Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes |
14. Income Taxes The components of the Company’s loss before income taxes were as follows (in thousands):
The components of the Company’s income tax provision were as follows (in thousands):
The Company has incurred net operating losses since inception. The Company has not reflected any benefit of such net operating loss carryforwards in the accompanying financial statements. The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding the realization of such assets. The effective tax rate of our provision for income taxes differs from the federal statutory rate as follows:
The tax effect of temporary differences that give rise to significant portions of the deferred tax assets is presented below (in thousands):
As of December 31, 2020 and 2019, the Company had approximately $750.2 million and $549.9 million of federal net operating loss carryforwards available to reduce future taxable income that will begin to expire in 2032. As of December 31, 2020 and 2019, the Company had approximately $616.8 million and $520.2 million of state net operating loss carryforwards available to reduce future taxable income that will begin to expire in 2031. As of December 31, 2020 and 2019, the Company had federal research tax credit carryforwards of $17.7 million and $11.7 million available to reduce future tax liabilities that will begin to expire in 2030. As of December 31, 2020 and 2019, the Company had state research credit carryforwards of $34.5 million and $25.5 million available to reduce future tax liabilities that will be carried forward indefinitely. As of December 31, 2020 and 2019, the Company had federal Orphan Drug Credits of $179.8 million and $160.0 million available to reduce future tax liabilities that will begin to expire in 2031. The Company’s ability to use net operating loss and tax credit carryforwards to reduce future taxable income and liabilities may be subject to annual limitations pursuant to Internal Revenue Code Sections 382 and 383 as a result of ownership changes in the past and future. As a result of ownership changes in 2012 and 2011, $3.6 million of federal net operating loss carryforwards, $3.6 million of state net operating loss carryforwards, and $0.2 million of federal tax credits are permanently limited. Deferred tax assets for net operating losses and tax credits have been reduced and a corresponding adjustment to the valuation allowance has been recorded. Based upon information available through the reporting date, the Company is not aware of any other changes in ownership that would result in material limitations under Section 382 as of December 31, 2020. The valuation allowance increased by $74.3 million and $125.1 million during the year ended December 31, 2020 and 2019, respectively. The Company recorded unrecognized tax benefits for uncertainties in income taxes. A reconciliation of the Company’s unrecognized tax benefits follows (in thousands):
The entire amount of the unrecognized tax benefits would not impact the Company’s effective tax rate if recognized. The Company has elected to include interest and penalties as a component of tax expense. During the years ended December 31, 2020 and 2019, the Company did not recognize accrued interest and penalties related to unrecognized tax benefits. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease during the next year. It is the Company’s intention to reinvest the earnings of its non-U.S. subsidiaries in their operations. As of December 31, 2020, the Company had not made a provision for any incremental foreign withholding taxes on approximately $6.3 million of the excess of the amount of net income for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration. If these earnings were repatriated to the U.S., the deferred tax liability associated with these temporary differences would result in a nominal amount of withholding taxes. The Company files income tax returns in the U.S. federal, California, and other state tax jurisdictions. The federal and state income tax returns from inception to December 31, 2020 remain subject to examination.
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