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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income (loss) before provision (benefit) for income taxes consists of the following:
Year Ended
December 31,
(in thousands)202220212020
U.S.$29,012 $(76,389)$(5,495)
International(2,293)1,351 (5,984)
Income (loss) before income taxes$26,719 $(75,038)$(11,479)
The Company’s provision (benefit) for income taxes consists of the following:
Year Ended
December 31,
(in thousands)202220212020
Current
Federal$42,532 $— $— 
State4,302 (8,166)3,158 
International(166)(30)170 
46,668 (8,196)3,328 
Deferred
Federal(39,920)1,048 (1,506)
State(8,315)3,058 (178)
International219 331 350 
(48,016)4,437 (1,334)
Income tax (benefit) expense$(1,348)$(3,759)$1,994 
The reconciliation of income taxes at the U.S. federal statutory rate to the income tax (benefit) expense is as follows:
Year Ended
December 31,
(in thousands)202220212020
U.S. statutory rate$5,611 $(15,758)$(2,411)
Permanent items2,309 1,764 1,176 
Acquisition costs - Progenics— — 2,723 
Recognition of deferred tax asset - assets held for sale— — (3,000)
Section 162(m)247 1,028 717 
Uncertain tax positions(12,629)(8,952)2,818 
Other tax credits(4,085)(990)(1,065)
State and local taxes67 656 1,457 
Impact on deferred taxes of change in tax rate4,169 3,049 — 
Non-deductible changes in fair value of contingent assets and liabilities5,422 15,015 230 
Foreign tax rate differential68 23 (254)
Valuation allowance(30)(400)(318)
Benefit of windfall related to stock compensation(4,612)(1,164)(128)
Change in indemnification deferred tax asset2,343 1,786 (590)
Other(228)184 639 
Income tax (benefit) expense$(1,348)$(3,759)$1,994 
The components of deferred income tax assets (liabilities) are as follows:
December 31,
(in thousands)20222021
Deferred Tax Assets
Federal benefit of state tax liabilities$1,739 $4,292 
Reserves, accruals and other31,532 27,159 
Inventory obsolescence919 297 
Capitalized research and development79,946 768 
Amortization of intangibles other than goodwill— 502 
Net operating loss carryforwards88,014 122,944 
Depreciation— 1,102 
Deferred tax assets202,150 157,064 
Deferred Tax Liabilities
Reserves, accruals and other(5,354)(3,026)
Intangible assets(80,770)(87,351)
Amortization of intangibles other than goodwill(385)— 
Depreciation(1,469)— 
Deferred tax liability(87,978)(90,377)
Less: valuation allowance(3,525)(3,923)
$110,647 $62,764 
Recorded in the accompanying consolidated balance sheets as:
Noncurrent deferred tax assets, net$110,647 $62,764 
The Tax Cuts and Jobs Act (the “Act”) was enacted on December 22, 2017. Under the Act, research and experimental expenditures incurred for tax years beginning after December 31, 2021, must be capitalized and amortized ratably over five or fifteen years for tax purposes, depending on where the research activities are conducted. If the requirement to capitalize Section 174 expenditures is not modified, it may also impact our effective tax rate and our cash tax liability in future years.The increase in worldwide net deferred tax asset is primarily due to the tax capitalization of the Company’s current year research and development expenses that are not currently deductible in 2022, offset by utilization of a portion of its net operating losses.
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. As of December 31, 2022 and 2021, the Company maintains a valuation allowance of $3.5 million and $3.9 million, respectively, related to net deferred tax assets of certain of its foreign subsidiaries and U.S. acquired tax credits.
Utilization of net operating loss carryforwards and research and development credit carryforwards may be subject to a substantial annual limitation due to ownership change limitations that could occur in the future in accordance with Section 382 of the Internal Revenue Code of 1986 (“IRC Section 382”) and with Section 383 of the Internal Revenue Code of 1986, as well as similar state provisions. These ownership changes may limit the amount of net operating loss carryforwards and research and development credit carryforwards that can be utilized annually to offset future taxable income and taxes, respectively. In general, an ownership change, as defined by IRC Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50 percentage points over a three-year period.
At December 31, 2022, the Company had U.S. federal net operating loss carryforwards of approximately $338.4 million, $200.4 million of which will expire between 2024 and 2037, and $138.0 million of which can be carried forward indefinitely. The Company’s state net operating losses are $11.6 million on a tax-effected basis, which will expire between 2024 and 2040. The Company has state research credit carryforwards of $2.9 million, which will expire between 2024 and 2037. The Company has state investment tax credit carryforwards of $1.4 million net of federal impact which have no expiration date.
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.
A reconciliation of the Company’s changes in uncertain tax positions for 2022 and 2021 is as follows:
(in thousands)Amount
Balance of uncertain tax positions as of January 1, 2021$5,292 
   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, 20213,658 
   Additions related to current year tax positions— 
   Reductions related to prior year tax positions(1,180)
   Settlements(306)
   Lapse of statute of limitations(692)
Balance of uncertain tax positions as of December 31, 2022$1,480 
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 an agreement to indemnify with BMS 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, 2022 and 2021, total liabilities for uncertain tax positions including interest and penalties were $8.3 million and $20.9 million, respectively, consisting of uncertain tax positions of $1.5 million and $3.7 million, respectively, interest accruals of $6.4 million and $16.5 million, respectively, and penalty accruals of $0.4 million and $0.8 million, respectively. As of December 31, 2022 and 2021, these liabilities were included in other long-term liabilities. Included in the 2022, 2021 and 2020 tax provisions are a benefit of $12.6 million, a benefit of $9.0 million and an expense of $2.8 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 $3.9 million and $13.5 million at December 31, 2022 and 2021, respectively. Included in other (income) loss for the years ended December 31, 2022, 2021 and 2020, is tax indemnification expense (income), net of $9.6 million, $7.1 million and $(2.2) million, respectively.
On August 16, 2022, the “Inflation Reduction Act” (H.R. 5376) was signed into law in the United States. We do not currently expect the Inflation Reduction Act to have a material impact on our financial results.