Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Tax Rate

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,
	2022		2021
Statutory rate	21.0	%	21.0	%
State taxes	(0.4)		0.8
Taxes on foreign earnings	(10.8)		(10.9)
Tax credits	(2.5)		(3.7)
Purchased intangible assets	0.6		0.8
GILTI	0.3		0.9
Neurimmune tax impacts	24.2		(0.6)
Other	3.8		1.2
Effective tax rate	36.2	%	9.5	%

Changes in Tax Rate

During the second quarter of 2021 we recorded a net deferred tax asset in Switzerland of approximately $490.0 million on Neurimmune SubOne AG's (Neurimmune) tax basis in ADUHELM, the realization of which is dependent on future sales of ADUHELM. During the fourth quarter of 2021, due to reduced future expected revenue associated with ADUHELM, we recorded a valuation allowance of approximately $390.0 million. During the first quarter of 2022, upon issuance of the final NCD related to ADUHELM, we recorded an additional valuation allowance of approximately $85.0 million to reduce the net value of this deferred tax asset to zero. These adjustments to our deferred tax assets and their valuation allowances are each recorded with an equal and offsetting amount assigned to net income (loss) attributable to noncontrolling interests, net of tax in our condensed consolidated statements of income, resulting in a zero net impact to net income attributable to Biogen Inc.

For the three months ended March 31, 2022, compared to the same period in 2021, the increase in our effective tax rate was primarily due to a deferred tax expense related to a valuation allowance, as discussed above, and the non-cash tax effects of changes in the value of our equity investments. The tax effects of this change in value of our equity investments were recorded discretely, since changes in value of equity investments cannot be forecasted.

For additional information on our collaboration arrangement with Neurimmune, please read Note 17, Investments in Variable Interest Entities, to these condensed consolidated financial statements.

Tax Basis in Samsung Bioepis

As of March 31, 2022 and December 31, 2021, the carrying value of our investment in Samsung Bioepis totaled 709.4 billion South Korean won ($586.4 million) and 713.3 billion South Korean won ($599.9 million), respectively, which is classified as a component of investments and other assets in our condensed consolidated balance sheets. As of March 31, 2022, we have not recorded deferred taxes of approximately $70.0 million on our tax over book basis related to this joint venture.

Accounting for Uncertainty in Income Taxes

We and our subsidiaries are routinely examined by various taxing authorities. We file income tax returns in various U.S. states and in U.S. federal and other foreign jurisdictions. With few exceptions, we are no longer subject to U.S. federal tax examination for years before 2017 or state, local or non-U.S. income tax examinations for years before 2012.

The U.S. Internal Revenue Service 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.

It is reasonably possible that we will adjust the value of our uncertain tax positions related to certain transfer pricing, collaboration matters and other issues as we receive additional information from various taxing authorities, including reaching settlements with such authorities.

We estimate that it is reasonably possible that our gross unrecognized tax benefits, exclusive of interest, could decrease by up to approximately $500.0 million, including approximately $455.0 million related to the unrecognized tax benefits related to Neurimmune's tax basis in ADUHELM in the next 12 months as a result of various audit closures, settlements and expiration of the statute of limitations.