Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Inflation Reduction Act

In August 2022 the IRA was signed into law in the U.S. The IRA introduced new tax provisions, including a 15.0% corporate alternative minimum tax and a 1.0% excise tax on stock repurchases. The provisions of the IRA are effective for periods after December 31, 2022. The IRA did not result in any material adjustments to our income tax provision or other income tax balances as of September 30, 2023 and December 31, 2022. Preliminary guidance has been issued by the IRS and we expect additional guidance and regulations to be issued in future periods. We will continue to assess its potential impact on our business and results of operations as further information becomes available.

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 September 30,				For the Nine Months Ended September 30,
	2023		2022		2023		2022
Statutory rate	21.0	%	21.0	%	21.0	%	21.0	%
State taxes	(1.3)		1.9		1.6		1.1
Taxes on foreign earnings	2.6		(3.4)		(6.1)		(4.4)
Tax credits	24.6		(1.4)		(7.7)		(1.5)
Purchased intangible assets	(2.3)		0.1		0.7		0.2
GILTI	14.8		0.8		(1.7)		0.5
Sale of Samsung Bioepis	—		(0.8)		—		(1.9)
Litigation settlement agreement	—		(1.2)		—		3.1
Neurimmune tax impacts	(0.1)		—		—		2.8
International reorganization	—		—		—		(1.7)
Other, including permanent items	(7.7)		0.2		1.4		0.2
Effective tax rate	51.6	%	17.2	%	9.2	%	19.4	%

The effective tax rate for the three months ended September 30, 2023, reflects a tax benefit of $72.9 million recognized as a result of a pretax loss from operations of $141.2 million recorded during the third quarter of 2023, which was driven, in part, by the impact of the non-cash changes in the value of our equity investments and Reata acquisition-related expenses. For all other periods presented, the effective tax rates reflect tax expense on pretax income from operations in the respective periods.

Changes in Tax Rate

For the three months ended September 30, 2023, compared to the same period in 2022, the change in our effective tax rate was driven by the impact of the non-cash changes in the value of our equity investments and Reata acquisition-related expenses.

For the nine months ended September 30, 2023, compared to the same period in 2022, our effective tax rate, in addition to the items noted above, was also impacted by the combined net unfavorable tax rate impacts in 2022 related to a litigation settlement agreement, the sale of our equity interest in Samsung Bioepis, the impact of a Neurimmune valuation allowance and an international reorganization to align with global tax developments. The change also benefits from the resolution of an uncertain tax matter during the first quarter of 2023 related to tax credits.

For additional information on our acquisition of Reata, please read Note 2, Acquisitions, to these condensed consolidated financial statements.

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 2019 or state, local or non-U.S. income tax examinations for years before 2013.

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, withholding taxes 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 $460.0 million, including approximately $450.0 million related to the unrecognized

tax benefits related to Neurimmune's tax basis in ADUHELM, as discussed above, in the next 12 months as a result of various audit closures, settlements and expiration of the statute of limitations. Any changes to our gross unrecognized tax benefits related to Neurimmune's tax basis in ADUHELM would result in a zero net impact to net income attributable to Biogen, Inc., as we have recorded a full valuation allowance against the relevant deferred tax assets.