XML 48 R31.htm IDEA: XBRL DOCUMENT v3.25.0.1
Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income (loss) before income tax benefit and equity in loss of investees were as follows (in thousands):
Year Ended December 31,
202420232022
Ireland$497,860 $449,214 $(50,311)
United Kingdom (411,356)(643,096)(963,598)
United States29,594 (6,056)224,453 
Other354,253 497,867 416,672 
Total$470,351 $297,929 $(372,784)
The following table sets forth the details of income tax benefit (in thousands):
Year Ended December 31,
202420232022
Current
Ireland$97,680 $77,343 $61,550 
United Kingdom207 7,726 1,454 
United States22,065 20,803 37,823 
Other(3,054)34,433 32,779 
Total current tax expense116,898 140,305 133,606 
Deferred, exclusive of other components below
Ireland(20,022)(10,919)(62,011)
United Kingdom(114,600)(150,506)(193,219)
United States(63,162)(89,246)(9,086)
Other(11,481)(8,990)(11,144)
Total deferred, exclusive of other components(209,265)(259,661)(275,460)
Deferred, change in tax rates
United Kingdom— 268 (16,990)
United States955 (824)201 
Other(17)— (2)
Total deferred, change in tax rates938 (556)(16,791)
Total deferred tax benefit(208,327)(260,217)(292,251)
Total income tax benefit$(91,429)$(119,912)$(158,645)
Our income tax benefit was $91.4 million, $119.9 million and $158.6 million in 2024, 2023 and 2022, respectively, relating to tax arising on income or losses in Ireland, the U.K., the U.S. and certain other foreign jurisdictions, offset by deductions on subsidiary equity, patent box benefits, foreign derived intangible income benefits and originating tax credits. Our income tax benefit in 2024 decreased compared to 2023 primarily due to the change in income mix across jurisdictions, partially offset by patent box benefits. Our income tax benefit in 2023 decreased compared to 2022 primarily due to pretax losses from payments for acquired IPR&D made in 2022 and the 2022 impairment of our acquired IPR&D asset as a result of the decision to discontinue our nabiximols program, partially offset by the change in income mix across jurisdictions.
The reconciliation between income tax expense (benefit) at the Irish statutory trading income tax rate of 12.5 percent, the jurisdiction of tax domicile of Jazz Pharmaceuticals, applied to income before the income tax expense (benefit) and equity in loss of investees and our reported income tax benefit was as follows (in thousands):
Year Ended December 31,
202420232022
Income tax expense (benefit) at the statutory income tax rate$58,794 $37,241 $(46,598)
Change in valuation allowance201,996 75,081 95,051 
Deduction on subsidiary equity(180,460)(153,655)(158,488)
Change in estimates(106,007)(5,472)(14,065)
Patent box incentive benefit(65,413)(13,862)(6,203)
Research and other tax credits(65,255)(49,900)(27,976)
Foreign derived intangible income benefit (39,470)(42,400)(29,541)
Foreign income tax rate differential38,346 (7,763)5,863 
Non-deductible financing costs22,437 15,705 4,504 
Tax deficiencies/(excess tax benefits) from share-based compensation18,074 3,959 (1,690)
Non-deductible compensation10,889 14,092 13,505 
Change in unrecognized tax benefits9,767 (12,612)5,029 
Change in tax rate938 (605)(16,790)
Non-deductible facility expense22 16,618 8,093 
Non-deductible royalty expense— — 6,274 
Other3,913 3,661 4,387 
Reported income tax benefit$(91,429)$(119,912)$(158,645)
The 2024 patent box incentive benefit above includes a non-recurring benefit of $40.9 million related to a claim for benefits in Italy in respect of tax years 2020 to 2023. The 2024 change in estimates above includes a benefit of $103.3 million that is fully offset by a related change in valuation allowance, resulting in a net nil impact to our income tax benefit.
Significant components of our net deferred tax assets (liabilities) were as follows (in thousands):
December 31,
20242023
Deferred tax assets:
Deduction on subsidiary equity carryforwards$393,960 $212,015 
Operating loss carryforwards307,413 296,490 
Capitalized research and development295,779 201,186 
Intangible assets243,391 238,062 
Tax credit carryforwards127,483 142,854 
Accrued liabilities115,290 128,948 
Share-based compensation47,486 48,403 
Indirect effects of unrecognized tax benefits35,000 40,811 
Other15,714 19,340 
Total deferred tax assets1,581,516 1,328,109 
Valuation allowance(509,190)(312,340)
Deferred tax assets, net of valuation allowance1,072,326 1,015,769 
Deferred tax liabilities:
Intangible assets(1,130,485)(1,290,425)
Inventories(47,802)(81,995)
Other(10,530)(13,221)
Total deferred tax liabilities(1,188,817)(1,385,641)
Net deferred tax liabilities$(116,491)$(369,872)
The net change in valuation allowance was an increase of $196.9 million, $77.6 million, and $80.5 million in 2024, 2023 and 2022, respectively.
The following table summarizes the presentation of deferred tax assets and liabilities (in thousands):
December 31,
20242023
Deferred tax assets$560,245 $477,834 
Deferred tax liabilities(676,736)(847,706)
Net deferred tax liabilities$(116,491)$(369,872)
As of December 31, 2024, we had NOL and tax credit carryforwards for U.S. federal income tax purposes of $11.0 million and $20.5 million, respectively, available to reduce future income subject to income taxes. The U.S. federal NOL carryforwards will expire, if not utilized, in the tax years 2025 to 2033 and the U.S. federal tax credits will expire, if not utilized, in the tax years 2027 to 2044. In addition, we had $4.9 million of NOL carryforwards and $5.8 million of tax credit carryforwards as of December 31, 2024 available to reduce future taxable income for U.S. state income tax purposes. The U.S. state NOL carryforwards will expire, if not utilized, in the tax years 2025 to 2034. As of December 31, 2024, there were NOL and other carryforwards for income tax purposes of $1,125.6 million, $790.3 million and $374.8 million available to reduce future income subject to income taxes in Malta, the United Kingdom and Ireland respectively. The NOLs and other carryforwards generated in Malta, the United Kingdom and Ireland have no expiration date. We also had foreign tax credit carryforwards in Ireland, as of December 31, 2024, of $100.9 million, which may only be utilized against certain sources of income.  The foreign tax credit carryforwards have no expiration date.
Utilization of certain of our NOL and tax credit carryforwards in the U.S. is subject to an annual limitation due to the ownership change limitations provided by Sections 382 and 383 of the Internal Revenue Code and similar state provisions. Such an annual limitation may result in the expiration of certain NOLs and tax credits before future utilization. In addition, as a result of the Azur Merger, until 2022 we were subject to certain limitations under the Internal Revenue Code in relation to the utilization of U.S. NOLs to offset U.S. taxable income resulting from certain transactions.
Valuation allowances require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required by tax-paying component. Our valuation allowance was $509.2 million and $312.3 million as of December 31, 2024 and 2023, respectively, for certain Irish, U.S. (federal and state) and foreign deferred tax assets which we maintain until sufficient positive evidence exists to support reversal. As part of the overall change in valuation allowance, we recognized a net income tax expense of $202.0 million, $76.2 million and $95.1 million in 2024, 2023 and 2022, respectively, relating primarily to the creation of a valuation allowance against certain deferred tax assets primarily associated with carryforwards in foreign subsidiaries and foreign tax credit carryforwards in Ireland. We periodically evaluate the likelihood of the realization of deferred tax assets and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant taxing authorities, the progress of tax examinations and the regulatory approval of products currently under development. Realization of the deferred tax assets is dependent on future taxable income. The Company believes that it is more likely than not to generate sufficient taxable income to realize the deferred tax assets carried as of December 31, 2024 for which no valuation allowance has been recognized.
No provision has been made for income tax on undistributed earnings of the Company’s foreign subsidiaries where such earnings are considered indefinitely reinvested in the foreign operations. Temporary differences related to such earnings totaled $1.6 billion as of December 31, 2024. In the event of the distribution of those earnings in the form of dividends, a sale of the subsidiaries, or certain other transactions, we may be liable for income taxes, subject to an adjustment, if any, for foreign tax credits. The Company estimates that it would incur additional income taxes of up to $81.0 million on repatriation of these unremitted earnings to Ireland.
We only recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. As a result, we have recorded an unrecognized tax benefit for certain tax positions which we judge may not be sustained upon examination.
A reconciliation of our unrecognized tax benefits follows (in thousands):
 December 31,
 202420232022
Balance at the beginning of the year$122,694 $143,976 $137,867 
Increases related to current year tax positions32,559 15,004 25,128 
Increases related to prior year tax positions— 224 2,794 
Decreases related to prior year tax positions(150)(12,702)(164)
Decreases related to settlements with taxing authorities(2,605)— (223)
Lapse of the applicable statute of limitations(26,520)(23,808)(21,426)
Balance at the end of the year$125,978 $122,694 $143,976 
The unrecognized tax benefits were included in income taxes payable, other non-current liabilities and deferred tax assets, net, in our consolidated balance sheets. Interest related to income taxes is recorded in income tax benefit in our consolidated statements of income (loss). As of December 31, 2024 and 2023, our accrued interest related to income taxes was $8.6 million and $8.4 million, respectively. Interest related to income taxes recognized in the consolidated statements of income (loss) were not significant. Included in the balance of unrecognized tax benefits were potential benefits of $86.8 million and $77.1 million at December 31, 2024 and 2023, respectively, that, if recognized, would affect the effective tax rate on income. The Company believes that it is reasonably possible that $26.7 million of its currently remaining unrecognized tax benefits may be recognized by the end of 2025 as a result of a lapse of the statute of limitations.
We file income tax returns in multiple tax jurisdictions, the most significant of which are Ireland, the U.K. and the U.S. (both at the federal level and in various state jurisdictions). For Ireland we are no longer subject to income tax examinations by taxing authorities for the years prior to 2020. For the U.K. we are no longer subject to income tax examinations by taxing authorities for the years prior to 2016. The U.S. jurisdictions generally have statute of limitations three to four years from the later of the return due date or the date when the return was filed. However, in the U.S. (at the federal level and in most states), carryforwards that were generated in 2020 and earlier may still be adjusted upon examination by the taxing authorities. Certain of our Luxembourg subsidiaries are currently under examination by the Luxembourg taxing authorities for the years ended December 31, 2017, 2018 and 2019. In October 2022 and January 2023, we received tax assessment notices from the Luxembourg taxing authorities for all open tax years relating to certain transfer pricing and other adjustments. The notices propose additional Luxembourg income tax of approximately $23.3 million, translated at the foreign exchange rate as at December 31, 2024. We disagree with the proposed assessments and are contesting them vigorously.
The Government of Ireland, the jurisdiction in which Jazz Pharmaceuticals Plc is incorporated, transposed the Global Minimum Tax Pillar Two rules into domestic legislation as part of the Finance (No. 2) Act 2023 (the "Finance Act"). The Finance Act closely follows the EU Minimum Tax Directive and certain OECD Guidance released to date. The Company is within the scope of these rules, which took effect from January 1, 2024. Under the new legislation, we are liable to pay a top-up tax for the difference between the Pillar Two effective tax rate per jurisdiction and the 15% minimum rate. The rules on how to calculate the Pillar Two effective tax rate are detailed and highly complex and specific adjustments envisaged in the Pillar Two legislation can give rise to different effective tax rates compared to those calculated for accounting purposes. We account for Pillar Two top-up taxes as a current tax when they are incurred. We do not believe we were subject to the top-up tax in 2024. The proportion of our profit before tax which is subject to the top-up tax and our exposure to Pillar Two top-up taxes in future years will depend on factors such as future revenues, costs and foreign currency exchange rates. We will continue to monitor changes in law and guidance in relation to Pillar Two.