 2018 will expire in 2029 through 2037. Federal net operating losses incurred in 2018 and onward have an indefinite expiration under the 2017 Tax Act. Most of the state carry forwards generated prior to 2009 have expired through 2016. The remaining state carry forwards including those generated in 2009 through 2020 will expire in 2029 through 2040. Utilization of NOLs may be subject to a substantial limitation pursuant to Section 382 of the Internal Revenue Code of 1986, as amended ( the "Code") as well as similar state statutes in the event of an ownership change. Such ownership changes have occurred in the past and could occur again in the future. Under Section 382 of the Internal Revenue Code of 1986, as amended, or Section 382, if a corporation undergoes an "ownership change," generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation's ability to use its pre-change NOLs and other pre-change tax attributes (such as research and development tax credits) to offset its post-change income may be limited. The Company may experience ownership changes in the future as a result of shifts in the stock ownership some of which are outside the Company's control. The Company completed a detailed study of the NOLs and determined that there was not an ownership change in excess of 50%. Ownership changes in future periods may place additional limits on the Company's ability to utilize net operating loss and tax credit carry forwards. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently decrease the amount of state attributes and increase state taxes owed.
The Company also has research and experimentation and orphan drug credit carryforwards of approximately $30.4 million and $141.8 million, respectively, which will expire in the years 2021 through 2040. Deferred tax assets for these carryforwards are subject to a full valuation allowance.