Income Taxes

12 Months Ended

Dec. 31, 2021

Income Tax Disclosure [Abstract]

Income Taxes

(16) Income Taxes

The domestic and foreign components of (loss) income before income taxes were as follows:

(In thousands)	Year ended December 31,         2021			Year ended December 31,         2020
Domestic	$	(112,530	)	$	(112,371	)
Foreign		3,456			4,704
Total	$	(109,074	)	$	(107,667	)

The benefit (expense) from income taxes in 2021 and 2020 consists of current and deferred federal, state and foreign taxes as follows:

(In thousands)	Year ended December 31,         2021			Year ended December 31,         2020
Current:
Federal	$	230		$	11,770
State		(182	)		(184	)
Foreign		(113	)		(65	)
		(65	)		11,521
Deferred:
Federal		4,412			(478	)
State		711			(3,896	)
Foreign		62			926
		5,185			(3,448	)
Total benefit from income taxes	$	5,120		$	8,073

As of December 31, 2021, Acorda’s U.S. consolidated tax return has a federal NOL carryforward of approximately $112.4 million which can be carried forward indefinitely and, under the Act, limited to 80% of taxable income in any year in which it will be utilized. Biotie Therapies, Inc. (“Biotie US”), which files a separate company federal income tax return has an NOL carryforward of approximately $121.6 million as of December 31, 2021. The Biotie US NOLs are offset entirely by a valuation allowance and are expected to begin to expire in 2026. The Company’s capital loss carryforward of approximately $471.0 million is fully offset with a valuation allowance. The Company had available state NOL carryforwards of approximately $304.8 million and $267.0 million as of December 31, 2021 and 2020, respectively. The state losses are expected to begin to expire in 2027, although not all states conform to the federal carryforward period and occasionally limit the use of net operating losses for a period of time. The Company has $48.2 million of net operating loss carryforwards outside of the U.S. as of December 31, 2021, that begin to expire in 2022 all of which are fully reserved with a valuation allowance.

The Company’s U.S. Federal research and development and orphan drug credit carry-forwards of $35.3 million and $35.3 million as of December 31, 2021 and 2020, respectively, begin to expire in 2022. The Company does not expect to pay U.S. Federal or state cash taxes as they are in a current year taxable loss. The Company generated a tax liability for its operations in Puerto Rico.

The Internal Revenue Code of 1986 contains certain provisions that can limit a taxpayer's ability to utilize net operating loss and tax credit carryforwards in any given year resulting from cumulative changes in ownership interests in excess of 50 percent over a three-year period. These provisions were unchanged by the Act. The Company’s ability to utilize the NOL's may be further limited if it undergoes an ownership change, as defined in section 382 of the Code. This ownership change could be triggered by substantial changes in the ownership of the Company’s outstanding stock, which are generally outside of its control. An ownership change would exist if the stockholders, or group of stockholders, who own or have owned, directly or indirectly, 5% or more of the value of the Company’s stock, or are otherwise treated as 5% stockholders under section 382 and the regulations promulgated thereunder, increase their aggregate percentage ownership of the Company’s stock by more than 50 percentage points over the lowest percentage of the Company’s stock owned by these stockholders at any time during the testing period, which is generally the three-year period preceding the potential ownership change. In the event of an ownership change, section 382 imposes an annual limitation on the amount of post-ownership change taxable income a corporation may offset with pre-ownership change NOL's. If an ownership change were to occur, the annual limitation under Section 382 could result in a material amount of the Company’s NOLs expiring unused. As of December 31, 2021, based on a completed IRC Section 382 analysis, the Company is not subject to a limitation.  

The temporary differences between the book and tax treatment of income and expenses results in deferred tax assets and liabilities, which are included within the consolidated balance sheet. The Company must assess the likelihood that any recorded deferred tax assets will be recovered against future taxable income. To the extent the Company believes it is more likely than not that any portion of the deferred tax asset will not be recoverable, a valuation allowance must be established. To the extent the Company establishes a valuation allowance or changes the allowance in a future period, income tax expense will be impacted. The Company continued to maintain a full valuation allowance against its net U.S. and net foreign deferred tax assets of Biotie at December 31, 2021. The Company had a net increase of $6.8 million of valuation allowance.

The reconciliation of the statutory U.S. federal income tax rate to the Company’s effective income tax rate is as follows:

	Year ended December 31,         2021			Year ended December 31,         2020
U.S. federal statutory tax rate		21.0	%		21.0	%
State and local income taxes		0.4	%		(3.0	)%
Stock option compensation		(0.1	)%		0.3	%
Stock option shortfall		(5.0	)%		(5.8	)%
Research and development and orphan drug credits		—			(0.4	)%
Uncertain tax positions		0.5	%		0.1	%
Other nondeductible and permanent differences		(2.6	)%		(2.5	)%
Valuation allowance, net of foreign tax rate     differential		(9.5	)%		(7.6	)%
Tax effect of NOL carryback - CARES Act		—			5.4	%
Effective income tax rate		4.7	%		7.5	%

The Company’s overall effective tax rate is affected by the increase in the valuation allowance and the forfeitures of equity of which no tax deduction is recorded.    

Provisions have been made for deferred taxes based on the differences between the basis of the assets and liabilities for financial statement purposes and the basis of the assets and liabilities for tax purposes using currently enacted tax rates and regulations that will be in effect when the differences are expected to be recovered or settled. The components of the deferred tax assets and liabilities are as follows:

(In thousands)	December 31, 2021			December 31, 2020
Deferred tax assets:
Net operating loss carryforward	$	77,510		$	61,774
Capital loss carryforward		116,717			106,371
Tax credits		34,332			33,577
Stock based compensation		12,257			17,454
Contingent consideration		12,730			11,975
Employee compensation		1,513			2,638
Rebate and returns reserve		2,290			3,339
Capitalized R&D		10,696			11,564
Derivative liability		9			296
Asset impairment		—			14,384
Other		7,656			9,651
Total deferred tax assets	$	275,710		$	273,023
Valuation allowance		(193,253	)		(186,491	)
Total deferred tax assets net of valuation allowance	$	82,457		$	86,532
Deferred tax liabilities:
Intangible assets		(83,930	)		(88,547	)
Convertible debt		(12,842	)		(16,227	)
Depreciation		400			(803	)
Other		(15	)		(72	)
Total deferred tax liabilities	$	(96,387	)	$	(105,649	)
Net deferred tax liability	$	(13,930	)	$	(19,117	)

The Company follows authoritative guidance regarding accounting for uncertainty in income taxes, which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

The beginning and ending amounts of unrecognized tax benefits reconciles as follows:

(In thousands)	Year ended December 31,         2021			Year ended December 31,         2020
Beginning of period balance	$	7,093		$	7,145
Increases for tax positions taken during a prior period		—			—
Decreases for tax positions taken during a     prior period		(723	)		(52	)
Increases for tax positions taken during the     current period		—			—
	$	6,370		$	7,093

Due to the amount of the Company’s tax credit carryforwards, it has not accrued interest relating to these unrecognized tax benefits. Accrued interest and penalties, however, would be disclosed within the related liabilities lines in the consolidated balance sheet and recorded as a component of income tax expense. All of its unrecognized tax benefits, if recognized, would impact the effective tax rate.

The Company is no longer subject to federal income tax audits for tax years prior to 2018, however, such net operating losses utilized by the Company in years subsequent to 2002 are subject to review.  

The Company was notified during the first quarter of 2021 that it is being audited by the state of Minnesota and Massachusetts for the tax years 2018 and 2019. There have been no proposed adjustments at this stage of the examination.

The Company also has an ongoing state examination in New Jersey for the tax periods, 2015 through 2018. There have been no proposed adjustments at this stage of the examination. The Minnesota examinations for 2016 and 2017 were closed during 2021 with no changes.

The Company is subject to taxation in the United States and various state and foreign jurisdictions. The Company has operations in the United States and Puerto Rico, as well as filing obligations in Finland, Switzerland and Germany. Typically, the period for the statute of limitations ranges from 3 to 5 years, however, this could be extended due to the Company’s NOL carryforward position in a number of its jurisdictions. The tax authorities generally have the ability to review income tax returns for periods where the statute of limitations has previously expired and can subsequently adjust the NOL carryforward or tax credit amounts. Accordingly, the Company does not expect to reverse any portion of the unrecognized tax benefits within the next year.

The beginning and ending amounts of valuation allowances reconcile as follows:

	Balance at							Balance at
(In thousands)	Beginning of Period		Additions		Deductions			End of Period
Valuation allowance for deferred tax assets:
Year ended December 31, 2020	$	177,572		8,964		(45	)	$	186,491
Year ended December 31, 2021	$	186,491		10,028		(3,266	)	$	193,253