Income Taxes

12 Months Ended

Dec. 31, 2011

Income Taxes [Abstract]

Income Taxes

17.   Income Taxes

For the year ended December 31, 2011, the Company incurred a net loss for tax purposes and recognized a full valuation allowance against deferred taxes.  In 2011, the Company recognized a $1.1 million income tax benefit, consisting of (i) $0.7 million related to tax legislation that allowed the Company to claim a refund for a portion of its unused pre-2006 research tax credits and (ii) $0.4 million in connection with the net tax effect of the change in the Company’s unrealized gain (loss) on “available for sale” marketable securities, which is included in other comprehensive income (loss).

For the year ended December 31, 2010, the Company incurred a net loss for tax purposes and recognized a full valuation allowance against deferred taxes.  No provision or benefit for income taxes was recognized by the Company in 2010.

For the year ended December 31, 2009, the Company incurred a net loss for tax purposes and recognized a full valuation allowance against deferred taxes.  In 2009, the Company recognized a $4.1 million income tax benefit, consisting of (i) $2.7 million resulting from tax legislation that allowed the Company to claim a refund of U.S. federal alternative minimum tax (“AMT”) that the Company paid in connection with its 2007 U.S. federal income tax return, (ii) $0.7 million resulting from tax legislation that allowed the Company to claim a refund for a portion of its unused pre-2006 research tax credits on its 2009 U.S. federal income tax return, and (iii) $0.7 million in connection with the net tax effect of the Company’s unrealized gain on “available-for-sale” marketable securities, which is included in other comprehensive income in 2009.

The tax effect of temporary differences, net operating loss carry-forwards, and research and experimental and other tax credit carry-forwards as of December 31, 2011 and 2010 is as follows:

		2011	2010
Deferred tax assets:
	Net operating loss carry-forward	$282,480	$243,893
	Fixed assets	14,847	13,600
	Deferred revenue	120,490	70,443
	Deferred compensation	47,092	39,120
	Research and experimental and other tax credit carry-forwards	67,734	45,588
	Capitalized research and development costs	31,371	38,865
	Other	15,956	10,863
		579,790	462,372
Deferred tax liabilities:
	Convertible senior notes	(1,428)
Net deferred tax assets		578,542
Valuation allowance		(578,542)	(462,372)
		--	--

The Company’s valuation allowance increased by $116.2 million in 2011, due primarily to increases in the Company’s net operating loss carry-forward and tax credit carry-forwards and the full recognition of the $165.0 million up-front payment received from Astellas in 2010 as taxable income in 2011.  The Company’s valuation allowance increased by $63.0 million in 2010, due primarily to increases in the net operating loss carry-forward and tax credit carry-forwards.

The Company is primarily subject to U.S. federal and New York State income taxes. The difference between the Company’s effective income tax rate and the U.S federal statutory rate of 35% is primarily attributable to an increase in the deferred tax valuation allowance.  In 2011 and early 2012, U.S. federal tax authorities concluded examinations of the Company’s 2007, 2008, and 2009 federal income tax returns.  The Company’s 2010 federal income tax return is currently being examined by the U.S. federal tax authorities.  In addition, tax years subsequent to 2007 remain open to examination by New York State tax authorities.

As of December 31, 2011 and 2010, the Company had no accruals for interest or penalties related to income tax matters.

As of December 31, 2011, the Company had available for tax purposes unused net operating loss carry-forwards of $800.2 million which will expire in various years from 2018 to 2031 and included $96.2 million of net operating loss carry-forwards related to exercises of Nonqualified Stock Options and disqualifying dispositions of Incentive Stock Options, the tax benefit from which, if realized, will be credited to additional paid-in capital. The Company's research and experimental and other tax credit carry-forwards expire in various years from 2012 to 2031.  Under the Internal Revenue Code and similar state provisions, substantial changes in the Company’s ownership have resulted in an annual limitation on the amount of net operating loss and tax credit carry-forwards that can be utilized in future years to offset future taxable income.  This annual limitation may result in the expiration of net operating losses and tax credit carry-forwards before utilization.

The following table summarizes the gross amounts of unrecognized tax benefits at the beginning and end of 2011 and 2010:

	2011	2010
Balance as of January 1	$12,819	$         -
Gross increases related to current year tax positions	2,192	3,550
Gross increases related to prior year tax positions		9,269
Gross decreases due to settlements	(9,415)	_____
Balance as of December 31	$5,596	$12,819

In 2011, the gross decrease in unrecognized tax benefits related to prior year tax positions was primarily due to the conclusion of examinations of the Company’s 2007, 2008, and 2009 federal income tax returns by U.S. federal tax authorities.  In 2010, the gross increases in unrecognized tax benefits related to prior year tax positions was primarily due to the Company’s calculations of certain pre-2010 tax credits.  Due to the amounts of the Company’s net operating loss carry-forward and tax credit carry-forwards, the Company has not accrued interest or penalties related to these unrecognized tax benefits.  In addition, unrecognized tax benefits at December 31, 2011 and 2010, if recognized, would not affect the Company’s effective tax rate since the adjustments to deferred tax assets would be fully offset by adjustments to the Company’s valuation allowance.  For the year ended December 31, 2009, income tax positions that were deemed uncertain under the recognition thresholds and measurement attributes prescribed in FASB authoritative guidance were not material.