NEUROCRINE BIOSCIENCES INCNBIX
NEUROCRINE BIOSCIENCES INC Income Taxes Disclosure
Income Taxes
The following table presents income from continuing operations before provision for income taxes for domestic and international operations.
Year Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
Domestic | $ | 845.2 | $ | 597.5 | $ | 409.2 | |||||||||||
| Foreign | (139.8) | (111.5) | (77.1) | ||||||||||||||
| Income before provision for income taxes | $ | 705.4 | $ | 486.0 | $ | 332.1 | |||||||||||
The following table presents the components of income tax expense for continuing operations.
Year Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Current: | |||||||||||||||||
| Federal | $ | 55.5 | $ | 215.2 | $ | 115.0 | |||||||||||
| State | 50.9 | 52.5 | 28.1 | ||||||||||||||
Foreign | (43.8) | — | — | ||||||||||||||
| Current income taxes | 62.6 | 267.7 | 143.1 | ||||||||||||||
| Deferred: | |||||||||||||||||
| Federal | 142.5 | (104.9) | (45.2) | ||||||||||||||
| State | 1.9 | (18.1) | (15.5) | ||||||||||||||
| Foreign | 19.8 | — | — | ||||||||||||||
Deferred income taxes | 164.2 | (123.0) | (60.7) | ||||||||||||||
| Provision for income taxes | $ | 226.8 | $ | 144.7 | $ | 82.4 | |||||||||||
As discussed in Note 1, we adopted ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, on January 1, 2025 on a prospective basis. As a result, our rate reconciliation for 2025 is presented in accordance with the new disclosure requirements, while the reconciliations for 2024 and 2023 continue to be presented under disclosure requirements in effect for those periods.
The provision for income taxes on earnings subject to income taxes differed from the statutory federal rate due to the following (after the adoption of ASU 2023-09):
| Year Ended December 31, 2025 | |||||||||||
(dollars in millions) | Amount | % | |||||||||
Federal income taxes at 21% | $ | 148.1 | 21.0 | % | |||||||
State and local income taxes, net of federal benefit (1) | 3.1 | 0.4 | % | ||||||||
| Foreign tax effects | |||||||||||
| Switzerland | |||||||||||
Statutory tax rate difference between Switzerland and U.S. | 16.4 | 2.3 | % | ||||||||
| Changes in valuation allowances | (18.8) | (2.7) | % | ||||||||
Undistributed earnings | 19.8 | 2.8 | % | ||||||||
| Other | (11.2) | (1.6) | % | ||||||||
| Other foreign jurisdictions | 3.7 | 0.5 | % | ||||||||
| Effect of cross-border tax laws | |||||||||||
| Global intangible low-taxed income, net | 52.9 | 7.5 | % | ||||||||
Foreign tax credits | (7.9) | (1.1) | % | ||||||||
Other effects of cross-border tax laws total - below 1.05% | (0.5) | (0.1) | % | ||||||||
| Tax credits | |||||||||||
| Research and development tax credits | (35.6) | (5.0) | % | ||||||||
| Changes in valuation allowance | 7.7 | 1.1 | % | ||||||||
| Nontaxable or nondeductible items | |||||||||||
Officer compensation | 13.6 | 1.9 | % | ||||||||
Branded prescription drug fee | 7.5 | 1.1 | % | ||||||||
Other non-deductible and non-taxable total - below 1.05% | 8.3 | 1.2 | % | ||||||||
| Other | |||||||||||
Stock-based compensation expense (windfall/shortfall) | (13.7) | (1.9) | % | ||||||||
Basis difference in subsidiary held for sale | (15.7) | (2.2) | % | ||||||||
| Changes in unrecognized tax benefits | 49.1 | 7.0 | % | ||||||||
| Provision for income taxes | $ | 226.8 | 32.2 | % | |||||||
_________________________
(1) 50% or more of our state tax provision relates to the Tennessee and Kentucky state jurisdictions.
The provision for income taxes on earnings subject to income taxes differed from the statutory federal rate due to the following (prior to the adoption of ASU 2023-09):
Year Ended December 31, | |||||||||||
(dollars in millions) | 2024 | 2023 | |||||||||
Federal income taxes at 21% | $ | 102.1 | $ | 69.7 | |||||||
| State income tax, net of federal benefit | 34.6 | 17.5 | |||||||||
| Branded prescription drug fee | 7.5 | 8.7 | |||||||||
| Loss on extinguishment of convertible senior notes | 29.1 | — | |||||||||
| Stock-based compensation expense | (20.4) | (3.9) | |||||||||
| Officer compensation | 3.3 | 9.6 | |||||||||
Foreign rate differential | 7.2 | 3.4 | |||||||||
| Change in tax rate | (0.6) | (5.5) | |||||||||
| Research credits | (49.2) | (42.2) | |||||||||
| Change in valuation allowance | 23.9 | 22.0 | |||||||||
| Other | 7.2 | 3.1 | |||||||||
| Provision for income taxes | $ | 144.7 | $ | 82.4 | |||||||
The following table presents income taxes paid for 2025:
| (in millions) | Amount | ||||
U.S. Federal | $ | 72.7 | |||
Aggregated state and local jurisdictions (1) | 8.7 | ||||
Total income taxes paid, net | $ | 81.4 | |||
_________________________
(1) The amount of income taxes paid during 2025 did not meet the 5% disaggregation threshold.
The following table presents the significant components of our deferred tax assets:
December 31, | |||||||||||
| (in millions) | 2025 | 2024 | |||||||||
| Deferred tax assets: | |||||||||||
| Net operating losses | $ | 8.4 | $ | 50.5 | |||||||
| Research and development credits | 74.6 | 62.8 | |||||||||
| Capitalized research and development | 85.7 | 255.7 | |||||||||
| Stock-based compensation expense | 59.7 | 61.4 | |||||||||
| Operating lease assets | 111.8 | 122.7 | |||||||||
| Intangible assets | 117.0 | 121.4 | |||||||||
Accrued payroll | 27.2 | 24.1 | |||||||||
| Other | 55.0 | 27.6 | |||||||||
| Total deferred tax assets | 539.4 | 726.2 | |||||||||
| Deferred tax liabilities: | |||||||||||
| Operating lease liabilities | (96.9) | (112.8) | |||||||||
| Other | (24.9) | (15.5) | |||||||||
| Total deferred tax liabilities | (121.8) | (128.3) | |||||||||
| Net of deferred tax assets and liabilities | 417.6 | 597.9 | |||||||||
| Valuation allowance | (97.3) | (112.2) | |||||||||
| Net deferred tax assets | $ | 320.3 | $ | 485.7 | |||||||
As of December 31, 2025 and 2024, we recorded a valuation allowance of $97.3 million and $112.2 million, respectively, against our gross deferred tax asset balance.
As of each reporting date, management considers new evidence, both positive and negative, that could affect its assessment of the future realizability of our deferred tax assets. As of December 31, 2025, management determined there was sufficient positive evidence to conclude that it is more likely than not deferred tax assets of $320.3 million are realizable. The recorded valuation allowance of $97.3 million consisted primarily of unrealized capital losses, state net operating losses, and state research credit carryforwards for which management cannot conclude it is more likely than not to be realized.
As of December 31, 2025, we had state income tax net operating loss carryforwards of $279.0 million. We had no federal or foreign income tax operating loss carryforwards as of December 31, 2025. California net operating losses and net operating losses related to other states will begin to expire in 2032 and 2041, respectively, unless previously utilized.
As of December 31, 2025, we had state R&D tax credit carryforwards of $114.7 million. California R&D tax credits carry forward indefinitely, while R&D tax credits related to other states will begin to expire in 2034 unless previously utilized.
Additionally, the future utilization of our state net operating loss and R&D tax credit carryforwards to offset future taxable income may be subject to an annual limitation, pursuant to Internal Revenue Code Sections 382 and 383, as a result of ownership changes that could occur in the future. No ownership changes have occurred through December 31, 2025.
As of December 31, 2025, we have recorded a U.S. deferred income tax liability of $12.0 million on the unremitted earnings of certain foreign subsidiaries as we cannot assert these earnings are indefinitely reinvested in foreign operations.
The impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.
We recognize interest and penalties related to income tax matters in income tax expense. As of December 31, 2025 and 2024, we had accruals for interest related to income tax matters of $24.9 million and $10.9 million, respectively. In addition, we had accruals for penalties related to income tax matters of $3.8 million and $2.2 million, respectively, as of December 31, 2025 and 2024.
We are subject to taxation in the U.S. and various state and foreign jurisdictions. Our tax years for 2002 for federal, 2000 for California, 2015 for other significant state jurisdictions, and 2019 and forward for foreign jurisdictions are subject to examination by tax authorities due to the carryforward of net operating losses and R&D tax credits.
The IRS is currently examining the 2023 tax year. Management believes that an adequate provision has been made for any adjustments that may result from tax examinations. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the tax audits are resolved in a manner not consistent with management’s expectations, we could be required to adjust the provision for income taxes in the period such resolution occurs.
The following table presents a summary of activity related to unrecognized tax benefits:
Year Ended December 31, | |||||||||||||||||
| (in millions) | 2025 | 2024 | 2023 | ||||||||||||||
| Balance at January 1 | $ | 179.8 | $ | 121.0 | $ | 84.5 | |||||||||||
(Decrease) increase related to prior year tax positions | (11.2) | 4.0 | 3.4 | ||||||||||||||
| Increase related to current year tax positions | 51.3 | 54.8 | 36.7 | ||||||||||||||
Decrease related to prior year tax positions | — | — | (3.6) | ||||||||||||||
| Balance at December 31 | $ | 219.9 | $ | 179.8 | $ | 121.0 | |||||||||||
As of December 31, 2025, we had $177.6 million of unrecognized tax benefits that, if recognized and realized, would affect the effective tax rate, subject to changes in the valuation allowance.
On July 4, 2025, the One Big Beautiful Bill Act (the OBBBA) was signed into law. The OBBBA includes significant changes to U.S. tax and related laws. Some of the provisions of the OBBBA affecting us include the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act (TCJA), changes to the treatment of research and development expenditures under Internal Revenue Code Section 174, modifications to the Global Intangible Low-Taxed Income (GILTI) and Foreign-Derived Intangible Income (FDII) international tax provisions, and reinstatement of 100% bonus depreciation deduction from the TCJA for eligible property acquired after January 19, 2025. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. The OBBBA’s financial reporting implications have been recognized in our income tax provision for 2025.
Swiss Cantonal Tax Relief
In August 2025, the Company received approval from Swiss tax authorities granting cantonal tax relief to its Swiss subsidiary, Neurocrine Switzerland GmbH. The tax relief applies for a period of 10 tax years beginning with the 2024 tax year through 2033.
The Swiss cantonal tax relief had a minimal impact on the Company’s earnings per share for the year ended December 31, 2025.
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Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 11, 2026 | Showing above |
| 2024 | Feb 10, 2025 | |
| 2023 | Feb 9, 2024 | |
| 2022 | Feb 9, 2023 | |
| 2021 | Feb 11, 2022 | |
| 2020 | Feb 5, 2021 | |
| 2019 | Feb 7, 2020 | |
| 2018 | Feb 8, 2019 | |
| 2017 | Feb 13, 2018 | |
| 2016 | Feb 14, 2017 | |
| 2015 | Feb 11, 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.