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Income Taxes
6 Months Ended
Jun. 30, 2015
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
The IP Assignment resulted in the recognition of a taxable gain for U.S. federal and state income tax purposes. As of June 30, 2015, the estimated income tax liability was $8.7 million after utilization of net operating loss carry-forwards, current year losses generated through June 30, 2015 and quarterly estimated payments made through June 30, 2015. Under ASC 810, Consolidation, the income tax expense of $9.0 million for the six months ended June 30, 2015 was recorded as a prepaid asset. The income tax liability and prepaid asset are expected to be substantially reduced by current year losses projected after June 30, 2015. In accordance with ASC 810, Consolidation, the remaining estimated prepaid asset will be amortized into income tax expense over the estimated remaining patent life of the intellectual property subject to the IP Assignment, through approximately 2030.
As a result of the IP Assignment, the Company reversed approximately $40.8 million of its valuation allowance on certain deferred tax assets, primarily federal and state net operating losses, as of June 30, 2015. Due to the Company’s history of operating losses and lack of available evidence supporting future taxable income, the Company believes that a valuation allowance on its remaining deferred tax assets as of June 30, 2015 remains appropriate.
In addition, the IP Assignment is subject to complex tax and transfer pricing regulations administered by taxing authorities in various jurisdictions. The relevant taxing authorities may disagree with the Company’s determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and the Company’s position were not sustained, the Company could be required to pay additional taxes, interest and penalties, which could result in one-time tax charges, higher effective tax rates and reduced cash flows than otherwise would be expected.