18. INCOME TAXES

The Company’s (benefit) provision for income taxes is comprised of the following:

The income tax benefit in 2019 and the income tax provision in 2018 and 2017 were primarily due to U.S. federal and state taxes. The favorable change in income taxes in 2019, as compared to 2018, was primarily due the foreign derived intangible income proposed regulations issued by the U.S. Department of the Treasury and the U.S. Internal Revenue Service (“IRS”) in March 2019. The favorable change in income taxes in 2018, as compared to 2017, was due to the one-off nature of a $21.5 million tax expense in 2017 from the enactment of the Tax Cuts and Jobs Act, partially offset by increased taxes on income earned in the U.S.

No provision for income tax has been provided on undistributed earnings of the Company's foreign subsidiaries because such earnings are indefinitely reinvested in the foreign operations or may be repatriated to Ireland without incurring any tax liability. Cumulative unremitted earnings of overseas subsidiaries totaled approximately $418.1 million at December 31, 2019. In the event of a repatriation of those earnings in the form of dividends or otherwise, the Company may be liable for income taxes, subject to adjustment, if any, for foreign tax credits and foreign withholding taxes payable to foreign tax authorities. The Company estimates that approximately $12.9 million of income taxes would be payable on the repatriation of the unremitted earnings to Ireland.

The distribution of the Company’s loss before the (benefit) provision for income taxes by geographical area consisted of the following:

The components of the Company’s net deferred tax assets (liabilities) were as follows:

In February 2016 the FASB issued Topic 842, Leases, which includes the requirement for lessees to record a right-of-use asset and lease liability for virtually all leases. In addition, lessees are required to record deferred taxes resulting from any book versus tax basis differences upon the adoption of the standard. On January 1, 2019, the Company adopted this standard and recorded a cumulative-effect adjustment of $4.3 million to deferred tax asset in respect of the accrued lease liability and a $4.3 million deferred tax liability in respect of the right to use asset.  There was no net impact to the income statement or to equity as a result of the adoption.

The activity in the valuation allowance associated with deferred taxes consisted of the following:

At December 31, 2019, the Company maintained a valuation allowance of $17.3 million against certain U.S. state deferred tax assets and $224.8 million against certain Irish deferred tax assets as the Company has determined that it is more-likely-than-not that these net deferred tax assets will not be realized. If the Company demonstrates consistent profitability in the future, the evaluation of the recoverability of these deferred tax assets could change and the remaining valuation allowances could be released in part or in whole. If the Company incurs losses in the U.S. in the future, or experiences significant excess tax benefits arising from the future exercise of stock options and/or the vesting of RSUs, the evaluation of the recoverability of the U.S. deferred tax assets could change and a valuation allowance against the U.S. deferred tax assets may be required in part or in whole.

As of December 31, 2019, the Company had $1.5 billion of Irish NOL carryforwards, $49.5 million of U.S. federal NOL carryforwards, $44.5 million of state NOL carryforwards, $49.6 million of federal R&D credits and $18.0 million of state tax credits which will either expire on various dates through 2039 or can be carried forward indefinitely. These loss and credit carryforwards are available to reduce certain future Irish and foreign taxable income and tax. These loss and credit carryforwards are subject to review

and possible adjustment by the appropriate taxing authorities. These loss and credit carryforwards, which may be utilized in a future period, may be subject to limitations based upon changes in the ownership of the Company's ordinary shares.

As a result of the acquisition of Rodin, the Company acquired $51.4 million of U.S. federal NOL carryforwards, $43.3 million of state NOL carryforwards, $0.8 million of U.S. federal R&D credit carryforwards and $0.4 million of state R&D credit carryforwards. These attributes are subject to multiple limitations based upon prior changes in the ownership of the ordinary shares of Rodin.

A reconciliation of the Company’s statutory tax rate to its effective tax rate is as follows:

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

The unrecognized tax benefits at December 31, 2019, if recognized, would affect the Company's effective tax rate. The Company does not anticipate that the amount of existing unrecognized tax benefits will significantly increase or decrease within the next 12 months. The Company has elected to include interest and penalties related to uncertain tax positions as a component of its provision for taxes. For the years ended December 31, 2019, 2018 and 2017, the Company's accrued interest and penalties related to uncertain tax positions were not material.

The Company’s major taxing jurisdictions include Ireland and the U.S. (federal and state). These jurisdictions have varying statutes of limitations.  In the U.S., the 2016 through 2019 fiscal years remain subject to examination by the respective tax authorities. In Ireland, the years 2015 to 2019 remain subject to examination by the Irish tax authorities. Additionally, because of the Company’s Irish and U.S. loss carryforwards and credit carryforwards, certain tax returns from fiscal years 1999 onward may also be examined. These years generally remain open for three to four years after the loss carryforwards and credit carryforwards have been utilized.

The years ended December 31, 2018 and 2017 for Alkermes U.S. Holdings, Inc. are currently under examination by the State of California.  The years ended December 31, 2015 and 2014 for Alkermes U.S. Holdings, Inc. are currently under examination by the State of Illinois.  There are no uncertain tax positions or adjustments associated with the audits at this time.