Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The Company’s income tax provision was computed based on the federal statutory rate and the state statutory rates, net of the related federal benefit. At December 31, 2018 the Company recorded a tax benefit of $28.3 million as a result of the Merger with Keryx. As part of purchase accounting, the Company recorded a deferred tax liability that is a source of income for which the Company can benefit from its tax attributes. The use of the Company’s tax attributes resulted in a release of the corresponding valuation allowance associated with this benefit. At December 31, 2019 the Company recorded an additional tax benefit of $6.6 million as a result of additional losses incurred during the year. There was no current or deferred income tax expense or benefit for the year ended December 31, 2020 due to the Company’s net losses and increases in its valuation allowance against its deferred tax assets. The provision for income taxes for each of the years ended December 31, 2020, 2019 and 2018 consisted of the following:
Our effective income tax rate differs from the statutory federal income tax rate as follows for the years ended December 31, 2020, 2019 and 2018:
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. When realization of the deferred tax asset is more likely than not to occur, the benefit related to the deductible temporary differences attributable to operations is recognized as a reduction of income tax expense. A valuation allowance is recorded against deferred tax assets if it is more likely than not that some or all of the deferred tax assets will not be realized. The Company cannot be certain that future taxable income will be sufficient to realize its deferred tax assets. Accordingly, the Company has recorded a valuation allowance against the Company’s otherwise recognizable net deferred tax assets. The Company continues to maintain the underlying tax benefits to offset future taxable income and to monitor the need for a valuation allowance based on the profitability of its future operations. The valuation allowance increased by approximately $82.5 million and $64.0 million, during the years ended December 31, 2020 and 2019, respectively. Significant components of the Company’s deferred tax assets and liabilities are as follows:
At December 31, 2020 and 2019, the Company has approximately $0.4 million (after amortization of $1.6 million) and $0.5 million (after amortization of $1.4 million), respectively, of start-up expenses capitalized for income tax purposes with amortization available to offset future federal, state and local income tax. As of December 31, 2020 and 2019, the Company has approximately $1,128.3 million and $1,014.8 million, respectively, of federal NOL carry-forwards which expire through 2037. Included in the $1,128.3 million of federal NOLs are losses of $546.4 million that will carry forward indefinitely as a result of the Tax Cuts and Jobs Act. Additionally, at December 31, 2020 and 2019, the Company has approximately $1,620.7 million and $1,374.0 million, respectively, of state NOL carry-forwards which expired through 2040. The Company also has approximately $2.4 million of federal research and development tax credit carryforwards which expire through 2040 and $2.8 million of state research and development tax credit carryforwards which expire through 2035. Under the provisions of the Internal Revenue Code, the net operating losses and tax credit carry-forwards are subject to review and possible adjustment by the Internal Revenue Service and state tax authorities. Net operating losses and tax credit carryforwards may become subject to an annual limitation under Internal Revenue Code 382 and 383 if there is more than a 50% change in ownership of the stockholders that own 5% or more of the Company’s outstanding stock over a three-year period. The Company completed an evaluation of its ownership changes and concluded that an ownership change did occur on December 12, 2018 for both Akebia and Keryx in connection with the Merger. As a consequence of this ownership change, the Company’s NOL’s and tax credit carryforwards allocable to the tax periods preceding the ownership change became subject to limitation under Section 382. The Company reduced its associated deferred tax assets by $44.9 million as a result of the limitation. The Company files income tax returns in the U.S. federal and various state and local jurisdictions. For federal and state income tax purposes, the 2019, 2018 and 2017 tax years remain open for examination under the normal three-year statute of limitations. The statute of limitations for income tax audits in the United States will commence upon utilization of net operating losses and will expire three years from the filing of the tax return the loss was utilized on. There was no accrual for uncertain tax positions or for interest and penalties related to uncertain tax positions for 2020, 2019 and 2018. The Company does not believe that there will be a material change in its unrecognized tax positions over the next twelve months. All of the unrecognized tax benefits, if recognized, would be offset by the valuation allowance.
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