Jazz Pharmaceuticals plcJAZZ
Jazz Pharmaceuticals plc Income Taxes Disclosure
Income Taxes
The components of income (loss) before income tax benefit and equity in loss of investees were as follows (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Ireland | $ | 164,697 | $ | 497,860 | $ | 449,214 | |||||||||||
| United States | (872,206) | 29,594 | (6,056) | ||||||||||||||
| United Kingdom | (251,890) | (411,356) | (643,096) | ||||||||||||||
| Other | 331,540 | 354,253 | 497,867 | ||||||||||||||
| Total | $ | (627,859) | $ | 470,351 | $ | 297,929 | |||||||||||
The following table sets forth the details of income tax expense (benefit) (in thousands):
| Year Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Current | |||||||||||||||||
| Ireland | $ | 71,627 | $ | 97,680 | $ | 77,343 | |||||||||||
| United States | 44,093 | 22,065 | 20,803 | ||||||||||||||
| United Kingdom | 9,108 | 207 | 7,726 | ||||||||||||||
| Other | 47,700 | (3,054) | 34,433 | ||||||||||||||
| Total current tax expense | 172,528 | 116,898 | 140,305 | ||||||||||||||
| Deferred, exclusive of other components below | |||||||||||||||||
| Ireland | (9,820) | (20,022) | (10,919) | ||||||||||||||
| United States | (296,555) | (63,162) | (89,246) | ||||||||||||||
| United Kingdom | (122,939) | (114,600) | (150,506) | ||||||||||||||
| Other | (13,582) | (11,481) | (8,990) | ||||||||||||||
| Total deferred, exclusive of other components | (442,896) | (209,265) | (259,661) | ||||||||||||||
| Deferred, change in tax rates | |||||||||||||||||
| United States | (2,075) | 955 | (824) | ||||||||||||||
| United Kingdom | — | — | 268 | ||||||||||||||
| Other | — | (17) | — | ||||||||||||||
| Total deferred, change in tax rates | (2,075) | 938 | (556) | ||||||||||||||
| Total deferred tax benefit | (444,971) | (208,327) | (260,217) | ||||||||||||||
| Total income tax expense (benefit) | |||||||||||||||||
| Ireland | 61,807 | 77,658 | 66,424 | ||||||||||||||
| United States | (254,537) | (40,142) | (69,267) | ||||||||||||||
| United Kingdom | (113,831) | (114,393) | (142,512) | ||||||||||||||
| Other | 34,118 | (14,552) | 25,443 | ||||||||||||||
| Total income tax expense (benefit) | $ | (272,443) | $ | (91,429) | $ | (119,912) | |||||||||||
Our income tax benefit was $272.4 million, $91.4 million and $119.9 million in 2025, 2024 and 2023, respectively. Our income tax benefit in 2025 arose primarily due to the reversal of a valuation allowance against certain U.S. federal and state deferred tax assets acquired through the Chimerix Acquisition. Apart from the reversal of the valuation allowance, the income tax benefits relate to tax arising on income or losses in Ireland, the U.K., the U.S. and certain other foreign jurisdictions, offset by deductions on subsidiary equity, patent box benefits, foreign derived intangible income benefits and originating tax credits. Our income tax benefit in 2024 decreased compared to 2023 primarily due to the change in income mix across jurisdictions, partially offset by patent box benefits.
Beginning with the 2025 annual reporting, we adopted ASU 2023-09 prospectively. See Note 2 - Summary of Significant Accounting Policies - Adoption of New Accounting Standards for additional details on the adoption of ASU 2023-09. The reconciliation between the income tax benefit at the Irish statutory trading income tax rate of 12.5 percent, the jurisdiction of tax domicile of Jazz Pharmaceuticals, applied to the loss before income tax benefit and equity in loss of investees and our reported income tax benefit pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 was as follows (in thousands, except percentages):
| Year Ended December 31, | |||||||||||
| 2025 | |||||||||||
| Income tax at the statutory tax rate | $ | (78,482) | 12.5 | % | |||||||
| Domestic tax effects | |||||||||||
Effects of cross-border tax laws(1) | 29,812 | (4.7) | |||||||||
| Non-taxable/non-deductible items | |||||||||||
| Non-deductible financing costs | 7,070 | (1.1) | |||||||||
| Other | 963 | (0.2) | |||||||||
| Foreign tax effects | |||||||||||
| United States | |||||||||||
| Statutory income tax rate differential | (74,137) | 11.8 | |||||||||
| Non-deductible acquired in-process research and development expense | 187,346 | (29.8) | |||||||||
| Change in valuation allowance | (199,907) | 31.8 | |||||||||
| Research and orphan drug tax credits | (35,329) | 5.6 | |||||||||
| Foreign Derived Intangible Income benefit | (28,623) | 4.6 | |||||||||
| Non-deductible compensation | 8,856 | (1.4) | |||||||||
| Non-deductible contingent consideration payments | 7,641 | (1.2) | |||||||||
| State and local income tax, net of federal benefit | (5,477) | 0.9 | |||||||||
| Tax deficiencies/(excess tax benefits) from share-based compensation | 5,050 | (0.8) | |||||||||
| Other | 525 | (0.1) | |||||||||
| United Kingdom | |||||||||||
| Statutory income tax rate differential | (30,766) | 4.9 | |||||||||
| Patent box incentive benefit | (60,993) | 9.7 | |||||||||
| Non-deductible financing costs | 7,222 | (1.2) | |||||||||
| Other | 2,107 | (0.3) | |||||||||
| Italy | |||||||||||
| Statutory income tax rate differential | 7,603 | (1.2) | |||||||||
| Other | 2,006 | (0.3) | |||||||||
| Malta | |||||||||||
| Statutory income tax rate differential | 64,010 | (10.2) | |||||||||
| Deduction on subsidiary equity | (90,788) | 14.5 | |||||||||
| Other | 827 | (0.1) | |||||||||
| Other foreign jurisdictions | 7,460 | (1.2) | |||||||||
| Worldwide changes in unrecognized tax benefits | (6,439) | 0.9 | |||||||||
| Total income tax benefit | $ | (272,443) | 43.4 | % | |||||||
________________________
(1) Related to Pillar two top-up taxes imposed by Ireland in respect of income in Malta
The reconciliation between income tax benefit at the Irish statutory trading income tax rate of 12.5 percent, the jurisdiction of tax domicile of Jazz Pharmaceuticals, applied to the income before income tax benefit and equity in loss of investees and our reported income tax benefit for the years ended December 31, 2024 and 2023 was as follows (in thousands):
| Year Ended December 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Income tax expense at the statutory income tax rate | $ | 58,794 | $ | 37,241 | |||||||
| Change in valuation allowance | 201,996 | 75,081 | |||||||||
| Deduction on subsidiary equity | (180,460) | (153,655) | |||||||||
Change in estimates(1) | (106,007) | (5,472) | |||||||||
Patent box incentive benefit(2) | (65,413) | (13,862) | |||||||||
| Research and other tax credits | (65,255) | (49,900) | |||||||||
| Foreign derived intangible income benefit | (39,470) | (42,400) | |||||||||
| Foreign income tax rate differential | 38,346 | (7,763) | |||||||||
| Non-deductible financing costs | 22,437 | 15,705 | |||||||||
| Tax deficiencies/(excess tax benefits) from share-based compensation | 18,074 | 3,959 | |||||||||
| Non-deductible compensation | 10,889 | 14,092 | |||||||||
| Change in unrecognized tax benefits | 9,767 | (12,612) | |||||||||
| Change in tax rate | 938 | (605) | |||||||||
| Non-deductible facility expense | 22 | 16,618 | |||||||||
| Other | 3,913 | 3,661 | |||||||||
| Reported income tax benefit | $ | (91,429) | $ | (119,912) | |||||||
________________________
(1) The 2024 change in estimates includes a benefit of $103.3 million that is fully offset by a related change in valuation allowance, resulting in a net nil impact to our income tax benefit.
(2) The 2024 patent box incentive benefit includes a non-recurring benefit of $40.9 million related to a claim for benefits in Italy in respect of tax years 2020 to 2023.
The following table sets forth the details of income taxes paid, net of refunds received, by jurisdiction pursuant to the disclosure requirements of ASU 2023-09 for the year ended December 31, 2025 (in thousands):
| Year Ended December 31, | |||||
| 2025 | |||||
| Ireland | $ | 82,363 | |||
| Foreign | |||||
| United States - federal | 11,763 | ||||
| Other | 27,682 | ||||
| Total foreign | 39,445 | ||||
| Total cash paid for income taxes, net of refunds | $ | 121,808 | |||
Significant components of our net deferred tax assets (liabilities) were as follows (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets: | |||||||||||
| Capitalized research and development | $ | 398,547 | $ | 295,779 | |||||||
| Deduction on subsidiary equity carryforwards | 395,115 | 393,960 | |||||||||
| Operating loss carryforwards | 394,614 | 307,413 | |||||||||
| Intangible assets | 264,002 | 243,391 | |||||||||
| Tax credit carryforwards | 190,819 | 127,483 | |||||||||
| Accrued liabilities | 130,948 | 115,290 | |||||||||
| Share-based compensation | 47,878 | 47,486 | |||||||||
| Indirect effects of unrecognized tax benefits | 31,625 | 35,000 | |||||||||
| Other | 16,175 | 15,714 | |||||||||
| Total deferred tax assets | 1,869,723 | 1,581,516 | |||||||||
| Valuation allowance | (529,674) | (509,190) | |||||||||
| Deferred tax assets, net of valuation allowance | 1,340,049 | 1,072,326 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Intangible assets | (1,041,150) | (1,130,485) | |||||||||
| Inventories | (13,532) | (47,802) | |||||||||
| Other | (10,707) | (10,530) | |||||||||
| Total deferred tax liabilities | (1,065,389) | (1,188,817) | |||||||||
| Net deferred tax assets (liabilities) | $ | 274,660 | $ | (116,491) | |||||||
The net change in valuation allowance was an increase of $20.5 million, $196.9 million, and $77.6 million in 2025, 2024 and 2023, respectively.
The following table summarizes the presentation of deferred tax assets and liabilities (in thousands):
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Deferred tax assets | $ | 869,130 | $ | 560,245 | |||||||
| Deferred tax liabilities | (594,470) | (676,736) | |||||||||
| Net deferred tax assets (liabilities) | $ | 274,660 | $ | (116,491) | |||||||
As of December 31, 2025, we had net operating loss (“NOL”) and tax credit carryforwards for U.S. federal income tax purposes of $432.3 million and $75.6 million, respectively, available to reduce future income subject to income taxes. The U.S. federal NOL carryforwards will expire, if not utilized, in the tax years 2026 to 2036 and the U.S. federal tax credits will expire, if not utilized, in the tax years 2027 to 2045. In addition, we had $30.3 million of NOL carryforwards and $0.7 million of tax credit carryforwards as of December 31, 2025 available to reduce future taxable income for U.S. state income tax purposes. The U.S. state NOL carryforwards will expire, if not utilized, in the tax years 2026 to 2044. As of December 31, 2025, there
were NOL and other carryforwards for income tax purposes of $1,128.9 million, $980.2 million and $448.4 million available to reduce future income subject to income taxes in Malta, the U.K. and Ireland respectively. The NOLs and other carryforwards generated in Malta, the U.K. and Ireland have no expiration date. We also had foreign tax credit carryforwards in Ireland, as of December 31, 2025, of $113.4 million, which may only be utilized against certain sources of income. The foreign tax credit carryforwards have no expiration date.
Utilization of certain of our NOL and tax credit carryforwards in the U.S. is subject to an annual limitation due to the ownership change limitations provided by Sections 382 and 383 of the Internal Revenue Code and similar state provisions. Such an annual limitation may result in the expiration of certain NOLs and tax credits before future utilization.
Valuation allowances require an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required by tax-paying component. Our valuation allowance was $529.7 million and $509.2 million as of December 31, 2025 and 2024, respectively, for certain Irish, U.S. (federal and state) and foreign deferred tax assets which we maintain until sufficient positive evidence exists to support reversal. As part of the overall change in valuation allowance, we recognized a net income tax benefit of $204.9 million in 2025 and a net income tax expense of $202.0 million and $76.2 million in 2024 and 2023, respectively. The FDA approval of Modeyso and its commercial launch in August 2025 provided sufficient positive evidence to support a change in judgment regarding the realizability of the deferred tax assets acquired through the Chimerix Acquisition. We concluded it is more-likely-than-not that the assets will be realized through related future income. Accordingly, the valuation allowance recorded at the acquisition date was released during the third quarter and we recognized a deferred tax asset of $212.5 million on the balance sheet, with a corresponding U.S federal and state income tax benefit in the income statement. The changes in valuation allowance in 2024 and 2023 related primarily to the creation of a valuation allowance against certain deferred tax assets primarily associated with carryforwards in foreign subsidiaries and foreign tax credit carryforwards in Ireland. We periodically evaluate the likelihood of the realization of deferred tax assets and will adjust such amounts in light of changing facts and circumstances including, but not limited to, future projections of taxable income, tax legislation, rulings by relevant taxing authorities, the progress of tax examinations and the regulatory approval of products currently under development. Realization of the deferred tax assets is dependent on future taxable income. The Company believes that it is more likely than not to generate sufficient taxable income to realize the deferred tax assets carried as of December 31, 2025 for which no valuation allowance has been recognized.
No provision has been made for income tax on undistributed earnings of the Company’s foreign subsidiaries where such earnings are considered indefinitely reinvested in the foreign operations. In the event of the distribution of those earnings in the form of dividends, a sale of the subsidiaries, or certain other transactions, we may be liable for income taxes, subject to an adjustment, if any, for foreign tax credits. The Company estimates that it would incur additional income taxes of up to $56 million on repatriation of these unremitted earnings to Ireland.
We only recognize the financial statement effects of a tax position when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. As a result, we have recorded an unrecognized tax benefit for certain tax positions which we judge may not be sustained upon examination.
A reconciliation of our unrecognized tax benefits follows (in thousands):
| December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Balance at the beginning of the year | $ | 125,978 | $ | 122,694 | $ | 143,976 | |||||||||||
| Increases related to current year tax positions | 24,536 | 32,559 | 15,004 | ||||||||||||||
| Increases related to prior year tax positions | 1,199 | — | 224 | ||||||||||||||
| Decreases related to prior year tax positions | (648) | (150) | (12,702) | ||||||||||||||
| Acquisition-related increases | 18,663 | — | — | ||||||||||||||
| Decreases related to settlements with taxing authorities | — | (2,605) | — | ||||||||||||||
| Lapse of the applicable statute of limitations | (26,706) | (26,520) | (23,808) | ||||||||||||||
| Balance at the end of the year | $ | 143,022 | $ | 125,978 | $ | 122,694 | |||||||||||
The unrecognized tax benefits were included in income taxes payable, other non-current liabilities and deferred tax assets, net, in our consolidated balance sheets. Interest related to income taxes is recorded in income tax benefit in our consolidated statements of income (loss). As of December 31, 2025 and 2024, our accrued interest related to income taxes was $5.8 million and $8.6 million, respectively. Interest related to income taxes recognized in the consolidated statements of income (loss) were not significant. Included in the balance of unrecognized tax benefits were potential benefits of $101.2 million and $86.8 million at December 31, 2025 and 2024, respectively, that, if recognized, would affect the effective tax rate on income.
We file income tax returns in multiple tax jurisdictions, the most significant of which are Ireland, the U.K. and the U.S. (both at the federal level and in various state jurisdictions). For Ireland we are no longer subject to income tax examinations by taxing authorities for the years prior to 2021. For the U.K. we are no longer subject to income tax examinations by taxing authorities for the years prior to 2016. The U.S. jurisdictions generally have statute of limitations three to four years from the later of the return due date or the date when the return was filed. However, in the U.S. (at the federal level and in most states), carryforwards that were generated in 2020 and earlier may still be adjusted upon examination by the taxing authorities. Certain of our Italian subsidiaries are currently under examination by the Italian taxing authorities for the years ended December 31, 2019, 2023, 2024 and 2025.
The Government of Ireland, the jurisdiction in which Jazz Pharmaceuticals plc is incorporated, transposed the Global Minimum Tax Pillar Two rules into domestic legislation with effect from January 1, 2024. The legislation closely follows the EU Minimum Tax Directive and certain OECD Guidance released to date. The Company is within the scope of these rules. Under the legislation, we are liable to pay a top-up tax for the difference between the Pillar Two effective tax rate per jurisdiction and the 15% minimum rate. The rules on how to calculate the Pillar Two effective tax rate are detailed and highly complex and specific adjustments envisaged in the Pillar Two legislation can give rise to different effective tax rates compared to those calculated for accounting purposes. We account for Pillar Two top-up taxes as a current tax when they are incurred. Our income tax benefit for 2025 includes a provision for Pillar Two top-up taxes of $32.2 million. We were not subject to the top-up tax in 2024. The proportion of our profit before tax which is subject to the top-up tax and our exposure to Pillar Two top-up taxes in future years will depend on factors such as future revenues, costs and foreign currency exchange rates. We will continue to monitor changes in law and guidance in relation to Pillar Two.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 24, 2026 | Showing above |
| 2024 | Feb 26, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 1, 2023 | |
| 2021 | Mar 1, 2022 | |
| 2020 | Feb 23, 2021 | |
| 2019 | Feb 25, 2020 | |
| 2018 | Feb 26, 2019 | |
| 2017 | Feb 27, 2018 | |
| 2016 | Feb 28, 2017 | |
| 2015 | Feb 23, 2016 | |
About Income Taxes Disclosures
The income tax disclosure reveals how much a company actually pays in taxes versus what the statutory rate would predict. Analysts focus on the effective tax rate (ETR) reconciliation, which breaks down every item driving the gap between the 21% federal rate and the company's reported ETR — including R&D credits, foreign rate differentials, and state taxes. Deferred tax assets (DTAs) and their valuation allowances signal management's confidence in future profitability: a rising allowance suggests the company doubts it can use accumulated tax benefits. Uncertain tax benefit (UTB) reserves quantify exposure to IRS challenges on aggressive positions.
Key signals to watch: sudden ETR drops without clear operational reasons, large increases in valuation allowances, growing UTB balances, and significant unremitted foreign earnings. Post-TCJA, pay attention to GILTI and BEAT provisions that affect multinational tax structures. Compare the cash taxes paid (from the cash flow statement) against the income tax provision to gauge earnings quality.