Income Taxes

3 Months Ended

Mar. 31, 2020

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


	Three Months Ended March 31,
	2020			2019
(Loss) before income taxes	$	(280,172)		$	(80,761)
Income tax (benefit)/provision	(23,445)			1,420
Net (loss)	$	(256,727)		$	(82,181)

Income tax as a percentage of (loss) before income taxes	8.4		%	(1.8)		%

During the three month periods ended March 31, 2020 and 2019, the Company recorded income tax (benefit)/provision of $(23.4) million and $1.4 million, respectively, on (loss) before income taxes. The reason for the overall tax benefit during the three month period ended March 31, 2020, was the impact of a $(37.1) million net operating (loss) carryback benefit partially offset by $13.9 million of current year tax expense. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was enacted to provide relief to taxpayers due to the COVID-19 pandemic. Among other things, this law change allows companies to carryback tax net operating (losses) generated during 2018 – 2020. The Company will continue to monitor the impact of the CARES Act as additional guidance is released and evaluate how these provisions in the CARES Act impact our financial position, results of operations and cash flows. The $13.9 million of current year tax expense is primarily a result of taxable income expected for the period ended March 31, 2020, driven by revenue recognized from exiting the market for an unapproved product for which the ASC 606 constraint on the amount of revenue recognized caused us to recognize a significant reserve that is not currently deductible for tax purposes. The tax receivable of $24.6 million is included in prepaid expenses and other current assets on the condensed consolidated balance sheet. The Company used the discrete method to calculate the quarterly provision due to its inability to reliably estimate annual ordinary income (loss).

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 $111.1 million against its deferred tax assets as of March 31, 2020.

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 $2.4 million related to uncertain tax positions as of March 31, 2020. If recognized, $2.4 million of the above positions would impact the Company’s effective rate. The Company accounts for interest and penalties related to uncertain tax positions as income tax expense. As of March 31, 2020, the Company had accrued no penalties and a total of $0.1 million of interest.