INCOME TAXES

12 Months Ended

Dec. 31, 2020

The domestic and foreign components of loss before income taxes are as follows:


(In thousands)	2020		2019		2018
Domestic	$	(682,859)	$	(597,602)	$	(573,245)
Foreign	(172,741)		(287,651)		(187,429)
Loss before income taxes	$	(855,600)	$	(885,253)	$	(760,674)

The provision for income taxes consisted of the following:


	Year Ended December 31,
(In thousands)	2020		2019		2018
Current provision:
Domestic	$	61	$	(394)	$	—
Foreign	5,837		3,232		1,611
Total current provision	5,898		2,838		1,611
Deferred benefit:
Domestic	393		394		(788)
Foreign	(3,610)		(2,369)		—
Total deferred benefit	(3,217)		(1,975)		(788)
Total provision for income taxes	$	2,681	$	863	$	823

Deferred income taxes reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. We establish a valuation allowance when uncertainty exists as to whether all or a portion of the net deferred tax assets will be realized. Components of the net deferred tax (liability) asset are as follows:


	As of December 31,
(In thousands)	2020		2019
Deferred tax assets:
Net operating loss carryforwards	$	537,382	$	627,466
Research and development and ODC credits	301,792		261,616
Sale of future royalties	259,014		—
Lease liability	70,402		69,334
Deferred revenue	84,946		—
Deferred compensation	67,530		75,058
Intangible assets	148,168		66,615
Other	32,725		13,660
Total deferred tax assets	1,501,959		1,113,749
Deferred tax liabilities:
Property, plant and equipment, net	(10,812)		(10,077)
Unrealized gain on marketable securities	(12,766)		(3,932)
Right of use assets	(50,323)		(50,294)
Deferred revenue tax accounting method change	(71,812)		—
Deferred tax asset valuation allowance	(1,349,729)		(1,046,013)
Net deferred tax asset	$	6,517	$	3,433

Our effective income tax rate differs from the statutory federal income tax rate, as follows:


	Year Ended December 31,
(In thousands)	2020		2019		2018
At U.S. federal statutory rate	21.0	%	21.0	%	21.0	%
State taxes, net of federal effect	4.5		3.6		2.1
Stock-based compensation	2.2		—		0.8
Tax credits	3.3		3.7		4.2

Other permanent items	(1.5)		(0.3)		(0.3)
Foreign rate differential	(3.5)		(6.9)		(5.3)
Internal reorganization of certain intellectual property rights	12.3		—		—

Revaluation of deferred credits due to rate change	—		—		(3.5)
Other	(2.7)		(0.1)		—
Valuation allowance	(35.9)		(21.0)		(19.0)
Effective income tax rate	(0.3)	%	—	%	—	%

We have evaluated the positive and negative evidence bearing upon the realizability of our deferred tax assets. We have concluded, in accordance with the applicable accounting standards, that it is more likely than not that we may not realize the benefit of all of our deferred tax assets, with the exception of the deferred assets related to certain foreign subsidiaries. Accordingly, we have recorded a valuation allowance against the deferred tax assets that management believes will not be realized. We re-evaluate the positive and negative evidence on a quarterly basis. The valuation allowance increased by $303.7 million, $185.9 million and $171.8 million for the years ended December 31, 2020, 2019 and 2018, respectively, primarily due to the liability related to the sale of future royalties for the year ended December 31, 2020 and additional net operating losses for the years ended December 31, 2019 and 2018.

During the year ended December 31, 2020, we recorded a net provision for income taxes of $2.7 million. This is primarily comprised of $5.8 million of foreign current provision offset by $3.6 million of deferred provision, primarily related to foreign jurisdictions.

As of December 31, 2020, we had federal and state net operating loss carryforwards of $2.0 billion and $1.9 billion, respectively, to reduce future taxable income. As of December 31, 2020, approximately $0.9 billion of our federal net operating loss carryforward can be carried forward indefinitely while the remaining federal net operating loss of $1.1 billion expires at various dates through 2037. As of December 31, 2020, we had federal and state research and development, including Orphan Drug, and state investment tax credit carryforwards of $272.5 million and $43.1 million, respectively, available to reduce future tax liabilities that expire at various dates through 2040. We have a valuation allowance against the net operating loss and credit carryforwards as it is unlikely that we will realize these assets. Ownership changes, as defined in the Internal Revenue Code, including those resulting from the issuance of common stock in connection with our public offerings, may limit the amount of net operating loss and tax credit carryforwards that can be utilized to offset future taxable income or tax liability. The amount of the limitation is determined in accordance with Section 382 of the Internal Revenue Code. We have performed an analysis of ownership changes through December 31, 2020. Based on this analysis, we do not believe that any of our tax attributes will expire unutilized due to Section 382 limitations.

We apply the accounting guidance in ASC 740 related to accounting for uncertainty in income taxes. Our reserves related to income taxes are based on a determination of whether, and how much of, a tax benefit taken by us in our tax filings or positions is more likely than not to be realized following resolution of any potential contingencies present related to tax benefit. We recognize potential interest and penalties related to unrecognized tax benefits in our provision for income taxes. Our reserve related to income taxes, including potential interest and penalties, was not material as of December 31, 2020 and 2019.

Our uncertain income tax positions do not impact our effective tax rate due to our full valuation allowance in the U.S.

As of December 31, 2020, the unremitted earnings of our foreign subsidiaries are not material. We have not provided for U.S. income taxes or foreign withholding taxes on these earnings as it is our current intention to permanently reinvest these earnings outside the U.S. The tax liability on these earnings is also not material. Events that could trigger a tax liability include, but are not limited to, distributions, reorganizations or restructurings and/or tax law changes.

The tax years 2017 through 2020 remain open to examination by major taxing jurisdictions, which are primarily in the U.S., although net operating loss and credit carryforwards generated prior to 2017 may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have or will be used in a future period.

- 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.

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