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Income Taxes
12 Months Ended
Dec. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes 
In 2016, we changed our jurisdiction of incorporation from France to Ireland by merging with and into our wholly owned Irish subsidiary. Information about the reincorporation was included in the definitive proxy statement filed with the Securities and Exchange Commission on July 5, 2016. Accordingly, beginning in 2016, the Company reports the Irish tax jurisdiction as our Domestic jurisdiction. For periods prior to 2016, the French tax jurisdiction was the Domestic jurisdiction.
The components of income (loss) before income taxes for the years ended December 31, are as follows: 
Income (Loss) Before Income Taxes:
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
Ireland
 
$
(3,123
)
 
$
(22,866
)
 
$
(29,469
)
United States
 
92,754

 
32,786

 
100,552

France
 
3,029

 
(19,638
)
 
6,622

Total income (loss) before income taxes
 
$
92,660

 
$
(9,718
)
 
$
77,705

 
The income tax provision consists of the following for the years ended December 31:  
 Income Tax Provision:
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
Current:
 
 

 
 

 
 

United States - Federal
 
$
18,064

 
$
30,738

 
$
33,289

United States - State
 
331

 
1,081

 
970

France
 
265

 
5,267

 
1,657

Total current
 
18,660

 
37,086

 
35,916

 
 
 
 
 
 
 
Deferred:
 
 

 
 

 
 

United States - Federal
 
4,686

 
(6,443
)
 
504

United States - State
 
1,043

 
(23
)
 
1,234

France
 

 
938

 
(1,747
)
Total deferred
 
5,729

 
(5,528
)
 
(9
)
 
 
 
 
 
 
 
Income tax provision
 
$
24,389

 
$
31,558

 
$
35,907

 
The reconciliation between Domestic income taxes at the statutory rate and the Company’s provision (benefit) for income taxes is as follows for the years ended December 31: 
 Reconciliation to Effective Income Tax Rate:
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
Statutory tax rate (1)
 
12.5
 %
 
12.5
 %
 
33.3
 %
Differences in international tax rates
 
22.2
 %
 
(31.9
)%
 
11.0
 %
Nondeductible changes in fair value of contingent consideration
 
(11.6
)%
 
(165.0
)%
 
11.9
 %
Income tax deferred charge
 
 %
 
(9.7
)%
 
1.3
 %
Change in valuation allowances
 
(0.7
)%
 
11.8
 %
 
(9.6
)%
Nondeductible stock based compensation
 
(0.4
)%
 
(14.8
)%
 
1.3
 %
Cross border merger
 
0.3
 %
 
(100.6
)%
 
 %
Unrealized tax benefits
 
1.4
 %
 
(15.2
)%
 
0.4
 %
State and local taxes (net of federal)
 
0.3
 %
 
(9.6
)%
 
1.5
 %
Change in U.S. tax law
 
3.8
 %
 
 %
 
 %
Other
 
(1.5
)%
 
(2.3
)%
 
(4.9
)%
Effective income tax rate
 
26.3
 %

(324.8
)%

46.2
 %
 
 
 
 
 
 
 
Income tax provision (benefit) - at statutory tax rate(1)
 
$
11,582

 
$
(1,215
)
 
$
25,876

Differences in international tax rates
 
20,557

 
3,097

 
8,547

Nondeductible changes in fair value of contingent consideration
 
(10,779
)
 
16,036

 
9,249

Income tax deferred charge
 

 
938

 
980

Change in valuation allowances
 
(610
)
 
(1,143
)
 
(7,425
)
Nondeductible stock based compensation
 
(375
)
 
1,436

 
1,004

Cross-border merger
 
265

 
9,773

 

Unrecognized tax benefits
 
1,296

 
1,475

 
290

State and local taxes (net of federal)
 
252

 
934

 
1,170

Change in U.S. tax law
 
3,513

 

 

Other
 
(1,312
)
 
227

 
(3,784
)
Income tax provision - at effective income tax rate
 
$
24,389

 
$
31,558

 
$
35,907


(1) The statutory rate reflects the Irish statutory tax rate of 12.5% for fiscal 2017 and 2016, and the French statutory tax rate of 33.3% for fiscal 2015.
In 2017, the income tax provision decreased by $7,169 when compared to the same period in 2016. The decrease in the income tax provision was primarily driven by a significant reduction in the amount of taxable income recorded in the United States in 2017, when compared to 2016. In 2017, the Company did not incur any significant additional income tax provision associated with the Cross-Border Merger as a majority of the transaction was completed in 2016. In 2017, the Company recorded $3,513 of tax provision associated with the Tax Cuts and Jobs Act signed into law in the United States in December of 2017.

In 2016, the income tax provision decreased by $4,349 when compared to the same period in 2015. The primary reason for the decrease in the income tax provision is a substantially lower level of pre-tax book income in the United States and France. Increases in the amount of nondeductible expenses due to changes in the fair value of contingent consideration and a reduced amount of income tax benefit from the release of valuation allowances partially offset the income tax benefit from the reduced amount of pre-tax book income in 2016, when compared to 2015. The Company also recorded $9,773 of income tax provision in 2016 related to the cross-border merger.
Unrecognized Tax Benefits
The Company or one of our subsidiaries files income tax returns in Ireland, France, United States and various states. With few exceptions, the Company is no longer subject to Irish, French, US Federal, and state and local examinations for years before 2013. The Internal Revenue Service (IRS) commenced an examination of the Company’s US income tax return for 2015 in the 4th quarter of 2016 that is anticipated to be completed by the end of 2018.
The following table summarizes the activity related to the Company’s unrecognized tax benefits for the twelve months ended December 31:
 Unrecognized Tax Benefit Activity
 
2017
 
2016
 
2015
 
 
 
 
 
 
 
Balance at January 1:
 
$
1,686

 
$
448

 
$

Additions based on tax positions related to the current year
 
2,268

 
1,578

 
448

Reductions for tax positions of prior years
 

 
(340
)
 

Balance at December 31:
 
$
3,954

 
$
1,686

 
$
448


It is reasonably possible that within the next twelve months, as a result of activities performed in various jurisdictions, that the unrecognized tax benefits could change by up to $600. Interest and penalties could change by up to $500.
At December 31, 2017, 2016, and 2015, there are $3,349, $1,565, and $291 of unrecognized tax benefits that if recognized would affect the annual effective tax rate.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2017, 2016, and 2015, the Company recognized approximately $304, $26, and $0 in interest and penalties. The Company had approximately $331, and $26 for the payment of interest and penalties accrued at December 31, 2017, and 2016, respectively.
Deferred Tax Assets (Liabilities) 
Deferred income tax provisions reflect the effect of temporary differences between consolidated financial statement and tax reporting of income and expense items. The net deferred tax assets/liabilities at December 31, 2017 and 2016 resulted from the following temporary differences: 
 Net Deferred Tax Assets and Liabilities:
 
2017
 
2016
 
 
 
 
 
Deferred tax assets:
 
 

 
 

Net operating loss carryforwards
 
$
9,831

 
$
11,566

Amortization
 
7,563

 

Stock based compensation
 
4,375

 
5,012

Fair value royalty agreements
 
635

 
3,386

Fair value contingent consideration
 
870

 
2,152

Other
 
406

 
583

Gross deferred tax assets
 
23,680

 
22,699

 
 
 
 
 
Deferred tax liabilities:
 
 

 
 

Amortization
 
(2,419
)
 
(4,349
)
Accounts receivable
 
(936
)
 
(3,319
)
Prepaid expenses
 
(1,094
)
 

Gross deferred tax liabilities
 
(4,449
)

(7,668
)
 
 
 
 
 
Less: valuation allowances
 
(15,354
)
 
(7,599
)
 
 
 
 
 
Net deferred tax assets
 
$
3,877

 
$
7,432


At December 31, 2017, the Company had $39,574 of net operating losses in Ireland and $698 of net operating losses in France that do not have an expiration date and $11,190 of net operating losses in the United States that expire 2034 through 2035. The US net operating losses were acquired as part of the acquisition of FSC. A valuation allowance is recorded if, based on the weight of available evidence, it is more likely than not that a deferred tax asset will not be realized. This assessment is based on an evaluation of the level of historical taxable income and projections for future taxable income. For the year ended December 31, 2017 the Company recorded $4,963 of valuation allowances related to Irish net operating losses, $233 of valuation allowances related to French net operating losses and $309 of valuation allowances on U.S. net operating losses. The U.S. net operating losses are subject to an annual limitation as a result of the FSC acquisition under Internal Revenue Code Section 382 and will not be fully utilized before they expire.
We recorded a valuation allowance against all of our net operating losses in Ireland and France as of both December 31, 2017, and December 31, 2016. We intend to continue maintaining a full valuation allowance on the Irish and French net operating losses until there is sufficient evidence to support the reversal of all or some portion of these allowances.
At December 31, 2017, the Company has unremitted earnings of $3,038 outside of Ireland as measured on a US GAAP basis. Whereas the measure of earnings for purposes of taxation of a distribution may be different for tax purposes, these earnings, which are considered to be invested indefinitely, would become subject to income tax if they were remitted as dividends or if the Company were to sell our stock in the subsidiaries, net of any prior income taxes paid. It is not practicable to estimate the amount of deferred tax liability on such earnings, if any.
Research and Development Tax Credits Receivable 
The French and Irish governments provide tax credits to companies for spending on innovative R&D. These credits are recorded as an offset of R&D expenses and are credited against income taxes payable in years after being incurred or, if not so utilized, are recoverable in cash after a specified period of time, which may differ depending on the tax credit regime. As of December 31, 2017, the Company’s net Research tax credit receivable amounts to $5,272 and represents a French gross research tax credit of $4,754 and an Irish gross research tax credit of $518. As of December 31, 2016, the Company’s net research tax credit receivable amounted to $1,775 and represented a French gross research tax credit of $3,376, partially offset by current income tax payable of $1,601. The Company utilized $4,001 of research tax credits in 2016 to offset the tax cost of the cross-border merger.
Income Tax Deferred Charge 
On December 16, 2014, the Company transferred all of our intangible intellectual property from its French entity to our Irish entity as part of a global reorganization. The intellectual property includes patents on drug delivery platforms, clinical data sets and other intangible assets related to the pipeline of proprietary products in development. This intra-entity transaction resulted in a charge of $14,088 of related taxes to the French government in December 2014. As this represents an intra-entity transaction, no deferred tax asset was originally recognized, but rather was recorded as $986 of prepaid expenses and $13,102 of a long-term income tax deferred charge asset in accordance with ASC 740-10-25-3 (e). This income tax deferred charge asset is amortized over the tax life of the asset at a rate of 7% per year and will result in tax relief in Ireland of $8,500 from 2016 to 2029, subject to the ability to realize tax benefits for additional deductions. At December 31, 2016, the balance of these respective accounts was classified as prepaid expenses of $814 and income tax deferred charge asset of $10,342. In 2017, the Company adopted the provisions of ASU 2016-16, related to Intra-Entity Transfers of Assets Other Than Inventory. Adoption of ASU 2016-16 eliminated the $11,156 income tax deferred charge recorded within the consolidated balance sheet as of December 31, 2016. In addition to the elimination of the income tax deferred charge, the Company recorded a deferred tax asset of $7,954 related to the remaining unamortized tax basis of the intangible intellectual property. A full valuation allowance was recorded against the deferred tax asset as sufficient evidence does not exist at this time that the Company will be able to utilize these benefits.
Cross-Border Merger
In 2016, we changed our jurisdiction of incorporation from France to Ireland by merging with and into our wholly owned Irish subsidiary. Information about the reincorporation was included in the definitive proxy statement filed with the Securities and Exchange Commission on July 5, 2016. Prior to the merger, the Company submitted a request to the French tax authorities seeking to benefit from a special regime for mergers and demergers, conditional upon a formal consent of the French tax authority, which would allow for the deferral of a portion of the tax cost of the cross-border merger. In 2017, the Company received a letter from the French tax authorities indicating that our request to benefit from the special regime had been declined. Completion of the cross-border merger resulted in the recognition of a net income tax provision of $4,266, after considering tax benefits from the utilization of current and prior year French net operating losses. The Company was able to utilize $4,266 of French research and development tax credits to offset the remaining cost of the transaction. The Company also removed $111,495 of French net operating losses as the carryforward of these losses was contingent on receiving favorable consent from the French tax authority. The French net operating losses had a full valuation allowance, resulting in no impact to the income tax provision from their removal.
2017 Tax Cuts and Jobs Act
On December 22, 2017, the U.S. government enacted the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act includes significant changes to the U.S. corporate income tax system including: a federal corporate rate reduction from 35% to 21%; limitations on the deductibility of interest expense and executive compensation; creation of the base erosion anti-abuse tax (“BEAT”), a new minimum tax.  As a result of the Act being signed into law, the Company recognized a provisional charge of $3,513 in the fourth quarter of 2017 related to the re-measurement of its U.S. net deferred tax assets and certain unrecognized tax benefits based on the lower enacted corporate tax rates. A majority of the provisions in the Tax Act are effective January 1, 2018.  In response to the Tax Act, the SEC staff issued guidance on accounting for the tax effects of the Tax Act. The guidance provides a one-year measurement period for companies to complete the accounting. We reflected the income tax effects of those aspects of the Tax Act for which the accounting is complete. To the extent our accounting for certain income tax effects of the Tax Act is incomplete but we are able to determine a reasonable estimate, we recorded a provisional estimate in the financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.  We have not completed our accounting for the income tax effects of certain elements of the Tax Act.  Because of the complexity of the new BEAT rules, we are continuing to evaluate these provisions of the Tax Act and whether taxes due on future U.S. inclusions related to BEAT should be recorded as a current-period expense when incurred, or factored into the Company’s measurement of its deferred taxes. As a result, we have not included an estimate of the tax expense or benefit related to these items for the period ended December 31, 2017.