Income Taxes

3 Months Ended

Mar. 31, 2019

The following table sets forth information about the Company’s income tax provision (benefit) for the periods indicated (dollar amounts in thousands):



	Three Months Ended March 31,
	2019			2018
(Loss) before income taxes	$	(80,761	)	$	(36,027	)
Income tax provision (benefit)	1,420			(7,280		)
Net (loss)	$	(82,181	)	$	(28,747	)

Income tax provision (benefit) as a percentage of (loss) before income taxes	(1.8		)%	20.2		%

During the three month periods ended March 31, 2019 and 2018, the Company recorded an income tax provision of $1.4 million and an income tax benefit of $7.3 million, or (1.8)% and 20.2%, of (loss) before income tax in the applicable periods, respectively. The Company did not use the discrete method to calculate the quarterly provision due to the company’s overall valuation allowance position. The reason for the overall tax provision rate of (1.8)% during the three month period ended March 31, 2019 is due to the full valuation allowance recorded against our deferred tax assets.

The Company records a valuation allowance to reduce net deferred income tax assets to the amount that is more likely than not to be realized. In performing its analysis of whether a valuation allowance to reduce the deferred income tax asset was necessary, the Company evaluated the data and believes that it is not more likely than not that the deferred tax assets in the U.S., India, and Switzerland will be realized. Accordingly, the Company has recorded a full valuation allowance against U.S., India, and Switzerland deferred tax assets. The Company has a valuation allowance of $84.6 million against its deferred tax assets as of March 31, 2019.

In accordance with ASC 740-10-25, Income Taxes - Recognition, the Company reviews its tax positions to determine whether it is “more likely than not” that its tax positions will be sustained upon examination, and if any tax positions are deemed to fall short of that standard, the Company establishes reserves based on the financial exposure and the likelihood that its tax positions would not be sustained. Based on its evaluations, the Company determined that it would not recognize tax benefits on $29.5 million related to uncertain tax positions as of March 31, 2019. If recognized, $2.4 million of the above positions would impact the Company’s effective rate, while the remaining $27.1 million would result in adjustments to the Company’s deferred taxes. On December 31, 2018, the Company filed a non-automatic accounting method change related to the chargebacks and rebates reserves that accounts for $27.1 million of the unrecognized tax benefits. It is pending approval from the Internal Revenue Service as of March 31, 2019, and as such the Company reasonably expects this balance to reverse during 2019. The Company accounts for interest and penalties as income tax expense. During the three month period ended March 31, 2019, the Company recorded no penalties and $1.3 million interest related to unrecognized tax benefits. As of March 31, 2019, the Company had accrued a total of $8.6 million and $13.4 million of penalties and interest, respectively.