Income Taxes

12 Months Ended

Dec. 31, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 13. Income Taxes

We are subject to U.S. federal, state and foreign corporate income taxes. The provision for income taxes is based on income before provision for income taxes as follows (in thousands):

	Year Ended December 31,
	2024		2023		2022
U.S.	$	401,760	$	1,084,254	$	766,781
Non-U.S.	(85,130)		(250,039)		(237,665)
Income before provision for income taxes	$	316,630	$	834,215	$	529,116

Our provision for income taxes consists of the following (in thousands):

	Year Ended December 31,
	2024		2023		2022
Current:
Federal	$	322,682	$	344,407	$	90,088
State	43,955		48,106		38,136
Foreign	2,931		3,001		3,141
	369,568		395,514		131,365
Deferred:
Federal	(106,549)		(139,468)		62,107
State	21,824		(19,625)		(3,709)
Foreign	(828)		195		(1,307)
	(85,553)		(158,898)		57,091
Total provision for income taxes	$	284,015	$	236,616	$	188,456

A reconciliation of income taxes at the U.S. federal statutory rate to the provision for income taxes is as follows (in thousands):

	Year Ended December 31,
	2024		2023		2022
Provision at U.S. federal statutory rate	$	66,492	$	175,185	$	111,114
State and local income taxes	51,753		21,145		26,767
Foreign tax rate differential	61,026		(96,434)		13,670
Income tax credits	(70,989)		(1,433,507)		(30,505)
Change in valuation allowance	21,425		1,572,951		67,056
Change in uncertain tax positions	6,418		5,943		3,262
Foreign-derived intangible income	(31,786)		(32,891)		(36,748)
Stock based compensation	25,647		20,971		19,704
Acquisitions accounted for as research and development expenses	149,287		4,200		14,700
Other	4,742		(947)		(564)
Provision for income taxes	$	284,015	$	236,616	$	188,456

The 2024 acquisitions accounted for as research and development expenses in the table above reflects the impact of non-deductible charges associated with the Escient acquisition. The 2023 foreign tax rate differential in the table above reflects the impact of operations in jurisdictions with tax rates that differ from the U.S. federal statutory rate of 21%. It also includes a tax benefit associated with the remeasurement of foreign deferred tax assets resulting from the cancellation of a tax holiday. The 2023 income tax credits in the table above includes a tax benefit associated with the issuance of non-

refundable Swiss income tax credits. The 2023 remeasurement of foreign deferred tax assets and the Swiss income tax credits are fully offset with a valuation allowance in the table above.

Significant components of our deferred tax assets and liabilities are as follows (in thousands):

	December 31,
	2024		2023
Deferred tax assets:
Net operating loss carry forwards	$	315,969	$	326,446
Income tax credits	1,398,495		1,441,981
Capitalized research and development	648,989		457,603
Deferred revenue and accruals	190,446		130,291
Non-cash compensation	100,788		96,469
Acquisition-related contingent consideration	27,796		30,298
Intangibles, net	229,741		233,311
Long term investments	6,697		42,975
Other	20,814		9,044
Total gross deferred tax assets	2,939,735		2,768,418
Less valuation allowance for deferred tax assets	(2,139,673)		(2,096,318)
Net deferred tax assets	$	800,062	$	672,100
Deferred tax liabilities:
Property and equipment	$	(30,676)	$	(34,757)
Other	(7,315)		(5,457)
Total gross deferred tax liabilities	(37,991)		(40,214)
Net deferred tax assets	$	762,071	$	631,886

During the year ended December 31, 2024, the Company’s net deferred tax assets increased by $130.2 million. This was primary due to future deductible temporary differences associated with U.S. research and development expenses required to be capitalized and amortized under the Tax Cuts and Jobs Act of 2017, partially offset by an increase to a related valuation allowance. As part of the Escient acquisition, the Company also recorded a net deferred tax asset of $44.8 million predominately related to U.S. net operating losses ("NOLs") and capitalized researched and development costs. As of December 31, 2024, the Company continues to maintain a valuation allowance on certain U.S. temporary differences, foreign NOLs and the non-refundable Swiss income tax credits granted in the year ended December 31, 2023.

The valuation allowance for deferred tax assets increased by approximately $43.4 million during the year ended December 31, 2024 and increased by approximately $1.6 billion during the year ended December 31, 2023. The valuation allowance increase during 2024 was primarily due to future deductible temporary differences mainly associated with U.S. research and development expenses required to be capitalized and amortized under the Tax Cuts and Jobs Act of 2017 and the acquisition of Escient’s U.S. NOLs, a portion of which is not more-likely-than-not to be realized as of December 31, 2024. This was partially offset by the expiration of foreign NOLs with a full valuation allowance.

As of December 31, 2024, we had NOL carryforwards, research and development credit carryforwards and foreign income tax credit carryforwards as follows (in thousands):

	Amount		Expiring if not utilized
Net operating loss carryforwards
Federal	$	102,034	Indefinite
State	782,156		2025 through 2044; indefinite
Foreign	1,749,821		2025 through 2041; indefinite
Research and development credit carryforwards
Federal	$	9,431	2039 through 2044
State	18,064		2025 through 2043
Swiss income tax credit carryforwards	1,382,413		2028

The Federal NOL and tax credit carryforward are subject to an annual limitation under Internal Revenue Code Section 382.

The financial statement recognition of the benefit for a tax position is dependent upon the benefit being more likely than not to be sustainable upon audit by the applicable taxing authority. If this threshold is met, the tax benefit is then measured and recognized at the largest amount that is greater than 50% likely of being realized upon ultimate settlement. If such unrecognized tax benefits were realized, we would recognize a tax benefit of $79.3 million. The following table summarizes the gross amounts of unrecognized tax benefits (in thousands):

	Year Ended December 31,
	2024		2023
Balance at beginning of year	$	69,145	$	73,040
Additions related to prior periods tax positions	9,173		3,687
Reductions related to prior periods tax positions	(2,014)		(10,382)
Additions related to current period tax positions	5,939		3,019
Additions related to acquisitions	9,114		—
Settlements	(71)		(209)
Reductions due to lapse of applicable statute of limitations	(3,538)		(33)
Currency translation adjustment	(25)		23
Balance at end of year	$	87,723	$	69,145

Our policy is to recognize interest and penalties related to uncertain tax positions, if any, as a component of income tax expense. During the years ending December 31, 2024 and 2023, we recorded interest and penalties as a component of income tax expense of $8.5 million and $4.9 million, respectively. As of December 31, 2024 and 2023, the Company has accrued liabilities of $18.7 million and $10.1 million, respectively, for interest and penalties related to its uncertain tax positions. We do not expect any significant decreases in recognized tax benefits within the next 12 months.

One or more of our legal entities file income tax returns in the U.S. and in certain foreign jurisdictions. Our income tax returns may be examined by tax authorities in those jurisdictions. Significant disputes may arise with tax authorities involving issues such as the timing and amount of deductions, the use of tax credits and allocations of income and expenses among various tax jurisdictions because of differing interpretations of tax laws and regulations and relevant facts. In the U.S., the statute of limitations remains open beginning with tax year 2021. We are currently under U.S. federal audit for tax year 2021.