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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Amneal is a limited liability company that is treated as a partnership for U.S. federal and most applicable state and local income tax purposes. As a partnership, Amneal is not subject to U.S. federal and certain state and local income taxes. Any taxable income or loss generated by Amneal is passed through to and included in the taxable income or loss of its members, including the Company, on a pro rata basis subject to applicable tax regulations. The Company is subject to U.S. federal income taxes, in addition to state and local income taxes with respect to its allocable share of any taxable income or loss of Amneal, as well as any stand-alone income or loss generated by the Company. Amneal provides for income taxes in the various foreign jurisdictions in which it operates.
The Company recorded a deferred tax asset for its outside basis difference in its investment in Amneal on May 4, 2018.  The Company recorded a deferred tax asset related to the net operating loss of Impax from January 1, 2018 through May 4, 2018 as well as certain federal and state credits and interest carryforwards of Impax that were attributable to the Company.
The Company records its valuation allowances against its deferred tax assets (“DTAs”) when it is more likely than not that all or a portion of a DTA will not be realized. The Company routinely evaluates the realizability of its DTAs by assessing the likelihood that its DTAs will be recovered based on all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, estimates of future taxable income, tax planning strategies and results of operations. Estimating future taxable income is inherently uncertain and requires judgment. In projecting future taxable income, the Company considers its historical results and incorporates certain assumptions, including projected new product launches, revenue growth, and operating margins, among others.
A valuation allowance, if needed, reduces DTAs to the amount expected to be realized. When determining the amount of net DTAs that are more likely than not to be realized, the Company assesses all available positive and negative evidence. This evidence includes, but is not limited to, prior earnings history, projected future earnings, carryback and carry-forward periods and the feasibility of ongoing tax strategies that could potentially enhance the likelihood of the realization of a DTA. The weight given to the positive and negative evidence is commensurate with the extent the evidence may be objectively verified. As such, it is generally difficult for positive evidence regarding projected future taxable income to outweigh objective negative evidence of recent financial reporting losses.
The Company established a valuation allowance based upon all available objective and verifiable evidence both positive and negative, including historical levels of pre-tax income (loss) both on a consolidated basis and tax reporting entity basis, legislative developments, expectations and risks associated with estimates of future pre-tax income, and prudent and feasible tax planning strategies. Since first establishing a valuation allowance, the Company has continued to estimate that it has generated a cumulative consolidated three year pre-tax loss through December 31, 2021. As a result of the analysis through December 31, 2021, the Company determined that it is more likely than not that it will not realize the benefits of its gross DTAs and therefore maintained its valuation allowance. As of December 31, 2021, this valuation allowance was $417 million, and it reduced the carrying value of these gross DTAs, net of the impact of the reversal of taxable temporary differences, to zero.
In connection with the acquisition of Impax, the Company entered into a tax receivable agreement (“TRA”) for which it is generally required to pay the other holders of Amneal Common Units 85% of the applicable tax savings, if any, in U.S. federal and state income tax that it is deemed to realize as a result of certain tax attributes of their Amneal Common Units sold to the Company (or exchanged in a taxable sale) and that are created as a result of (i) the sales of their Amneal Common Units for shares of Class A Common Stock and (ii) tax benefits attributable to payments made under the TRA.  In conjunction with the
valuation allowance recorded on the DTAs, the Company reversed the accrued TRA liability of $193 million, which resulted in a gain recorded in other (expense) income, net for the year ended December 31, 2019. As of December 31, 2021, no additional TRA liability has been accrued.
The timing and amount of any payments under the TRA may vary, depending upon a number of factors including the timing and number of Amneal common units sold or exchanged for the Company's Class A Common Stock, the price of the Company's Class A Common Stock on the date of sale or exchange, the timing and amount of the Company's taxable income, and the tax rate in effect at the time of realization of the Company's taxable income (the TRA liability is determined based on a percentage of the corporate tax savings from the use of the TRA's attributes). Further sales or exchanges occurring subsequent to December 31, 2021 could result in future Amneal tax deductions and obligations to pay 85% of such benefits to the holders of Amneal Common Units. These obligations could be incremental to and substantially larger than the approximate $206 million contingent liability as of December 31, 2021 described below. Under certain conditions, such as a change of control or other early termination event, the Company could be obligated to make TRA payments in advance of tax benefits being realized.

As noted above, the Company has determined it is more-likely-than-not we will be unable to utilize all of its DTAs subject to TRA; therefore, as of December 31, 2021, the Company has not recognized the contingent liability under the TRA related to the tax savings it may realize from common units sold or exchanged. If utilization of these DTAs becomes more-likely- than-not in the future, at such time, these TRA liabilities (which amounted to approximately $206 million at December 31, 2021, as a result of basis adjustments under Internal Revenue Code Section 754) will be recorded through charges in the Company’s consolidated statements of operations. However, if the tax attributes are not utilized in future years, it is reasonably possible no amounts would be paid under the TRA. Should the Company determine that a DTA with a valuation allowance is realizable in a subsequent period, the related valuation allowance will be released and if a resulting TRA payment is determined to be probable, a corresponding TRA liability will be recorded.
On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act is an emergency economic stimulus package in response to the COVID-19 pandemic which, among other things, includes provisions relating to income and non-income-based tax laws. As a result of the CARES Act, the Company carried back approximately $345 million in NOLs generated in 2018 to prior taxable income years. In carrying back the 2018 loss to an earlier year, the Company is able to benefit the losses at a 35% tax rate rather than the current U.S. corporate tax rate of 21%. Accordingly, the Company recorded a discrete income tax benefit of $110 million for the year ended December 31, 2020. During July 2020, the Company received a cash refund for $106 million of the $110 million NOL carryback, plus interest of approximately $4 million, with an additional $2 million received in February of 2021. The remainder of the NOL carryback is expected to be received before December 31, 2022.

For the years ended December 31, 2021, 2020 and 2019 the Company's provision for (benefit from) income taxes and effective tax rates were $11 million and 35.7%, $(104) million and 291.7%, and $383 million and 174%, respectively.  

The change in income taxes for the year ended December 31, 2021 compared to the prior year was primarily associated with the $110 million benefit from the carryback of U.S. Federal DTAs under the CARES Act for the year ended December 31, 2020 described above. The change in income taxes for the year ended December 31, 2020 compared to the prior year was primarily due to the provision to record the valuation allowance against the Company’s DTAs. 

The Company and its subsidiaries file income tax returns in the U.S. federal, and various state, local and foreign jurisdictions. The Company is currently under income tax audit by IRS for the 2018 tax return, the year when the Company filed the CARES Act carryback. Impax's federal tax filings for the 2015, 2016 and 2017 tax years are currently under audit, and the IRS statute of limitations has been extended for these Impax federal tax returns until 2023. If there were adjustments to the attributes of Impax for any of the 2015, 2016 or 2017 tax years, they could impact the carryforward losses at the Company, which is the successor in interest to Impax. The Amneal partnership was audited for the tax year ended December 31, 2015 without any adjustments to taxable income. Income tax returns are generally subject to examination for a period of three years in the U.S. However, Impax’s 2013 and 2014 tax years remain open to adjustment to the extent of the 2018 NOL carryback as described above. Neither the Company nor any of its other affiliates is currently under audit for state income tax.
The components of the Company's income (loss) before income taxes were as follows (in thousands):
 Years Ended December 31,
 202120202019
United States$(10,540)$(99,966)$(291,608)
International41,906 64,186 71,366 
Total income (loss) before income taxes$31,366 $(35,780)$(220,242)
The provision for (benefit from) income taxes was comprised of the following (in thousands):
 Years Ended December 31,
 202120202019
Current:   
Domestic$1,311 $(113,754)$(2,760)
Foreign9,885 9,396 14,375 
Total current income tax11,196 (104,358)11,615 
Deferred:
Domestic— — 365,546 
Foreign— — 6,170 
Total deferred income tax— — 371,716 
Total provision for (benefit from) income tax$11,196 $(104,358)$383,331 
The effective tax rate was as follows:
 Years Ended December 31,
 202120202019
Federal income tax at the statutory rate21.0 %21.0 %21.0 %
State income tax, net of federal benefit4.2 (2.0)(15.1)
Income not subject to tax (losses for which no benefit has been recognized)6.4 (29.8)(25.8)
Foreign rate differential17.3 (7.1)(5.5)
Permanent book/tax differences4.8 — — 
TRA revaluation— — 18.4 
CARES Act— 139.9 — 
Valuation allowance(13.5)163.2 (168.2)
Other(4.5)6.5 1.2 
Effective income tax rate35.7 %291.7 %(174.0)%

The change in effective income tax rate for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to the benefit to record the NOL carryback resulting from the CARES Act.

The change in effective income tax rate for the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily due to the benefit to record the NOL carryback resulting from the CARES Act in 2020, and the provision to record the valuation allowance against the Company’s DTAs in 2019.
The following table summarizes the changes in the Company's valuation allowance on deferred tax assets (in thousands):
 Years Ended December 31,
 202120202019
Balance at the beginning of the period$422,812 $470,193 $41,235 
(Decrease) increase due to net operating losses and temporary differences(10,828)(54,971)424,692 
Increase due to stock-based compensation 5,513 — — 
Increase (decrease) recorded against additional paid-in capital2,842 (1,631)4,266 
(Decrease) increase recorded against other comprehensive income(3,751)9,221 — 
Balance at the end of the period$416,588 $422,812 $470,193 
At December 31, 2021, the Company had approximately $107 million of foreign net operating loss carry forwards.  These net operating loss carry forwards will partially expire, if unused, between 2029 and 2030.  At December 31, 2021, the Company had approximately $227 million of federal and $172 million of state net operating loss carry forwards. The federal net operating losses are generally allowed to be carried forward indefinitely, and the majority of the state net operating losses will expire, if unused, between 2035 and 2041.  At December 31, 2021, the Company had approximately $12 million of federal R&D credit carry forwards and $10 million of state R&D credit carry forwards.  The majority of the federal R&D credit carry forwards will expire if unused, between 2034 and 2041 and the majority of state credits can be carried forward indefinitely.
The tax effects of temporary differences that give rise to deferred taxes were as follows (in thousands):
 December 31,
2021		December 31,
2020
Deferred tax assets:  
Partnership interest in Amneal$200,872 $212,402 
Projected imputed interest on TRA25,615 25,539 
Net operating loss carryforward73,861 77,255 
IRC Section 163(j) interest carryforward46,407 45,425 
Capitalized costs1,300 1,502 
Accrued expenses498 410 
Stock-based compensation 5,513 — 
Intangible assets28,380 28,400 
Tax credits and other34,142 31,879 
Total deferred tax assets416,588 422,812 
Valuation allowance(416,588)(422,812)
Net deferred tax assets$— $— 
The Company updated its analysis with respect to stock-based compensation. Accordingly, the Company recorded a deferred tax asset for its allocable share of stock-based compensation cost that would ordinarily result in future tax deductions when the compensation vests. As stock options are exercised, the deferred tax asset recorded is reversed, and generally a current tax benefit is taken unless it would create additional net operating losses, which would then be evaluated for the potential need for a valuation allowance.
The Company's Indian subsidiaries are primarily export-oriented and in some cases are eligible for certain limited income tax holiday benefits granted by the government of India for export activities conducted within Special Economic Zones, or SEZs, for periods of up to 15 years. Amneal’s SEZ income tax holiday benefits are currently scheduled to expire in whole or in part during the years 2028 to 2030. Indian profits ineligible for SEZ benefits are subject to corporate income tax at the rate of 34.9%. In addition, all Indian profits, including those generated within SEZs, are subject to the Minimum Alternate Tax (MAT), at the rate of 21.5%.  The Company established a full valuation allowance against its deferred tax assets in India due to its reliance on intercompany sales for U.S. distribution.  For the years ended December 31, 2021, 2020 and 2019, the effect of income tax holidays granted by the Indian government reduced the overall provision for income taxes/ increased the benefit from income taxes and increased net income/ decreased net loss by approximately $3 million, $3 million, and $4 million, respectively.
The Company accounts for income tax contingencies using the benefit recognition model. The Company will recognize a benefit if a tax position is more likely than not to be sustained upon audit, based solely on the technical merits. The benefit is measured by determining the amount that is greater than 50% likely of being realized upon settlement, presuming that the tax position is examined by the appropriate taxing authority that has full knowledge of all relevant information. The amount of unrecognized tax benefits at December 31, 2021, 2020, and 2019, was $5 million, $5 million and $6 million, respectively, of which $5 million, $5 million and $6 million would impact the Company’s effective tax rate if recognized. The Company currently does not believe that the total amount of unrecognized tax benefits will increase or decrease significantly over the next 12 months. Interest expense related to income taxes is included in provision for (benefit from) income taxes. Net interest expense (benefit) related to unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019 was $0.1 million $(0.3) million, and $0.4 million, respectively. Accrued interest expense as of December 31, 2021, 2020, and 2019 was $0.8 million, $0.8 million, and $1.0 million, respectively. Income tax penalties are included in provision for (benefit from) income taxes. Accrued tax penalties as of December 31, 2021, 2020 and 2019 were immaterial.
A rollforward of unrecognized tax benefits for the years ended December 31, 2021, 2020 and 2019 is as follows (in thousands):
 Years Ended December 31,
 202120202019
Unrecognized tax benefits at the beginning of the period$5,368 $6,176 $7,206 
Gross change for current period positions131 125 83 
Gross change for prior period positions(10)443 (732)
Decrease due to settlements and payments— (1,376)(381)
Unrecognized tax benefits at the end of the period$5,489 $5,368 $6,176 
In India, the income tax return for fiscal year ending March 31, 2018 is currently being reviewed by tax authorities as part of the normal procedures, and the Company is not expecting any material adjustments. There are no other income tax returns in the process of examination, administrative appeal, or litigation. Income tax returns are generally subject to examination for a period of 3 years, 5 years, 2 years and 4 years after the tax year in India, Switzerland, United Kingdom and Ireland, respectively.
Applicable foreign taxes (including withholding taxes) have not been provided on the approximately $93 million of undistributed earnings of foreign subsidiaries as at December 31, 2021. These earnings have been and currently are considered to be indefinitely reinvested. Quantification of additional taxes that may be payable on distribution is not practicable.
The Company continuously monitors government proposals to make changes to tax laws, including comprehensive tax reform in the United States and proposed legislation in certain foreign jurisdictions resulting from the adoption of the Organization for Economic Cooperation and Development policies. If legislative changes are enacted in other countries, any of these proposals may include increasing or decreasing existing statutory tax rates. A change in statutory tax rates in any country would result in the revaluation of Amneal’s deferred tax assets and liabilities related to that particular jurisdiction in the period in which the new tax law is enacted.