v3.22.0.1

Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The domestic and foreign components of income (loss) before income taxes were as follows (in thousands):
| Year Ended December 31,
| 2019 | 2020 | 2021
Domestic | $ | (153,154) |  | $ | (4,509,519) |  | $ | (390,652) |
Foreign | (258,549) |  | (172,419) |  | 90,445 |
Loss before income taxes | $ | (411,703) |  | $ | (4,681,938) |  | $ | (300,207) |
The components of the provision for (benefit from) income taxes were as follows (in thousands):
| Year Ended December 31,
| 2019 | 2020 | 2021
Current |  |  |
Federal | $ | 223,673 |  | $ | (91,094) |  | $ | 4,704 |
State | 5,930 |  | (976) |  | 2,238 |
Foreign | 38,660 |  | 14,449 |  | 33,950 |
Total current provision for (benefit from) income taxes | 268,263 |  | (77,621) |  | 40,892 |
Deferred |  |  |
Federal | (1,563) |  | 47 |  | 98 |
State | (248) |  | 55 |  | — |
Foreign | (3,816) |  | (19,703) |  | 10,837 |
Total deferred benefit for income taxes | (5,627) |  | (19,601) |  | 10,935 |
Total provision for (benefit from) income taxes | $ | 262,636 |  | $ | (97,222) |  | $ | 51,827 |
The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate:
| Year Ended December 31,
| 2019 | 2020 | 2021
Expected income tax expense at federal statutory rate | 21.0 | % | 21.0 | % | 21.0 | %
State taxes, net of federal benefits | (0.2) |  | — |  | (0.7) |
Foreign tax rate differential | (19.5) |  | (0.5) |  | (5.1) |
Stock-based compensation | (0.9) |  | 7.1 |  | 282.4 |
Acquisition related expenses | (0.3) |  | — |  | — |
Deferred tax impacts of restructuring | — |  | 6.5 |  | (9.7) |
Other statutorily non-deductible expenses | (2.6) |  | (0.3) |  | (1.1) |
Non-deductible warrant revaluations | — |  | (3.9) |  | (20.4) |
Research and development credits | (0.9) |  | 4.3 |  | 51.0 |
Uncertain tax positions—prior year positions | (53.0) |  | (0.1) |  | (3.1) |
Uncertain tax positions—current year positions | (4.2) |  | (0.2) |  | (1.0) |
Other | 0.2 |  | 0.3 |  | 1.3 |
Change in valuation allowance | (3.4) |  | (32.1) |  | (331.9) |
Effective tax rate | (63.8) | % | 2.1 | % | (17.3) | %
For the year ended December 31, 2019, the difference in the Company’s effective tax rate and the U.S. federal statutory tax rate was primarily due to a change in the jurisdictional mix of earnings, the Company’s full valuation allowance on its U.S. deferred tax assets, and the Company’s uncertain tax positions. For the year ended December 31, 2020, the difference in the Company’s effective tax rate and the U.S. federal statutory tax rate was primarily due to the Company’s tax impact of restructuring and the IPO, and the Company’s full valuation allowance on its U.S. deferred tax assets. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted by the United States on March 27, 2020. The CARES Act contains certain tax provisions, including provisions that retroactively and/or temporarily suspend or relax in certain respects the application of certain provisions in the Act, such as the limitations on the deduction of net operating losses and interest. For the year ended December 31, 2020, the Company recorded a benefit of $95.6 million related to the carryback of its 2020 net operating loss. For the year ended December 31, 2021, the difference in the Company’s effective tax rate and the U.S. federal statutory tax rate was primarily due to the jurisdictional mix of earnings, excess tax benefits related to stock-based compensation, and the Company’s full valuation allowance on its U.S. deferred tax assets. The components of deferred tax assets and liabilities consisted of the following (in thousands):
| As of December 31,
| 2020 | 2021
Deferred tax assets: |  |
Net operating loss carryforwards | $ | 1,078,070 |  | $ | 1,987,606 |
Tax credit carryforwards | 333,991 |  | 568,468 |
Accruals and reserves | 70,130 |  | 105,530 |
Non-income tax accruals | 71,706 |  | 64,757 |
Stock-based compensation | 211,216 |  | 156,726 |
Operating lease liabilities | 94,840 |  | 86,690 |
Intangible assets | 274,396 |  | 210,057 |
Other | 53,477 |  | 155,020 |
Gross deferred tax assets | 2,187,826 |  | 3,334,854 |
Valuation allowance | (2,053,069) |  | (3,263,823) |
Total deferred tax assets | 134,757 |  | 71,031 |
Deferred tax liabilities: |  |
Property and equipment basis differences | (33,503) |  | (7,834) |
Operating lease assets | (72,659) |  | (48,628) |
Other | (3,091) |  | — |
Total deferred tax liabilities | (109,253) |  | (56,462) |
Total net deferred tax assets | $ | 25,504 |  | $ | 14,569 |
In the fourth quarter of 2020, the Company completed a restructuring plan to repatriate its intellectual property to the United States to align with its evolving operations in a post-COVID-19 environment. The Company recorded a U.S. deferred tax asset of $140.7 million from a step-up in the tax basis of certain repatriated intellectual property. Based on available objective evidence, management believed it was not more-likely-than-not that these additional U.S. deferred tax assets would be realizable as of December 31, 2020 and, therefore, these deferred tax assets were offset by a full valuation allowance. For the year ended December 31, 2020, the net increase in the Company’s valuation allowance compared to the prior year was primarily due to the 2020 net operating loss, an increase in tax credits generated, accruals and reserves, and stock-based compensation. For the year ended December 31, 2021, the increase in the Company’s valuation allowance compared to the prior year was primarily due to the 2021 net operating loss, an increase in tax credits generated, and business interest expenses subject to limitation. In determining the need for a valuation allowance, the Company weighs both positive and negative evidence in the various jurisdictions in which it operates to determine whether it is more likely than not that its deferred tax assets are recoverable. In assessing the ultimate realizability of its deferred tax assets, the Company considers all available evidence, including cumulative historic and forecasted losses, and as such, does not believe it is more likely than not that its U.S. deferred tax assets will be realized. Accordingly, a full valuation allowance has been established in the United States, and no deferred tax assets and related tax benefit have been recognized in the financial statements. There is no valuation allowance in certain foreign jurisdictions that have cumulative income and expected future income. The Company’s policy with respect to its undistributed foreign subsidiaries’ earnings is to consider those earnings to be indefinitely reinvested. The Company has not provided for the tax effect, if any, of limited outside basis differences of its foreign subsidiaries. The determination of the future tax consequences of the remittance of these earnings is not practicable. As of December 31, 2020 and 2021, the Company had net operating loss carryforwards for federal income tax purposes of $5.1 billion and $8.8 billion, respectively. Certain of the Company’s federal net operating loss carryforwards will expire, if not utilized, beginning in 2034. As of December 31, 2020 and 2021, the Company had federal research and development tax credit carryforwards of $287.0 million and $491.2 million, respectively. The research and development tax credits will expire beginning in 2034 if not utilized. As of December 31, 2020 and 2021, the Company had net operating loss carryforwards for state income tax purposes of $2.5 billion and $5.5 billion, respectively. The state net operating loss carryforwards will expire, if not utilized, beginning in 2033. As of December 31, 2020 and 2021, the Company had state research and development carryforwards and enterprise zone tax credit carryforwards of $200.8 million and $338.1 million, respectively. The research and development tax credits do not expire, and the enterprise zone tax credits will expire, if not utilized, beginning in 2023. The Tax Reform Act of 1986 and similar California legislation impose substantial restrictions on the utilization of net operating losses and tax credit carryforwards in the event that there is a change in ownership as provided by Section 382 of the Internal Revenue Code and similar state provisions. Such a limitation could result in the expiration of the net operating loss carryforwards and tax credits before utilization, which could result in increased future tax liabilities. A reconciliation of the beginning and ending amount of the Company’s total gross unrecognized tax benefits was as follows (in thousands):
| Year Ended December 31,
| 2019 | 2020 | 2021
Balance at beginning of period | $ | 69,837 |  | $ | 336,726 |  | $ | 507,865 |
Gross increases related to prior year tax positions | 237,972 |  | 2,223 |  | 13,568 |
Gross decreases related to prior year tax positions | (5,029) |  | (5,970) |  | (1,772) |
Gross increases related to current year tax positions | 36,502 |  | 196,492 |  | 84,990 |
Reductions due to settlements with taxing authorities | (2,296) |  | (21,240) |  | (1,313) |
Reduction due to lapse in statute of limitations | (260) |  | (366) |  | (6,776) |
Balance at end of period | $ | 336,726 |  | $ | 507,865 |  | $ | 596,562 |
The Company is in various stages of examination in connection with its ongoing tax audits globally, and it is difficult to determine when these examinations will be settled. The Company believes that an adequate provision has been recorded for any adjustments that may result from tax audits. However, the outcome of tax audits cannot be predicted with certainty. If any issues addressed in the Company’s tax audits are resolved in a manner not consistent with management’s expectations, the Company may be required to record an adjustment to the provision for (benefit from) income taxes in the period such resolution occurs. Changes in tax laws, regulations, administrative practices, principles, and interpretations may impact the Company’s tax contingencies. The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that within the next twelve months the Company may experience an increase or decrease in its unrecognized tax benefits as a result of additional assessments by various tax authorities, possibly reach resolution of income tax examinations in one or more jurisdictions, or lapses of the statute of limitations. However, an estimate of the range of the reasonably possible change in the next twelve months cannot be made. As of December 31, 2021, $195.2 million of unrecognized tax benefits represents the amount that would, if recognized, impact the Company’s effective income tax rate. In accordance with the Company’s accounting policy, it recognizes accrued interest and penalties related to unrecognized tax benefits in the provision for (benefit from) income taxes. The Company’s accrual for interest and penalties was $52.2 million and $58.7 million as of December 31, 2020 and 2021, respectively. The Company’s significant tax jurisdictions include the United States, California, and Ireland. The Company is currently under examination for income taxes by the Internal Revenue Service (“IRS”) for the 2013, 2016, 2017, and 2018 tax years. The primary issue under examination in the 2013 audit is the valuation of the Company’s international intellectual property which was sold to a subsidiary in 2013. In the year ended December 31, 2019, new information became available which required the Company to remeasure its reserve for unrecognized tax benefits. The Company recorded additional tax expense of $196.4 million during the year ended December 31, 2019. In December 2020, the Company received a Notice of Proposed Adjustment (“NOPA”) from the IRS which proposes an increase to the Company’s U.S. taxable income that could result in additional income tax expense and cash liability of $1.3 billion, plus penalties and interest, which exceeds its current reserve recorded in its consolidated financial statements by more than $1.0 billion. The Company disagrees with the proposed adjustment and intends to vigorously contest it. In February 2021, the Company submitted a protest to the IRS describing its disagreement with the proposed agreement and requesting the case to be transferred to IRS Independent Office of Appeals (“IRS Appeals”). In December 2021, the Company received a rebuttal from the IRS with the same proposed adjustments that were in the NOPA. The Company will continue to pursue all available remedies to resolve this dispute, which include: entering into administrative settlement discussions with the IRS Appeals in 2022, and if necessary, petitioning the U.S. Tax Court (“Tax Court”) for redetermination if an acceptable outcome cannot be reached with IRS Appeals, and finally, and if necessary, appealing the Tax Court’s decision to the appropriate appellate court. The Company believes that adequate amounts have been reserved for any adjustments that may ultimately result from these examinations. If the IRS prevails in the assessment of additional tax due based on its position and such tax and related interest and penalties, if any, exceeds the Company’s current reserves, such outcome could have a material adverse impact on the Company’s financial position and results of operations, and any assessment of additional tax could require a significant cash payment and have a material adverse impact on the Company’s cash flow. On July 27, 2015, the United States Tax Court (the “Tax Court”) issued an opinion in Altera Corp. v. Commissioner (the “Tax Court Opinion”), which concluded that related parties in a cost sharing arrangement are not required to share expenses related to stock-based compensation. The Tax Court Opinion was appealed by the Commissioner to the Ninth Circuit Court of Appeals (the “Ninth Circuit”). On June 7, 2019, the Ninth Circuit issued an opinion (the “Ninth Circuit Opinion”) that reversed the Tax Court Opinion. On July 22, 2019, Altera Corp. filed a petition for a rehearing before the full Ninth Circuit. On November 12, 2019, the Ninth Circuit denied Altera Corp.’s petition for rehearing its case. The Company accordingly recognized tax expense of $26.6 million related to changes in uncertain tax positions during the year ended December 31, 2019. The Company reversed this expense entirely during the year ended December 31, 2020 due to the carryback of its 2020 net operating loss as allowable under the CARES Act. The Company’s 2008 to 2021 tax years remain subject to examination in the United States and California due to tax attributes and statutes of limitations, and its 2017 to 2021 tax years remain subject to examination in Ireland. There are other ongoing audits in various other jurisdictions that are not material to the Company’s financial statements. The Company remains subject to possible examination in various other jurisdictions that are not expected to result in material tax adjustments.

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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://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI http://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI http://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI http://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI http://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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