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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For financial reporting purposes, income (loss) before income taxes includes the following components:
Years ended December 31,
(in thousands)202420232022
United States$(210,049)$(234,482)$(343,424)
Foreign181,293 84,381 101,385 
Total$(28,756)$(150,101)$(242,039)
Following were the components of income tax expense (benefit) for the years ended December 31, 2024, 2023, and 2022:
Years ended December 31,
(in thousands)202420232022
Current
Federal$— $— $— 
State76 14 6 
Foreign27,274 6,408 (5,760)
Deferred
Federal— (4,801)274 
State— (138)9 
Foreign— — — 
Total$27,350 $1,483 $(5,471)
A reconciliation of the statutory tax rates and the effective tax rates for the years ended December 31, 2024, 2023, and 2022 are as follows:
Years ended December 31,
202420232022
Statutory rate(21)%(21)%(21)%
Tax credits(14)(8)(11)
Impact of foreign operations180 (9)18 
Executive compensation36 7 3 
Other63 1 — 
Valuation allowance(149)31 9 
Net95 %1 %(2)%
On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act ("Tax Act"). The Tax Act significantly revised 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.
Beginning in 2022, the Tax Act eliminated the right to deduct research and development expenditures for tax purposes in the period the expenses were incurred and instead requires all U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years, respectively.
Tax returns for years 2019 through 2024 are open to examination by tax authorities. The Company is also subject to examination in any period for which it has net operating losses. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Years ended December 31,
(in thousands)202420232022
Gross unrecognized tax benefits at beginning of year$4,888 $283 $— 
Gross increases for tax positions in prior years9,542 4,605 283 
Decreases for settlements and payments(625)— — 
Gross unrecognized tax benefits at end of year $13,805 $4,888 $283 
For the years ended December 31, 2024 and 2023, approximately $13.8 million and $4.8 million of unrecognized tax benefits respectively, would, if recognized, impact the Company's effective tax rate. The Company recognizes accrued interest related to its uncertain tax positions as part of its income tax expense within its consolidated statement of operations. The amount of accrued interest was $1.9 million for the year ended December 31, 2024. The Company's management determined that no accrual for penalties was required as of December 31, 2024.
Deferred income taxes reflect the net effect of temporary difference between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The significant components of the deferred tax assets and liabilities are as follows:
Years ended December 31,
(in thousands)20242023
Deferred tax assets
Net operating loss carry forwards302,066 321,004 
Research tax credit234,189 235,532 
Capitalized research and development costs34,883 34,425 
Share-based compensation20,045 17,314 
Lease liability10,026 10,567 
Interest carry forward limitation9,097 17,627 
Inventory1,599 1,931 
Other5,267 20,858 
Gross deferred tax assets617,172 659,258 
Deferred tax liabilities
Other(8,042)(10,004)
Total net deferred tax assets609,130 649,254 
Less: valuation allowance(609,130)(649,254)
Net deferred tax liability$— $— 
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, 2024 and 2023, the Company recorded valuation allowances of $609.1 million and $649.3 million, respectively, representing a decrease in the valuation allowance of $40.2 million in 2024, 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 intangible assets acquired by the Company. The Company's policy is to record a deferred tax liability related to acquired intangible assets 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, 2024, the Company had U.S. federal and state net operating loss carry forwards ("NOLs") of approximately $1.1 billion and $1.0 billion, respectively. The federal carry forward for losses generated prior to 2018 will expire in 2031 through 2037. Federal net operating losses incurred in 2018 and onward have an indefinite expiration under the Tax Act. Most of the state net operating loss carry forwards generated prior to 2009 have expired through 2016. The remaining state net operating loss carry forwards including those generated in 2009 through 2024 will expire in 2028 through 2042. State research and development credits will expire 2024 through 2033. Utilization of NOLs may be subject to a substantial limitation pursuant to Section 382 of the Internal Revenue Code of 1986, as amended ("Section 382"), 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, 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 for the tax year 2024 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 U.S. federal research and experimentation and orphan drug credit carryforwards of approximately $19.1 million and $201.6 million, respectively, which will expire in the years 2030 through 2043. The Company also has state research and development tax credit carryforwards of $13.5 million. Deferred tax assets for these carryforwards are subject to a full valuation allowance.
The Company permanently reinvests the earnings of its foreign subsidiaries except for its U.K. operations. The determination of the amount of the unrecognized of the deferred tax liability related to the undistributed earnings is not practicable because of the complexities associated with its hypothetical calculation.
The Organization Economic Co-operation and Development (“OECD”) introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%. Numerous countries, including European Union member states, have enacted or are expected to enact legislation to be effective as early as January 1, 2024, with general implementation of a global minimum tax by January 1, 2025. The Company does not expect this new rule to apply until the Company meets the minimum global revenue threshold.