Income Taxes

12 Months Ended

Dec. 31, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 17: Income Taxes

Income Tax Expense

Income before income tax (benefit) expense and the income tax (benefit) expense consist of the following:

	For the Years Ended December 31,
(In millions)	2023		2022		2021
Income before income tax (benefit) expense:
Domestic	$	192.4	$	1,842.0	$	448.3
Foreign	1,104.4		1,749.8		1,296.9
Total income before income tax (benefit) expense	$	1,296.8	$	3,591.8	$	1,745.2
Income tax (benefit) expense:
Current:
Federal	$	377.6	$	694.5	$	319.1
State	15.1		39.0		23.1
Foreign	48.4		67.9		137.1
Total current	441.1		801.4		479.3
Deferred:
Federal	(587.4)		(328.3)		(242.5)
State	(12.7)		2.5		(11.9)
Foreign	294.3		157.2		(172.4)
Total deferred	(305.8)		(168.6)		(426.8)
Total income tax (benefit) expense	$	135.3	$	632.8	$	52.5

Transition Toll Tax

The Tax Cuts and Jobs Act of 2017 eliminated the deferral of U.S. income tax on the historical unrepatriated earnings by imposing the one-time mandatory deemed repatriation tax on accumulated foreign subsidiaries' previously untaxed foreign earnings. The Transition Toll Tax was assessed on our share of our foreign corporations' accumulated foreign earnings that were not previously taxed. Earnings in the form of cash and cash equivalents were taxed at a rate of 15.5% and all other earnings were taxed at a rate of 8.0%.

As of December 31, 2023 and 2022, we have accrued income tax liabilities of $419.5 million and $558.0 million, respectively, under the Transition Toll Tax. Of the amounts accrued as of December 31, 2023, approximately $185.4 million is expected to be paid within one year. The Transition Toll Tax is being paid in installments over an eight--year period, which started in 2018, and will not accrue interest.

Unremitted Earnings

At December 31, 2023, we considered our earnings not to be permanently reinvested outside the U.S. and therefore recorded deferred tax liabilities associated with an estimate of the total withholding taxes expected as a result of our repatriation of earnings. Other than for earnings, we are permanently reinvested for book/tax basis differences of approximately $1.5 billion as of December 31, 2023, primarily arising through the impacts of purchase accounting. These permanently reinvested basis differences could reverse through sales of the foreign subsidiaries, as well as various other events, none of which were considered probable as of December 31, 2023. The residual U.S. tax liability, if these differences reverse, would be between $300.0 million and $400.0 million as of December 31, 2023.

Deferred Tax Assets and Liabilities

Significant components of our deferred tax assets and liabilities are summarized as follows:

	As of December 31,
(In millions)	2023		2022
Deferred tax assets:
Tax credits	$	252.8	$	112.6
Inventory, other reserves and accruals	203.7		202.8
Intangibles, net	1,153.9		1,370.3
Neurimmune's tax basis in ADUHELM	—		470.3
IRC Section 174 capitalized research and development	570.8		271.8
Net operating loss	1,700.4		1,845.9
Share-based compensation	36.1		37.2
Other	293.3		280.7
Valuation allowance	(1,278.7)		(2,003.3)
Total deferred tax assets	$	2,932.3	$	2,588.3
Deferred tax liabilities:
Purchased inventory valuation step-up and intangible assets	$	(1,257.4)	$	(76.1)
Samsung Bioepis investment installments	(35.5)		(138.0)
GILTI	(1,136.9)		(1,002.0)
Tax credits	—		(228.7)
Depreciation, amortization and other	(215.7)		(251.8)
Total deferred tax liabilities	$	(2,645.5)	$	(1,696.6)

As of December 31, 2023, 2022, 2021 and 2020, we had a valuation allowance of $1,278.7 million, $2,003.3 million, $1,961.3 million and $1,753.9 million, respectively, related to net operating losses in Switzerland and Neurimmune's tax basis in ADUHELM. The change in the valuation allowance between December 31, 2023 and 2022, was primarily driven by a reduction of approximately $470.3 million related to the elimination of Neurimmune's tax basis in ADUHELM as a result of its deconsolidation and reduction of approximately $230.3 million due to movements in net operating loss deferred tax assets in Switzerland. The net income tax impact of the changes in the valuation allowance was an expense of approximately $7.4 million for the year ended December 31, 2023. The change in the valuation allowance between December 31, 2022 and 2021, and between December 31, 2021 and 2020, was primarily driven by additions of $85.0 million and $390.0 million, respectively, related to Neurimmune's tax basis in ADUHELM. For additional information on the deconsolidation and our collaboration arrangement with Neurimmune, please read Note 20, Investments in Variable Interest Entities, to these consolidated financial statements.

In addition to deferred tax assets and liabilities, we have recorded deferred charges related to intra-entity sales of inventory. As of December 31, 2023 and 2022, the total deferred charges were $69.3 million and $56.6 million, respectively.

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 income tax balances as of December 31, 2023 and 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 Years Ended December 31,
	2023		2022		2021
Statutory rate	21.0	%	21.0	%	21.0	%
State taxes	1.1		1.1		0.8
Taxes on foreign earnings	(5.9)		(4.9)		(10.5)
Tax credits	(7.3)		(1.7)		(3.8)
Purchased inventory valuation step-up and intangible assets	0.7		0.3		(1.6)
GILTI	(0.6)		0.7		1.3
Sale of Samsung Bioepis	—		(1.6)		—
Litigation settlement agreement	—		2.6		—
Neurimmune tax impacts	—		2.3		(5.3)
Internal reorganization	(0.1)		(1.4)		—
Other, including permanent items	1.5		(0.8)		1.1
Effective tax rate	10.4	%	17.6	%	3.0	%

Changes in Tax Rate

For the year ended December 31, 2023, compared to 2022, the decrease in our effective tax rate was driven by the impact of the non-cash changes in the value of our equity investments, the impact of Fit for Growth related expenses and Reata acquisition-related expenses, as well as 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, as discussed below, 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 the year ended December 31, 2022, compared to 2021, the increase in our effective tax rate, excluding the impact of the net Neurimmune deferred tax asset, as discussed below, includes the tax impacts of the litigation settlement agreement and the sale of our building at 125 Broadway. These increases were partially offset by the impact of the current year tax benefits related to an international reorganization to align with global tax developments, the impacts of the sale of our equity interest in Samsung Bioepis and the tax impacts of the decision to discontinue development of vixotrigine. Further in 2021, our effective tax rate benefited from the tax effects of the BIIB111 and BIIB112 impairment charges and the non-cash tax effects of changes in the value of our equity instruments.

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

For additional information on the litigation settlement agreement, please read Note 18, Other Consolidated Financial Statement Detail, to these consolidated financial statements.

Neurimmune Deferred Tax Asset

During 2021 we recorded a net deferred tax asset in Switzerland of approximately $100.0 million on Neurimmune's tax basis in ADUHELM, the realization of which was dependent on future sales of ADUHELM.

During the first quarter of 2022, upon issuance of the final NCD related to ADUHELM, we recorded an increase in a valuation allowance of approximately $85.0 million to reduce the net value of this deferred tax asset to zero.

These adjustments to our net deferred tax asset were each recorded with an equal and offsetting amount assigned to net income (loss) attributable to noncontrolling interests, net of tax in our consolidated statements of income, resulting in a zero net impact to net income attributable to Biogen Inc.

During the fourth quarter of 2023 Neurimmune was deconsolidated from our consolidated financial statements. For additional information on the deconsolidation and our collaboration arrangement with Neurimmune, please read Note 20, Investments in Variable Interest Entities, to these consolidated financial statements.

Tax Attributes

As of December 31, 2023, we had general business credit carry forwards for U.S. federal income tax purposes of approximately $141.8 million that begin to expire in 2030 and net operating losses of approximately $913.1 million that do not expire. For U.S. state income tax purposes, we had research and investment credit carry forwards of approximately $140.5 million that begin to expire in 2027 and net operating losses of approximately $21.0 million that begin to expire in 2036. For foreign income tax purposes, we had $13.0 billion of federal net operating loss carryforwards that begin to expire in 2027 and $12.2 billion of Swiss cantonal net operating loss carryforwards that begin to expire in 2027.

In assessing the realizability of our deferred tax assets, we have considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. In making this determination, under the applicable financial reporting standards, we are allowed to consider the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies. Based upon the level of historical taxable income and income tax liability and projections for future taxable income over the periods in which the deferred tax assets are utilizable, we believe it is more likely than not that we will realize the net benefits of the deferred tax assets of our wholly owned subsidiaries, net of the recorded valuation allowance. In the event that actual results differ from our estimates or we adjust our estimates in future periods, we may need to adjust or establish a valuation allowance, which could materially impact our consolidated financial position and results of operations.

Accounting for Uncertainty in Income Taxes

A reconciliation of the beginning and ending amount of our unrecognized tax benefits is summarized as follows:

(In millions)	2023		2022		2021
Beginning balance	$	606.4	$	563.4	$	75.7
Additions based on tax positions related to the current period	5.2		36.3		4.2
Additions for tax positions of prior periods	60.2		23.4		509.9
Reductions for tax positions of prior periods	(485.0)		(14.9)		(18.8)
Statute expirations	(2.1)		(1.6)		(3.2)
Settlement refund (payment)	(11.3)		(0.2)		(4.4)
Ending balance	$	173.4	$	606.4	$	563.4

During the year ended December 31, 2021, we increased our gross unrecognized tax benefits by approximately $455.0 million, related to a deferred tax asset for Swiss tax purposes for Neurimmune's tax basis in ADUHELM. This unrecognized tax benefit was recorded as a reduction to the gross deferred tax asset, resulting in the net deferred tax asset, as discussed above, and not as a separate liability on our consolidated balance sheets. As of December 31, 2022, the unrecognized tax benefits related to Neurimmune was approximately $450.0 million. During the year ended December 31, 2023, we decreased our gross unrecognized tax benefits by approximately $450.0 million related to this item as a result of the deconsolidation of Neurimmune.

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.

Included in the balance of unrecognized tax benefits as of December 31, 2023, 2022 and 2021, are $147.6 million, $134.0 million and $87.5 million (net of the federal benefit on state issues), respectively, of unrecognized tax benefits that, if recognized, would affect the effective income tax rate in future periods.

We recognize potential interest and penalties related to unrecognized tax benefits in income tax expense. During the years ended December 31, 2023, 2022 and 2021, we recognized total interest and penalty expense of $5.1 million, $0.7 million and $2.7 million, respectively. We have accrued $30.2 million and $25.2 million for the payment of interest and penalties as of December 31, 2023 and 2022, respectively.

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 $20.0 million in the next 12 months as a result of various audit closures, settlements and expiration of the statute of limitations.