13. Income Taxes

The Company’s effective tax rate for the three months ended March 31, 2017 was 24.6% compared to 36.0% for the corresponding period in the prior year. For the current three month period, the effective tax rate was lower than the U.S. statutory tax rate of 34% primarily due to lower statutory tax rates in foreign jurisdictions. For the three month period ended March 31, 2016, the effective tax rate was higher than the U.S. statutory tax rate mainly due to the tax treatment of contingent consideration expense.

At December 31, 2016, the Company had net operating loss carryforwards of approximately $48,550,000 in the U.S., net operating loss carryforwards of approximately €2,287,000 (approximately $2,407,000) in Germany, federal business tax credit carryforwards of $1,745,000 and state business tax credit carryforwards of approximately $442,000 available to reduce future domestic income taxes, if any. The net operating loss and business tax credits carryforwards will continue to expire at various dates through December 2036. The net operating loss and business tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may be limited in the event of certain changes in the ownership interest of significant stockholders.

As of December 31, 2016, the Company concluded that realization of deferred tax assets in the United States beyond December 31, 2016 is not more likely than not, and as such, the Company maintained a valuation allowance against its net U.S. deferred tax assets, after considerations for deferred tax liabilities which will not be utilized as a future source of income.

ASU 2016-09 states that previously unrecognized excess tax benefits should be recognized on a modified retrospective basis. As such, the Company increased its U.S. federal and state net operating loss carryovers by approximately $5.3 million for previously unrecognized excess tax benefits outstanding as of the beginning of the period. Since the Company maintains a full valuation allowance on its net U.S. deferred tax assets, the Company recorded a corresponding increase to the valuation allowance and the impact of adopting ASU 2016-09 on retained earnings is zero.

In the first quarter of 2017, Repligen Germany GmbH was subject to a tax examination for the years 2012 through 2015. The examination was general in nature, covering all aspects of the subsidiary’s operations prior to the Atoll Acquisition on April 1, 2016. There were no material findings as a result of this examination, and the examination was closed by the German tax authorities.

The Company’s tax returns are subject to examination by federal, state and international taxing authorities for the following periods:


Jurisdiction		Fiscal years subject to examination
United States – federal and state		2013-2016
Sweden		2011-2016
Germany		2016