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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
On August 6, 2018, ANI Pharmaceuticals Canada Inc. (“ANI Canada”) acquired all the issued and outstanding equity interests of WellSpring in a non-taxable transaction. Following the consummation of the transaction, WellSpring was merged into ANI Canada. For U.S. Federal and state income tax purposes, ANI Canada is not part of ANI’s consolidated group; rather, ANI Canada is subject to income taxes only in Canada and solely based on its stand-alone operations. The foreign current and foreign deferred provisions (benefits) below represent the Company's tax provision (benefit) from the Canadian and Indian taxing jurisdictions.
The Company is required to establish a valuation allowance is required to be established for deferred tax assets if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Projected future taxable income and tax planning strategies in making this assessment.
As of December 31, 2023 and 2022, the consolidated valuation allowance was $0.4 million and $0.4 million, respectively, related solely to deferred tax assets for net operating loss carryforwards in certain U.S. state jurisdictions.
Total income tax expense (benefit) for income taxes consists of the following for the years ended December 31:
(in thousands)202320222021
Current income tax provision   
Federal$9,117 $152 $1,296 
State3,534 249 1,320 
Foreign26 66 691 
Total12,677 467 3,307 
Deferred income tax benefit   
Federal(7,601)(13,382)(12,163)
State(3,946)(1,722)(5,122)
Foreign(29)(128)336 
Total(11,576)(15,232)(16,949)
Change in valuation allowance(8)(4)187 
Total expense (benefit) for income taxes$1,093 $(14,769)$(13,455)
The difference between expected income tax expense (benefit) from applying U.S. Federal statutory tax rates to the pre-tax income (loss) and actual income tax expense (benefit) relates primarily to the effect of the following:
As of December 31,
202320222021
US Federal statutory rate21.0 %21.0 %21.0 %
State taxes, net of Federal benefit4.8 %3.2 %3.3 %
Foreign taxes0.0%0.1 %(1.0)%
Change in valuation allowance0.0%— %(0.3)%
Stock-based compensation10.8 %(1.4)%(1.7)%
Non-deductible costs2.1 %(0.5)%(0.8)%
Change in state apportionment factors, state and foreign rates(11.8)%(0.1)%5.5 %
Research and experimentation and charitable credits(19.0)%1.4 %0.9 %
Transfer pricing and other(2.4)%(0.1)%(2.9)%
Effective income tax rate5.5 %23.6 %24.0 %
Deferred income taxes reflect the net tax effects of differences between the bases of assets and liabilities for financial reporting and income tax purposes. Deferred income tax assets and liabilities consisted of the following:
As of December 31,
(in thousands)20232022
Deferred tax assets:
Accruals and advances$12,470 $9,233 
Stock-based compensation6,013 6,041 
Accruals for chargebacks and returns17,358 15,344 
Inventories4,569 5,292 
Intangible assets40,193 33,431 
Net operating loss carryforwards2,900 5,994 
Capitalized research expenditures11,294 4,708 
Other 7,450 11,840 
Total deferred tax assets$102,247 $91,883 
Deferred tax liabilities:  
Depreciation$(5,658)$(5,776)
Other liabilities (5,440)(4,298)
Total deferred tax liabilities$(11,098)$(10,074)
Valuation allowance(438)(446)
Deferred tax assets, net of deferred tax liabilities and valuation allowance$90,711 $81,363 
As of December 31, 2023, U.S. federal net operating loss carryforwards were approximately $8.0 million, all of which arose as a result of the 2013 merger with BioSante Pharmaceuticals, Inc. Net operating loss carryforwards related to the 2013 merger, if not used, expire in annual increments through 2033 and are limited on an annual basis as prescribed by Section 382 of the U.S. Internal Revenue Code; and the current annual limitation is approximately $0.8 million per year. Additionally, as of December 31, 2023, there were total net operating losses in various states of approximately $13.0 million which begin to expire through 2042, and in Canada of $1.0 million that expire through 2038.
The Company is subject to income taxes in numerous jurisdictions in the U.S., Canada, and India. Significant judgment is required in evaluating the tax positions and determining the provision for income taxes. Liabilities are established for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These liabilities are established when it is believed that certain positions might be challenged despite the belief that our tax return positions are fully supportable. These liabilities are adjusted in light of changing facts and circumstances, such as the outcome of a tax audit. The provision for income taxes includes the impact of changes to the liability that is considered appropriate. There were no material uncertain income tax positions identified as of December 31, 2023 and 2022.
The Company is subject to income tax audits in all jurisdictions for which tax returns are filed. Tax audits by their nature are often complex and can require several years to complete. All of the Company's income tax returns remain subject to examination by tax authorities due to the availability of net operating loss carryforwards.