Income Taxes

A reconciliation between the U.S. federal statutory tax rate and our effective tax rate is summarized as follows:



	For the Three Months Ended March 31,
	2016		2015
Statutory rate	35.0	%	35.0	%
State taxes	1.0		(0.4	)
Taxes on foreign earnings	(8.1	)	(8.4	)
Credits and net operating loss utilization	(1.2	)	(0.7	)
Purchased intangible assets	1.1		1.0
Manufacturing deduction	(1.8	)	(1.6	)
Other permanent items	0.6		0.6
Other	0.3		0.1
Effective tax rate	26.9	%	25.6	%

For the three months ended March 31, 2016, compared to the same period in 2015, our effective tax rate increased due to a state tax benefit in 2015, described below.

Accounting for Uncertainty in Income Taxes

We and our subsidiaries are routinely examined by various taxing authorities. We file income tax returns in the U.S. federal jurisdiction, various U.S. states, and foreign jurisdictions. With few exceptions, including the proposed disallowance we discuss below, we are no longer subject to U.S. federal tax examination for years before 2013 or state, local, or non-U.S. income tax examinations for years before 2004.

In March 2015, we received a final assessment from the Danish Tax Authority (SKAT) for 2009 regarding withholding taxes and the treatment of certain intercompany transactions involving our Danish affiliate and another of our affiliates. In April 2016, we received final assessments for 2011 and 2013 regarding withholding taxes for similar intercompany transactions. The total amount assessed for 2009, 2011 and 2013 is estimated to be $67.0 million, including interest. We are disputing the assessments for these periods, and believe that the positions we have taken are valid.

During the three months ended March 31, 2015, the net effect of adjustments to our uncertain tax positions was a net benefit of approximately $16.4 million primarily related to the state impact of a federal uncertain tax item.

It is reasonably possible that we will adjust the value of our uncertain tax positions related to our revenues from anti-CD20 therapeutic programs and certain transfer pricing issues as we receive additional information from various taxing authorities, including reaching settlements with the tax authorities. In addition, the Internal Revenue Service (IRS) and other national tax authorities routinely examine our intercompany transfer pricing with respect to intellectual property related transactions and it is possible that they may disagree with one or more positions we have taken with respect to such valuations.

In October 2011, in conjunction with our examination, the IRS proposed a disallowance of approximately $130.0 million in deductions for tax years 2007, 2008 and 2009 related to payments for services provided by our wholly owned Danish subsidiary located in Hillerød, Denmark. We initiated a mutual agreement procedure between the IRS and SKAT for the years 2001 through 2009, to reach agreement on the issue. In addition, we applied for a bilateral advanced pricing agreement for the years 2010 through 2014 to resolve similar issues for the subsequent years. Over the past year, we have reached agreement with the tax authorities in the U.S. and Denmark regarding the tax treatment of these items for the years up to and including 2009. We have recorded the results of these agreements, which were not significant to our results.