Income Taxes

12 Months Ended

Dec. 31, 2014

Income Taxes

(11)    Income Taxes

As of December 31, 2014 and 2013, interest and penalties related to any uncertain tax positions have been insignificant. The Company recognizes interest and penalties related to uncertain tax positions within the provision for income taxes. The total amount of unrecognized tax benefits that would affect the Company’s effective tax rate if recognized is $1.4 million as of December 31, 2014, as compared to $1.7 million as of December 31, 2013.

The following is a reconciliation of the total amounts of unrecognized tax benefits for the years ended December 31, 2014, 2013 and 2012 (in thousands):

	2014			2013			2012
Beginning uncertain tax benefits	$	1,674		$	1,243		$	997
Current year—increases		1,067			687			294
Current year—decreases for lapses in statutes of limitations		(254	)		(256	)		(48	)
Ending uncertain tax benefits	$	2,487		$	1,674		$	1,243

The Company files income tax returns in the U.S., Ireland and United Kingdom. The Company remains subject to tax examinations in the following jurisdictions as of December 31, 2014:

Jurisdiction	Tax Years
United States (Federal and State)		2011-2014
Ireland		2009-2014
United Kingdom		2013-2014

The Company expects gross liabilities of $439,000 to expire in 2015 based on statutory lapses.

The components of loss from operations before taxes were as follows at December 31, 2014, 2013 and 2012 (in thousands):

	2014			2013			2012
United States	$	(7,331	)	$	(9,234	)	$	1,874
Ireland and United Kingdom		(51,870	)		(160,187	)		(171,942	)
	$	(59,201	)	$	(169,421	)	$	(170,068	)

The (benefit) expense from income taxes shown in the accompanying consolidated statements of operations consists of the following for fiscal 2014, 2013 and 2012 (in thousands):

	2014			2013			2012
Current:
Federal-U.S.	$	660		$	122		$	10,265
State-U.S.		117			118			2,565
Total Current	$	777		$	240		$	12,830
Deferred:
Federal-U.S.		(3,689	)		(4,065	)		(2,803	)
State-U.S.		(226	)		631			(911	)
Ireland and United Kingdom		3,335			(33,106	)		(22,515	)
Change in valuation allowance		(3,034	)		33,106			22,515
Total Deferred	$	(3,614	)	$	(3,434	)	$	(3,714	)
	$	(2,837	)	$	(3,194	)	$	9,116

The (benefit) expense from income taxes differs from the amount computed by applying the statutory income tax rate to income before taxes due to the following for fiscal 2014, 2013 and 2012 (in thousands):

	2014			2013			2012
Benefits from taxes at statutory rate	$	(14,786	)	$	(42,355	)	$	(42,517	)
Rate differential		9,493			18,494			13,249
Change in valuation reserves		(3,034	)		33,106			22,515
Warrant derivative liabilities		(2,706	)		(11,984	)		8,904
Gain on extinguishment of debt		(9,509	)		—			—
Research and development credits		(1,455	)		(2,008	)		(48	)
Tax return to provision adjustments		10,026			125			375
Cumulative translation adjustment		8,061			(280	)		—
Permanent and other		1,073			1,708			6,638
	$	(2,837	)	$	(3,194	)	$	9,116

During 2014, the Company recorded adjustments to its deferred tax accounts related to the impact of foreign exchange rate changes and to reconcile the financial statement accounts to the amounts reported on its filed 2013 foreign tax returns, primarily for the impact of US GAAP to local statutory adjustments. These adjustments were fully offset with valuation allowances based on the Company’s position with respect to the realizability of its recorded deferred tax assets for non-US entities.

The Company is subject to corporate tax rate in Ireland of 25% for non-trading activities and 12.5% for trading activities. For the years ended December 31, 2014, 2013 and 2012, the Company applied the statutory corporate tax rate of 25% for Amarin Corporation plc, reflecting the non-trading tax rate in Ireland. However, for Amarin Pharmaceuticals Ireland Limited, a wholly-owned subsidiary of Amarin Corporation plc, the Company applied the 12.5% Irish trading tax rate.

The income tax effect of each type of temporary difference comprising the net deferred tax asset at December 31, 2014 and 2013 is as follows (in thousands):

	2014			2013
Deferred tax assets:
Net operating losses	$	80,096		$	85,724
Stock based compensation		15,600			11,660
Depreciation		(90	)		(126	)
Tax credits		2,141			1,256
Other reserves and accrued liabilities		1,708			2,900
Gross deferred tax asset		99,455			101,414
Less: valuation allowance		(85,965	)		(88,999	)
	$	13,490		$	12,415

The Company assesses whether it is more-likely-than-not that the Company will realize its deferred tax assets. The Company determined that it was more-likely-than-not that the Irish, UK, and Israeli net operating losses and the related deferred tax assets would not be realized in future periods and a full valuation allowance has been provided for all periods.

The following table reflects the activity in the valuation allowance for the years ended December 31, 2014 and 2013 (in thousands):

	2014			2013
Beginning valuation allowance	$	88,999		$	55,894
Increase as reflected in income tax expense		5,081			32,999
Cumulative translation adjustment		(8,115	)		106
Ending valuation allowance	$	85,965		$	88,999

The Company has combined Irish, UK, and Israeli net operating loss carryforwards of $513.3 million, which do not expire. The total net operating loss carryforwards decreased by approximately $14.9 million from the prior year primarily as a result of the impact of foreign exchange rate changes and adjustments to reconcile the financial statement accounts to the amounts reported on the filed 2013 foreign tax returns, which were in excess of current year taxable losses generated in these countries. In addition, the Company has available U.S. Federal tax credit carryforwards of $6.2 million and state tax credit carryforwards of $1.4 million. These amounts exclude the impact of any unrecognized tax benefits. These carryforwards, which will expire starting between 2020 and 2034 may be used to offset future taxable income, if any.

The Company recognized a tax benefit related to the extension of the research and development credits retroactively enacted during the fourth quarter of 2014 and recorded a benefit of approximately $1.4 million for the credit generated during the year.