L. INCOME TAXES

The following table reconciles the federal statutory tax rate to the effective tax rates for the three and nine months ended September 30, 2013 and 2012:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2013		2012		2013		2012
Federal statutory tax rate applied to income before taxes	35.0	%	35.0	%	35.0	%	35.0	%
Differential arising from:
State	2.4	%	0.6	%	3.4	%	1.3	%
Non-deductible expenses	(5.2	)%	0.5	%	(17.3	)%	0.6	%
Domestic manufacturing deduction	1.5	%	(2.4	)%	9.8	%	(2.7	)%
Contingent consideration	(4.7	)%	(0.4	)%	(15.8	)%	0.7	%
2013 Federal research credit	16.3	%	—	%	54.5	%	—	%
Prior year federal research credits	0.9	%	—	%	31.1	%	—	%
Transaction costs	(7.0	)%	—	%	(19.4	)%	—	%
Non-deductible loss on extinguishment of 2017 Notes	(24.4	)%	—	%	(67.5	)%	—	%
Impact of reserve for uncertain tax positions	(0.1	)%	0.1	%	2.6	%	(6.7	)%
Other	(1.4	)%	(0.4	)%	(5.3	)%	—	%
Total	13.3	%	33.0	%	11.1	%	28.2	%

As a result of the Company’s expected full year pre-tax loss for 2013, permanent items effecting the tax rate that reduce taxable income or reduce taxes payable are shown as an increase in the rate, as they increase the overall tax benefit for the three and nine months ended September 30, 2013. Permanent items that increase taxable income or increase the tax liability reduce the rate of tax benefit and are shown as negative items for the three and nine months ended September 30, 2013. For the three and nine months ended September 30, 2012, during which the Company was expecting full year pre-tax income and an overall tax provision, items that decrease the tax rate are shown as negative items, while items that increase the tax rate are shown as positive items.

The decrease in the effective tax rate for the three and nine months ended September 30, 2013, as compared to the three and nine months ended September 30, 2012, is primarily due to the significant permanent book-to-tax differences in relation to the expected full year pre-tax loss for 2013. These permanent differences include non-deductible losses incurred in connection with the induced conversion of $221.2 million of the principal amount of the 2017 Notes in September 2013, and non-deductible transaction costs associated with the acquisitions of Trius and Optimer. The impact of these non-deductible expenses was partially offset by the benefit of the 2013 federal research credit as well as prior year research credits, including the 2012 federal research credit, which was retroactively extended to January 1, 2012 by the American Taxpayer Relief Act of 2012, enacted on January 2, 2013. The effective tax rate for the nine months ended September 30, 2012 also included the impact of the resolution of uncertain state tax positions in the second quarter of 2012, which resulted in an income tax benefit.

Contingent consideration will fluctuate as a result of any changes in the fair value assumptions based on any additional data received on the Company’s ceftolozane/tazobactam, bevenopran and/or tedizolid phosphate programs. Any significant contingent consideration expense or income will result in a significantly higher or lower effective tax rate, because contingent consideration expense is largely not deductible for tax purposes and contingent consideration income is not taxable.

The Company acquired $192.8 million of federal NOLs in connection with the acquisition of Trius. These NOLs are subject to limitation under Internal Revenue Code, Section 382, which limits the amount of NOLs and credit carryforwards that may be utilized following an ownership change. The Company estimates that it will be able to utilize approximately $192.0 million of Trius NOLs in the future.

The Company’s total uncertain tax positions were $38.8 million and $36.1 million as of September 30, 2013 and December 31, 2012, respectively. Of the total uncertain tax positions as of September 30, 2013, $15.9 million were included in other long-term liabilities within the condensed consolidated balance sheet and $22.9 million were offset against deferred tax assets.