INCOME TAXES

The following table summarizes our effective tax rate and income tax expense (benefit) for the three and six months ended June 30, 2018 and 2017 (in thousands except for percentages):



	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Effective tax rate	197		%	38		%	(113		)%	38		%
Income tax expense (benefit)	$	52,556		$	(8,659	)	$	44,556		$	(30,120	)

For the three and six months ended June 30, 2018, we recognized an income tax expense of $52.6 million and $44.6 million, respectively, representing an effective tax rate of 197% and (113)%, respectively. The difference between the 2018 statutory federal tax rate of 21% and the effective tax rates for the three and six months ended June 30, 2018, was primarily attributable to the establishment of a valuation allowance on net deferred tax assets other than refundable alternative minimum tax (“AMT”) credits, the impact of non-deductible stock compensation and other non-deductible expenses, partially offset by a benefit from contingent consideration, state income taxes and orphan drug credits. We have established a valuation allowance on our deferred tax assets other than refundable credits to the extent that our existing taxable temporary differences would not be available as a source of income to realize the benefits of those deferred tax assets. Our valuation allowance on our deferred tax assets, other than refundable AMT credits, increased during the three and six months ended June 30, 2018 primarily because the deferred tax liabilities associated with the CBR business, which was reclassified to discontinued operations for the three and six months ended June 30, 2018, are no longer expected to be available as a source of income to realize the benefits of the net deferred tax assets.

On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act included significant changes to the U.S. corporate income tax system, including a reduction of the federal corporate income tax rate from 35% to 21%, effective January 1, 2018. Deferred tax assets and liabilities are measured using enacted rates in effect for the year in which those temporary differences are expected to be recovered or settled. As a result of the reduction in the federal tax rate from 35% to 21%, we revalued our ending net deferred tax liabilities at December 31, 2017 and recognized a provisional $17.6 million tax benefit. We are still assessing the implications of the 2017 Tax Act on both a federal and state level. Any additional impacts will be recorded as they are identified during the measurement period as provided for in accordance with Staff Accounting Bulletin No. 118, which addresses the application of GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the 2017 Tax Act.

For the three and six months ended June 30, 2017, we recognized an income tax benefit of $8.7 million and $30.1 million, respectively, representing an effective tax rate of 38% and 38%, respectively. The difference between the expected 2017 statutory federal tax rate of 35% and the effective tax rates for the three and six months ended June 30, 2017 was primarily attributable to the impact of state income taxes and the federal research and development tax credit, partially offset by non-deductible stock compensation.

The primary drivers of the increase in tax expense for the three and six months ended June 30, 2018 as compared to the three and six months ended June 30, 2017 is primarily attributable to an increase in valuation allowance on net deferred tax assets other than refundable AMT credits and a decrease in the federal tax benefit attributable to the decrease in the statutory federal rate from 35% to 21%, as well as an increase in nondeductible expenses, partially offset by contingent consideration.