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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income before income taxes is summarized as follows:
Year Ended
December 31,
(in thousands)202120202019
U.S.$(76,389)$(5,495)$25,432 
International1,351 (5,984)3,195 
(Loss) income before income taxes$(75,038)$(11,479)$28,627 
The income tax (benefit) expense is summarized as follows:
Year Ended
December 31,
(in thousands)202120202019
Current
Federal$— $— $287 
State(8,166)3,158 (13,166)
International(30)170 114 
(8,196)3,328 (12,765)
Deferred
Federal1,048 (1,506)8,712 
State3,058 (178)790 
International331 350 223 
4,437 (1,334)9,725 
Income tax (benefit) expense$(3,759)$1,994 $(3,040)
The reconciliation of income taxes at the U.S. federal statutory rate to the actual income taxes is as follows:
Year Ended
December 31,
(in thousands)202120202019
U.S. statutory rate$(15,758)$(2,411)$6,012 
Permanent items1,764 1,176 3,210 
Acquisition costs - Progenics— 2,723 — 
Recognition of deferred tax asset - assets held for sale— (3,000)— 
Section 162(m)1,028 717 527 
Uncertain tax positions(8,952)2,818 (13,156)
Other tax credits(990)(1,065)(1,685)
State and local taxes656 1,457 1,914 
Impact on deferred taxes of change in tax rate3,049 — — 
Non-deductible changes in fair value of contingent assets and liabilities15,015 230 — 
Foreign tax rate differential23 (254)(238)
Valuation allowance(400)(318)(22)
Benefit of windfall related to stock compensation(1,164)(128)(2,768)
Change in indemnification deferred tax asset1,786 (590)2,531 
Other184 639 635 
Income tax (benefit) expense$(3,759)$1,994 $(3,040)
The components of deferred income tax assets (liabilities) are as follows:
December 31,
(in thousands)20212020
Deferred Tax Assets
Federal benefit of state tax liabilities$4,292 $5,867 
Reserves, accruals and other27,159 32,030 
Inventory obsolescence297 404 
Capitalized research and development768 2,553 
Amortization of intangibles other than goodwill502 1,325 
Net operating loss carryforwards122,944 127,369 
Depreciation1,102 1,014 
Deferred tax assets157,064 170,562 
Deferred Tax Liabilities
Reserves, accruals and other(3,026)(5,676)
Intangible assets(87,351)(91,283)
Deferred tax liability(90,377)(96,959)
Less: valuation allowance(3,923)(3,456)
$62,764 $70,147 
Recorded in the accompanying consolidated balance sheets as:
Noncurrent deferred tax assets, net$62,764 $70,147 
On June 19, 2020, the Company completed the Progenics Acquisition in a transaction that is expected to qualify as a tax-deferred reorganization under Section 368 of the Internal Revenue Code. The transaction resulted in an ownership change of Progenics under Section 382 of the Internal Revenue Code, and a limitation on the utilization of Progenics’ precombination tax attributes. All of Progenics’ precombination research credits and Orphan drug credits have been removed from the balance sheet, and the gross carrying value of the tax loss carryforwards reduced to their realizable value on the opening balance sheet, in accordance with the Section 382 limitation. Deferred tax liabilities of $92.3 million on acquired identified intangibles were recorded at acquisition resulting in a small net overall deferred tax liability for Progenics after the application of acquisition accounting. The Company also acquired estimated utilizable U.S. federal loss carryforwards of $338.7 million, tax-effected state loss carryforwards of $12.5 million and state tax credits of $2.5 million as a result of the Progenics acquisition. The utilization of these losses and credits is subject to annual limitations based on Sections 382 and 383 of the Internal Revenue Code.
The Company regularly assesses its ability to realize its deferred tax assets. Assessing the realizability of deferred tax assets requires significant management judgment. In determining whether its deferred tax assets are more-likely-than-not realizable, the Company evaluated all available positive and negative evidence, and weighed the objective evidence and expected impact. The Company continues to record valuation allowances of $1.2 million against the net deferred tax assets of its U.K. subsidiary, $1.9 million against the net deferred tax assets of its Sweden subsidiary, and $0.8 million against certain domestic state tax credits and state loss carryforwards.
The Company will continue to assess the level of the valuation allowance required. If the weight of negative evidence exists in future periods to again support the recording of a partial or full valuation allowance against the Company’s deferred tax assets, there would likely be a material negative impact on the Company’s results of operations in that future period.
A summary of the changes in the Company’s valuation allowance is summarized below:
(in thousands)Amount
Balance, January 1, 2020$1,238 
Charged to income tax (benefit) expense311 
Foreign currency31 
Increase due to Progenics acquisition2,479 
Release valuation allowance(603)
Balance, December 31, 20203,456 
Charged to income tax (benefit) expense(189)
Adjustment related to Progenics acquired deferred assets867 
Foreign currency(211)
Balance, December 31, 2021$3,923 
The Company’s U.S. federal income tax returns are subject to examination for three years after the filing date of the return. The state and foreign income tax returns are subject to examination for periods varying from three to four years after filing, depending on the specific jurisdictions’ statutes of limitation, and in the case of Sweden, up to six years after the end of the financial year.
At December 31, 2021, the Company has U.S. federal net operating loss carryovers of approximately $476.2 million, $338.1 million of which will expire between 2022 and 2037, and $138.0 million of which can be carried forward indefinitely. The Company’s state net operating losses are $17.4 million on a tax-effected basis, which will expire between 2022 and 2040. The Company also has U.S. federal research credits carryforwards of $3.4 million which will begin to expire in 2037. The Company has state research credit carryforwards of $3.1 million, which will expire between 2024 and 2036. The Company has state investment tax credit carryforwards of $1.7 million net of federal impact, $0.7 million of which have no expiration date, and $1.0 million of which will expire between 2022 and 2024.
A reconciliation of the Company’s changes in uncertain tax positions for 2021 and 2020 is as follows:
(in thousands)Amount
Balance of uncertain tax positions as of January 1, 2020$5,292 
   Additions related to current year tax positions— 
   Reductions related to prior year tax positions— 
   Settlements— 
   Lapse of statute of limitations— 
Balance of uncertain tax positions as of December 31, 20205,292 
   Additions related to current year tax positions— 
   Reductions related to prior year tax positions(188)
   Settlements(1,446)
   Lapse of statute of limitations— 
Balance of uncertain tax positions as of December 31, 2021$3,658 
In connection with the Company’s acquisition of the medical imaging business from Bristol-Myers Squibb (“BMS”) in 2008, the Company recorded a liability for uncertain tax positions related to the acquired business and simultaneously entered into a tax indemnification agreement with BMS under which BMS agreed to indemnify the Company for any payments made to settle those uncertain tax positions with the taxing authorities. A long-term receivable is recorded within other long-term assets to account for the expected value to the Company of future indemnification payments, net of actual tax benefits received, to be paid on behalf of the Company by BMS.
In accordance with the Company’s accounting policy, the change in the tax liability, penalties and interest associated with these obligations (net of any offsetting federal or state benefit) is recognized within income tax expense. As these reserves change, adjustments are included in income tax expense while the offsetting adjustment is included in other income. Assuming that the receivable from BMS continues to be considered recoverable by the Company, there will be no effect on net income and no net cash outflows related to these liabilities.
As of December 31, 2021 and 2020, total liabilities for uncertain tax positions including interest and penalties were $20.9 million and $29.9 million, respectively, consisting of uncertain tax positions of $3.7 million and $5.3 million, respectively, interest accruals of
$16.5 million and $23.5 million, respectively, and penalty accruals of $0.8 million and $1.0 million, respectively. As of December 31, 2021 and 2020, these liabilities were included in other long-term liabilities. Included in the 2021, 2020 and 2019 tax provisions are a benefit of $9.0 million, an expense of $2.8 million and a benefit of $13.2 million, respectively, relating to accrual of interest, net of benefits for reversals of uncertain tax positions recognized upon settlements, effective settlements, or lapses of relevant statutes of limitation.
The total long-term asset related to the indemnification was $13.5 million and $20.8 million at December 31, 2021 and 2020, respectively. Included in other (income) loss for the years ended December 31, 2021, 2020 and 2019, is tax indemnification expense (income), net of $7.1 million, $(2.2) million and $10.6 million, respectively.
The Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act, was passed by the Congress and signed into law on March 27, 2020. The Company has reviewed the relevant measures of the Act. No material impacts of the Cares Act have been identified nor are any anticipated. On December 27, 2020, the Taxpayer Certainty and Disaster Tax Relief Act of 2020 was signed into law, modifying certain aspects of the CARES Act. The Company has analyzed the CARES Act and determined that the Act to date has had no material impact on the Company’s income taxes.