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Income Taxes | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
Income Taxes | (9) Income Taxes U.S. and international components of income before income taxes (in thousands) were comprised of the following for the periods indicated:
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  |  |  |  |  |  |  |  |  | (as adjusted) |
U.S. |  | $ | 9,944 |  |  | $ | (18,295 | ) |  | $ | 18,814 |
Foreign |  |  | 28,319 |  |  |  | 38,777 |  |  |  | 52,660 |
Total |  | $ | 38,263 |  |  | $ | 20,482 |  |  | $ | 71,474 |
The provision for (benefit from) income taxes (in thousands) consisted of the following for the periods indicated:
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  |  |  |  |  |  |  |  |  | (as adjusted) |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 1,256 |  |  | $ | (1,916 | ) |  | $ | 48,794 |
State |  |  | 143 |  |  |  | 1,656 |  |  |  | 4,077 |
Foreign |  |  | 5,135 |  |  |  | 6,460 |  |  |  | 4,074 |
|  | $ | 6,534 |  |  | $ | 6,200 |  |  | $ | 56,945 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | (749 | ) |  | $ | (6,071 | ) |  | $ | (1,649 | )
State |  |  | (480 | ) |  |  | (2,047 | ) |  |  | (1,260 | )
Foreign |  |  | (1,397 | ) |  |  | (101 | ) |  |  | (757 | )
|  | $ | (2,626 | ) |  | $ | (8,219 | ) |  | $ | (3,666 | )
Total provision (benefit) |  | $ | 3,908 |  |  | $ | (2,019 | ) |  | $ | 53,279 |
The provision for (benefit from) income taxes differs from the amount computed by applying the federal statutory income tax rate to the Company’s income before income taxes as follows for the periods indicated:
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  |  |  |  |  |  |  |  |  | (as adjusted) |
Income tax expense at federal statutory rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 35.0 | %
State taxes, net of federal tax effect |  |  | (1.7 | )% |  |  | (1.3 | )% |  |  | 2.5 | %
Foreign earnings taxed at different rates |  |  | (6.1 | )% |  |  | (20.5 | )% |  |  | (24.2 | )%
Book tax difference in amortization of intangible property |  |  | (4.6 | )% |  |  | 0.0 | % |  |  | 0.0 | %
Withholding tax |  |  | 3.1 | % |  |  | 5.5 | % |  |  | 1.9 | %
Foreign tax credit |  |  | (3.0 | )% |  |  | (5.2 | )% |  |  | (1.1 | )%
Other international components |  |  | 0.2 | % |  |  | 0.3 | % |  |  | 0.0 | %
Change in valuation allowance |  |  | 1.6 | % |  |  | 2.5 | % |  |  | 0.2 | %
Deferred tax adjustments and rate changes |  |  | 1.0 | % |  |  | (1.7 | )% |  |  | 4.0 | %
Meals and entertainment |  |  | 1.3 | % |  |  | 2.6 | % |  |  | 0.7 | %
Non-deductible officers compensation |  |  | 1.4 | % |  |  | 2.1 | % |  |  | 0.0 | %
Section 199 deduction |  |  | 0.0 | % |  |  | 0.0 | % |  |  | (1.4 | )%
Subpart F income |  |  | 3.2 | % |  |  | 7.0 | % |  |  | 1.5 | %
Research and development tax credit |  |  | (9.3 | )% |  |  | (11.8 | )% |  |  | (1.1 | )%
Stock compensation |  |  | 1.8 | % |  |  | 5.8 | % |  |  | 0.6 | %
GILTI, net of foreign tax credit |  |  | 0.9 | % |  |  | 0.5 | % |  |  | 0.0 | %
FDII |  |  | (1.9 | )% |  |  | (4.5 | )% |  |  | 0.0 | %
Transition Tax |  |  | 0.0 | % |  |  | (15.2 | )% |  |  | 55.4 | %
Other permanent differences |  |  | 1.3 | % |  |  | 3.0 | % |  |  | 0.5 | %
Total |  |  | 10.2 | % |  |  | (9.9 | )% |  |  | 74.5 | %
The Company’s U.S. and foreign effective tax rates for income before income taxes were as follows for the periods indicated:
|  | Years Ended December 31, |
|  | 2019 |  |  | 2018 |  |  | 2017 |
|  |  |  |  |  |  |  |  |  | (as adjusted) |
U.S. |  |  | 1.7 | % |  |  | 45.8 | % |  |  | 265.6 | %
Foreign |  |  | 13.2 | % |  |  | 16.4 | % |  |  | 6.3 | %
Combined |  |  | 10.2 | % |  |  | (9.9 | )% |  |  | 74.5 | %
The change in the Company’s effective tax rate in 2019, as compared to the prior year, was primarily due to the change in the proportion of U.S. versus foreign income and the benefit from the $3.1 million measurement-period adjustment discussed below. The Tax Act imposed a Transition Tax on previously untaxed accumulated and current earnings and profits of certain of the Company’s foreign subsidiaries. The Company recorded a final tax expense of $37.2 million related to the Transition Tax, comprised of a provisional Transition Tax obligation of $40.3 million in 2017 and a subsequent $(3.1) million measurement-period adjustment in 2018. As of December 31, 2019, $28.9 million of the Transition Tax was unpaid, of which $28.0 million is included in “Other long-term liabilities” and $0.9 million is included in “Accounts payable, accrued expenses, and operating lease liabilities” in the Company’s Consolidated Balance Sheets. The Tax Act also reduced the U.S. corporate tax rate from 35% to 21%, effective January 1, 2018. Consequently, the Company recorded a decrease related to its U.S. deferred tax assets and liabilities, with a corresponding net deferred income tax expense of $3.7 million for the year ended December 31, 2017 as a result of re-measuring net deferred tax assets at the new lower corporate tax rate of 21%. Additionally, the Tax Act requires certain Global Intangible Low Income (“GILTI”) earned by a controlled foreign corporation (“CFC”) to be included in the gross income of the CFC’s U.S. shareholder. The Company has elected the “period cost method” and treats taxes due on future U.S. inclusions in taxable income related to GILTI as a current-period expense when incurred. The Tax Act allows a U.S. corporation a deduction equal to a certain percentage of its foreign-derived intangible income (“FDII”). The Company estimated the impact of the GILTI tax and FDII deduction in determining its 2019 annual effective tax rate that is reflected in its provision for income taxes for the year ended December 31, 2019. As of December 31, 2019 and 2018, the amount of cash and cash equivalents and short-term investments held by the Company’s U.S. entities was $289.4 million and $173.6 million, respectively, and by the Company’s non-U.S. entities was $276.2 million and $402.5 million, respectively. The Company earns a significant amount of its revenues outside the United States and its accumulated foreign earnings and profits as of December 31, 2019 and 2018 were $431.2 million and $397.4 million, respectively. As of December 31, 2019, the Company intends to indefinitely reinvest $231.2 million of its undistributed foreign earnings. This amount takes into consideration a repatriation the Company made during 2019. After taking into account the Transition Tax, the Company estimates such repatriation generated only an immaterial U.S. tax expense related to U.S. state income taxes. Deferred income taxes reflect the net tax effects of the temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities (in thousands) were as follows for the periods indicated:
|  | December 31, |
|  | 2019 |  |  | 2018 |
Deferred tax assets, net: |  |  |  |  |  |  |  |
Net operating loss carryforwards |  | $ | 874 |  |  | $ | 841 |
Tax credits |  |  | 2,553 |  |  |  | 1,839 |
Intangible assets |  |  | 1,878 |  |  |  | 0 |
Deferred revenue adjustment |  |  | 423 |  |  |  | 543 |
Accrued compensation |  |  | 6,257 |  |  |  | 6,519 |
Share-based compensation expense |  |  | 14,182 |  |  |  | 12,987 |
Deferred rent |  |  | 1,330 |  |  |  | 1,764 |
Other |  |  | 1,453 |  |  |  | 2,115 |
Deferred tax assets before valuation allowance |  |  | 28,950 |  |  |  | 26,608 |
Valuation allowance |  |  | (2,130 | ) |  |  | (1,507 | )
Deferred tax assets, net of valuation allowance |  |  | 26,820 |  |  |  | 25,101 |
Deferred tax liabilities: |  |  |  |  |  |  |  |
Prepaid expenses and other |  |  | 1,693 |  |  |  | 1,049 |
Property and equipment |  |  | 5,092 |  |  |  | 5,841 |
Method change |  |  | 652 |  |  |  | 932 |
Total deferred tax liabilities |  |  | 7,437 |  |  |  | 7,822 |
Total net deferred tax asset |  | $ | 19,383 |  |  | $ | 17,279 |
Reported as: |  |  |  |  |  |  |  |
Non-current deferred tax assets, net |  |  | 19,409 |  |  |  | 17,316 |
Non-current deferred tax liabilities |  |  | (26 | ) |  |  | (37 | )
Total net deferred tax asset |  | $ | 19,383 |  |  | $ | 17,279 |
As of December 31, 2019, the Company had unrecognized income tax benefits of $1.7 million, recorded in “Other long-term liabilities” in the Company’s Consolidated Balance Sheets. The change in unrecognized income tax benefits (in thousands) is presented in the table below:
Unrecognized income tax benefits at January 1, 2019 |  | $ | 4,059 |
Increase related to positions taken in prior period |  |  | 26 |
Increase related to positions taken in current period |  |  | 315 |
Decrease related to expiration of statute of limitations |  |  | (2,837 | )
Unrecognized income tax benefits at December 31, 2019 |  |  | 1,563 |
Accrued interest |  |  | 163 |
Unrecognized income tax benefits recorded in other long-term liabilities at December 31, 2019 |  | $ | 1,726 |
If recognized, $1.6 million of the gross unrecognized income tax benefits would impact the Company’s effective tax rate. Over the next 12 months, the amount of the Company’s liability for unrecognized income tax benefits shown above is not expected to change materially. The Company recognizes estimated accrued interest related to unrecognized income tax benefits in the provision for (benefit from) income taxes. During the years ended December 31, 2019, 2018, and 2017, the Company released or recognized an immaterial amount of accrued interest. The amount of accrued interest related to the above unrecognized income tax benefits was approximately $0.2 million and $0.7 million as of December 31, 2019 and 2018, respectively. The Company files tax returns in numerous foreign countries as well as the United States and its tax returns may be subject to audit by tax authorities in all countries in which it files. Each country has its own statute of limitations for making assessment of additional tax liabilities. In 2018, the Company settled the tax examination in China for tax years 2008 to 2016 without any material audit assessments. In 2019, the Company settled the tax examination in Italy for tax years 2013 to 2015 without any material audit assessments. The Company’s U.S. tax returns for tax years from 2016 and forward are subject to potential examination by the Internal Revenue Service. However, due to the Company’s use of state NOL carryovers in the United States, state tax authorities may attempt to reduce or fully offset the amount of state NOL carryovers from tax years ended 2011 and forward that the Company used in later tax years. The Company’s major foreign tax jurisdictions and the tax years that remain subject to potential examination are Poland for tax years 2015 and forward; Spain, Germany, and Italy for tax years 2016 and forward, and the United Kingdom for tax years 2018 and forward. To date there have been no material audit assessments related to audits in the United States or any of the applicable foreign jurisdictions. The Company had no U.S. NOL carryforwards as of December 31, 2019 and 2018. The Company had $4.1 million and $3.6 million of foreign NOL carryforwards as of December 31, 2019 and 2018, respectively. The Company’s valuation allowances of $2.1 million and $1.5 million at December 31, 2019 and 2018, respectively, primarily relate to certain foreign tax credit carryforward tax assets that, in the Company’s present estimation, more likely than not will not be realized. In determining the Company’s provision for (benefit from) income taxes, net deferred tax assets, liabilities, and valuation allowances, management is required to make estimates and judgments related to projections of domestic and foreign profitability, the timing and extent of the utilization of NOL carryforwards, applicable tax rates, transfer pricing methods, and prudent and feasible tax planning strategies. As a multinational company, the Company is required to calculate and provide for estimated income tax liabilities for each of the tax jurisdictions in which it operates. This process involves estimating current tax obligations and exposures in each jurisdiction, as well as making judgments regarding the future recoverability of deferred tax assets. Changes in the estimated level of annual pre-tax income, changes in tax laws, particularly changes related to the utilization of NOLs in various jurisdictions, and changes resulting from tax audits can all affect the overall effective income tax rate which, in turn, impacts the overall level of income tax expense or benefit and net income. Estimates and judgments related to the Company’s projections and assumptions are inherently uncertain. Therefore, actual results could differ materi ally from projections. Currently, the Company expects to use its deferred tax assets, subject to Internal Revenue Code limitations, within the carryforward periods. Valuation allowances have been established where the Company has concluded that it is more likely than not that such deferred tax assets are not realizable. If the Company is unable to sustain or increase profitability in future periods, it may be required to increase the valuation allowance against the deferred tax assets, which could result i n a charge that would materially adversely affect net income in the period in which the charge is incurred.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 + Details
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