Income Taxes

9 Months Ended

Sep. 30, 2024

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 September 30,				For the Nine Months Ended September 30,
	2024		2023		2024		2023
Statutory rate	21.0	%	21.0	%	21.0	%	21.0	%
State taxes	2.5		(1.3)		1.7		1.6
Taxes on foreign earnings, including valuation allowances	(11.9)		2.6		(7.0)		(6.1)
Tax credits	(1.2)		24.6		(1.7)		(7.7)
Purchased inventory valuation step-up and intangible assets	3.3		(2.3)		2.0		0.7
GILTI	(1.1)		14.8		(1.4)		(1.7)
Other, including permanent items	1.3		(7.8)		0.8		1.4
Effective tax rate	13.9	%	51.6	%	15.4	%	9.2	%

Changes in Tax Rate

For the three and nine months ended September 30, 2024, compared to the same periods in 2023, our effective tax rate includes a decrease in our valuation allowance related to changes in projected future foreign taxable income, partially offset by the impact of certain foreign uncertain tax positions.

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.

The nine months ended September 30, 2023, was also impacted by the resolution of an uncertain tax matter 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 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.

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 $55.0 million in the next 12 months as a result of various audit closures, settlements and expiration of the statute of limitations.