Decreases related to tax positions taken during a prior year

[Table of Contents](#i30d98ad3bee64d018232130137db9899_7)Deferred income taxes reflect tax carry forwards and the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows (in millions):

|  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |
|   | December 31, |
|   | 2021 |  | 2020 |
| Deferred tax assets: |  |  |  |
| Net operating losses | $ | 9.7  |  |  | $ | 27.7  |  |
| Share-based compensation expense | 110.9  |  |  | 101.1  |  |
| Lease liabilities | 15.2  |  |  | 12.0  |  |
| Expenses deducted in later years for tax purposes | 38.4  |  |  | 29.3  |  |
| Intangible assets | 373.9  |  |  | 321.8  |  |
| Research and other credits | 98.5  |  |  | 76.3  |  |
| Other | 5.3  |  |  | —  |  |
| Gross deferred tax assets | 651.9  |  |  | 568.2  |  |
| Valuation allowance | (104.6) |  |  | (81.4) |  |
| Deferred tax assets | 547.3  |  |  | 486.8  |  |
| Deferred tax liabilities: |  |  |  |
| Property, plant, and equipment | (79.4) |  |  | (91.1) |  |
| Right-of-use assets | (12.3) |  |  | (8.4) |  |
| Intangible assets | (9.7) |  |  | (10.1) |  |
| Other | (5.1) |  |  | (13.2) |  |
| Deferred tax liabilities | (106.5) |  |  | (122.8) |  |
| Net deferred tax assets | $ | 440.8  |  |  | $ | 364.0  |  |

As of December 31, 2021, and 2020, the Company had valuation allowances of $104.6 million and $81.4 million, respectively, primarily related to California research and development credit carry forwards, for which the Company does not believe a tax benefit is more likely than not to be realized.As of December 31, 2021, the Company had US and foreign federal net operating loss carryforwards of $23.9 million and foreign local net operating loss carryforwards of $207.3 million, which will begin to expire in 2027, if not utilized. Utilization of these net operating loss carryforwards may be subject to certain limitations. The Company does not expect the limitations to result in any permanent loss of these tax benefits.The Company intends to repatriate earnings from its Swiss subsidiary and joint venture in Hong Kong, as needed, and the U.S. and foreign tax implications of such repatriations are not expected to be significant. The Company will continue to indefinitely reinvest earnings from the rest of its foreign subsidiaries, which are not significant.The Company’s 2021 income tax expense included a one-time benefit of $66.4 million from re-measurement of its Swiss deferred tax assets resulting from the extension of the economic useful life of certain intangible assets. The Company’s 2019 income tax expense included a one-time benefit of $51.3 million associated with re-measurement of its Swiss deferred tax assets due to a Swiss statutory tax rate increase enacted as part of Swiss tax reform in August 2019.A reconciliation of the beginning and ending amounts of gross unrecognized income tax benefits for the years ended December 31, 2021, 2020, and 2019, are as follows (in millions):

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|   | Years Ended December 31, |
|   | 2021 |  | 2020 |  | 2019 |
| Beginning balance | $ | 176.3  |  |  | $ | 96.7  |  |  | $ | 78.8  |  |
| Increases related to tax positions taken during the current year | 40.6  |  |  | 40.1  |  |  | 26.5  |  |
| Increases related to tax positions taken during a prior year | 11.2  |  |  | 46.1  |  |  | 1.2  |  |
| Decreases related to tax positions taken during a prior year | (1.3) |  |  | —  |  |  | —  |  |
| Decreases related to settlements with tax authorities | (0.2) |  |  | (0.5) |  |  | (3.8) |  |
| Decreases related to expiration of statute of limitations | (4.1) |  |  | (6.1) |  |  | (6.0) |  |
| Ending balance | $ | 222.5  |  |  | $ | 176.3  |  |  | $ | 96.7  |  |

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