Entity information:
Income Taxes
The benefit from (provision for) income taxes for continuing operations in 2017, 2016 and 2015 consists of current and deferred federal, state and foreign taxes based on income as follows:
 
2017
 
2016
 
2015
 
(In thousands)
Current:
 
 
 
 
 
Federal
$
4,859

 
$
—

 
$
(5
)
State
(31
)
 
(33
)
 
(182
)
Foreign
1,757

 
(34
)
 
(229
)
 
6,585

 
(67
)
 
(416
)
Deferred:
 
 
 
 
 
Federal
$
88,556

 
$
—

 
$
28,011

State
1,435

 
—

 
2,138

Foreign
—

 
—

 
—

 
89,991

 
—

 
30,149

Total benefit from (provision for) taxes
$
96,576

 
$
(67
)
 
$
29,733


The Company’s deferred benefit from income taxes of $89.9 million was primarily attributable to a reduction in the Company’s recorded valuation allowance against its deferred tax assets as a result of the commencement of amortization of IPR&D associated with Vabomere upon approval by the FDA and the impairment of IPR&D associated with MDCO-700.
The components of (loss) income from continuing operations attributable to The Medicines Company before income taxes consisted of:
 
2017
 
2016
 
2015
 
(In thousands)
Domestic
$
(704,814
)
 
$
22,289

 
$
(163,772
)
International
543

 
(1,712
)
 
(757
)
Total
$
(704,271
)
 
$
20,577

 
$
(164,529
)

The difference between tax expense and the amount computed by applying the statutory federal income tax rate of 35% in 2017, 2016, and 2015 to income before income taxes is as follows:
 
Year Ended December 31,
 
2017
 
2016
 
2015
 
(In thousands)
Statutory rate applied to pre-tax (loss) income from continuing operations
$
(246,495
)
 
$
7,202

 
$
(57,589
)
(Deduct) add:
 

 
 

 
 

State income taxes, net of federal benefit
(913
)
 
21

 
(1,273
)
Foreign
53

 
442

 
287

Revaluation of contingent purchase price
(5,366
)
 
(10,244
)
 
10,272

Tax credits
(3,539
)
 
(967
)
 
(305
)
Lobbying costs
—

 
—

 
35

Meals and entertainment
372

 
605

 
810

Uncertain tax positions
(1,635
)
 
(2,064
)
 
61

Bargain purchase
—

 
—

 
(7,310
)
Loss on extinguishment of debt
—

 
1,403

 
—

Loss on ACC goodwill
—

 
11,834

 
—

Excess stock option benefit
(4,589
)
 
—

 
—

Change in federal tax rate due to the Tax Cuts and Jobs Act
126,502

 
—

 
—

Other
785

 
(485
)
 
1,239

Tax benefit of operating loss carryforwards
11,509

 
(105,045
)
 
—

Valuation allowances
26,740

 
97,365

 
24,040

Income tax benefit
$
(96,576
)
 
$
67

 
$
(29,733
)

The significant components of the Company’s deferred tax assets are as follows:
 
December 31,
 
2017
 
2016
 
(In thousands)
Deferred tax assets:
 
 
 
Net operating loss carryforwards
$
235,852

 
$
230,775

Tax credits
20,096

 
20,973

Stock based compensation
19,611

 
28,268

Other
26,113

 
26,889

Total deferred tax assets
301,672

 
306,905

Valuation allowance
(239,536
)
 
(162,892
)
Total deferred tax assets net of valuation allowance
62,136

 
144,013

Deferred tax liabilities:
 
 
 
Fixed assets
$
(568
)
 
$
(4,997
)
Intangible assets
(30,664
)
 
(81,877
)
Convertible debt
(30,904
)
 
(57,430
)
Indefinite lived intangible assets
—

 
(89,701
)
Total deferred tax liabilities
(62,136
)
 
(234,005
)
Net deferred tax liabilities
$
—

 
$
(89,992
)

During 2017 and 2016, the Company recorded a net increase to its valuation allowance of $76.6 million and $95.0 million, respectively. At December 31, 2017 and 2016, the Company recorded a valuation allowance of $239.5 million and $162.9 million respectively, principally against net operating loss carryforwards in domestic and foreign jurisdictions. The Company considered positive and negative evidence including its level of past and future operating income, the utilization of carryforwards, the status of litigation with respect to the Angiomax patents and other factors in arriving at its decision to recognize its deferred tax assets. The Company continues to evaluate the realizability of its deferred tax assets and liabilities on a periodic basis 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 tax authorities, the progress of ongoing tax audits, the regulatory approval of products currently under development and the extension of patent rights relating to Angiomax. Any changes to the valuation allowance or deferred tax assets in the future would impact the Company’s effective tax rate.
On December 22, 2017, the “Tax Cuts and Jobs Act” (TCJA) was enacted which significantly reforms the Internal Revenue Code of 1986, as amended. The TCJA, among other things, reduces the U.S. federal corporate tax rate from 35% to 21%, repeals the corporate alternative minimum tax (AMT), imposes additional limitations on the deductibility of interest, allows for the expensing of capital expenditures, and puts into effect the migration from a “worldwide” system of taxation to a territorial system. As a result of this legislation, the Company remeasured its deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, which is generally 21%. However, the Company is still analyzing certain aspects of the TCJA and refining its calculations, which could potentially affect the measurement of these balances or potentially give rise to new deferred tax amounts. The provisional amount recorded related to the remeasurement of the Company’s deferred tax balances was $126.5 million which was offset fully by the provisional amount recorded related to the reversal of previously established valuation allowances against these deferred tax balances. The TCJA also permits any remaining AMT tax attribute carryforwards to be used to offset future taxable income and/or be refundable over the next several years. As a result, the Company recognized a provisional benefit of $4.9 million during the year ended December 31, 2017 related to the reversal of a previously established valuation allowance against its AMT tax attribute carryforwards and the related refundable amount has been classified in other assets in the accompanying consolidated balance sheet. In addition, based on its preliminary analysis, the Company does not believe that it has offshore earnings that would be subject to the mandatory transition tax.

While the Company has completed its provisional analysis of the income tax effects of the TCJA and recorded a reasonable estimate of such effects, the amounts recorded related to the TCJA may differ, possibly materially, due to, among other things, further refinement of the Company’s calculations, changes in interpretations and assumptions that the Company has made, additional guidance that may be issued by the U.S. Government, and actions and related accounting policy decisions the Company may take as a result of the TCJA. The Company will complete its analysis over a one-year measurement period ending no later than December 22, 2018, and any adjustments during this measurement period will be included in loss from continuing operations as an adjustment to income tax expense/benefit in the reporting period when such adjustments are determined.
In 1998 and 2002, the Company experienced a change in ownership as defined in Section 382 of the Internal Revenue Code. However, based on the market value of the Company at such dates, the Company believes that these ownership changes will not significantly impact its ability to use net operating losses or tax credits in the future to offset taxable income. During 2013 the Company acquired the stock of Incline and became the successor of certain net operating losses and tax credit carryforwards. These tax attributes are also subject to a limitation under Internal Revenue Code Section 382 and these amounts, combined with those of the Company in the table below, have been reduced appropriately for such utilization limitations. In addition, utilization of these net operating loss and tax credit carryforwards is dependent upon the Company achieving profitable results. To the extent the Company’s use of net operating loss and tax credit carryforwards is further limited by Section 382 as a result of any future ownership changes, the Company’s income would be subject to cash payments of income tax earlier than it would if the Company was able to fully use its net operating loss and tax credit carryforwards in the U.S.
At December 31, 2017, the Company has federal net operating loss carryforwards available to reduce taxable income and federal research and development tax credit carryforwards available to reduce future tax liabilities. They expire approximately as follows:
Year of Expiration
 
Federal Net
Operating Loss
Carryforwards
 
Federal Research
and Development
Tax Credit
Carryforwards
 
 
(In thousands)
2027
 
$
6,256

 
$
840

2028
 
38,954

 
2,108

2029
 
4,755

 
1,149

2030
 
1,030

 
1,162

2031
 
605

 
3,097

2032
 
1,533

 
3,666

2033
 
37,209

 
3,178

2034
 
4,353

 
1,861

2035
 
195,416

 
752

2036
 
293,661

 
1,739

2037
 
423,531

 
3,515

 
 
$
1,007,303

 
$
23,067


At December 31, 2017 the Company has the following additional carryforwards: Refundable Alternative Minimum Tax Credits of $4.9 million with no expiration date and foreign net operating losses of approximately $49.5 million. The foreign net operating losses expire in varying amounts beginning in 2018.
The Company does not anticipate a significant change in its unrecognized tax benefits in the next twelve months. The Company is no longer subject to federal, state or foreign income tax audits for tax years prior to 2013. However applicable taxing authorities can review and adjust net operating loss or tax credit carryforwards originating in a closed tax year if utilized in an open tax year. The Company concluded an audit of its 2010 Italy tax filing resulting in a tax assessment of approximately $0.5 million. During 2017, the Company reduced its liability for unrecognized tax benefits by approximately $1.4 million for the difference between the amount previously accrued and the final assessment resulting from that audit. The Company is not under examination by any taxing authorities. However, while tax examinations are often complex, as tax authorities may disagree with the treatment of items reported requiring several years to resolve, the Company believes that it has adequately provided for all uncertain tax provisions for open tax years by tax jurisdiction. The Company classifies interest and penalties related to unrecognized tax benefits in income tax expense. The Company has not accrued any interest or penalties as of December 31, 2017. The total amount of unrecognized tax benefits that, if recognized, would affect the Company’s effective tax rate was $0.0 million, $1.9 million and $1.9 million as of December 31, 2017, 2016 and 2015.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
 
Gross
Unrecognized
Tax Benefits
 
(In thousands)
Balance at January 1, 2015
$
8,022

Additions related to current year tax positions
61

Balance at December 31, 2015
8,083

Additions related to current year tax positions
193

Balance at December 31, 2016
6,018

Additions related to current year tax positions
708

Reductions for prior year tax positions
(2,843
)
Balance at December 31, 2017
$
3,883


The Company provides income taxes on the earnings of foreign subsidiaries to the extent those earnings are taxable or are expected to be remitted. As of December 31, 2017, the Company’s accumulated foreign unremitted earnings have been immaterial. The Company’s policy is to invest indefinitely its unremitted foreign earnings outside the United States.