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INCOME TAXES | 12 Months Ended
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Dec. 31, 2019
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of the provision for income taxes attributable to operations consist of the following (in thousands):
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
Current: |  |  |  |  |
Federal | $ | 53,039 |  |  | $ | 36,167 |  |  | $ | 41,453 |
State | 13,422 |  |  | 5,140 |  |  | 3,518 |
Foreign | 1,305 |  |  | 708 |  |  | 295 |
Total current | 67,766 |  |  | 42,015 |  |  | 45,266 |
Deferred: |  |  |  |  |  |  |  |
Federal | 6,881 |  |  | 6,576 |  |  | (7,917 | )
State | 2,424 |  |  | (2,582 | ) |  | 4,695 |
Foreign | (1,085 | ) |  | (328 | ) |  | 319 |
Total deferred | 8,220 |  |  | 3,666 |  |  | (2,903 | )
Total provision for income taxes | $ | 75,986 |  |  | $ | 45,681 |  |  | $ | 42,363 |
The components of deferred tax assets and liabilities consist of the following (in thousands):
| December 31,
| 2019 |  | 2018
Deferred tax assets: |  |  |
Reserve for bad debts | 1,312 |  |  | 1,457 |
Accrued compensation | 4,297 |  |  | 4,803 |
Stock compensation | 13,877 |  |  | 10,041 |
Net operating losses | 20,555 |  |  | 26,349 |
Accrued reserve and other | 4,177 |  |  | 1,773 |
Lease liabilities | 36,472 |  |  | — |
Deferred rent | — |  |  | 5,928 |
Deferred gain on the sale of building | — |  |  | 4,140 |
Research and development credits | 6,341 |  |  | 6,331 |
Total deferred tax assets, prior to valuation allowance | 87,031 |  |  | 60,822 |
Valuation allowance | (13,553 | ) |  | (14,246 | )
Total deferred tax assets, net of valuation allowance | 73,478 |  |  | 46,576 |
Deferred tax liabilities: |  |  |  |  |
Deferred commission costs, net | (22,612 | ) |  | (19,314 | )
Lease right-of-use assets | (30,830 | ) |  | — |
Prepaid expenses | (1,548 | ) |  | (2,204 | )
Property and equipment, net | (8,891 | ) |  | (5,367 | )
Intangible assets, net | (91,285 | ) |  | (82,079 | )
Total deferred tax liabilities | (155,166 | ) |  | (108,964 | )
Net deferred tax assets (liabilities) | $ | (81,688 | ) |  | $ | (62,388 | )
As of December 31, 2019 and 2018, a valuation allowance has been established for certain deferred tax assets due to the uncertainty of realization. The valuation allowance as of December 31, 2019 and 2018 includes an allowance for unrealized losses on ARS investments, foreign deferred tax assets and state net operating losses and tax credits. The valuation allowance for the deferred tax asset for unrealized losses on ARS has been recorded as an adjustment to accumulated other comprehensive loss. The Company established the valuation allowance because it is more likely than not that a portion of the deferred tax asset for certain items will not be realized based on the weight of available evidence. A valuation allowance was established for the unrealized losses on securities as the Company has not historically generated capital gains, and it is uncertain whether the Company will generate sufficient capital gains in the future to absorb the capital losses. A valuation allowance was established for the foreign deferred tax assets due to the cumulative loss in recent years in those jurisdictions. The Company has not had sufficient taxable income historically to utilize the foreign deferred tax assets, and it is uncertain whether the Company will generate sufficient taxable income in the future to utilize the deferred tax assets. Similarly, the Company has established a valuation allowance for net operating losses and tax credits in certain states where it is uncertain whether the Company will generate sufficient taxable income to utilize the net operating losses and tax credits before they expire. The Company’s change in valuation allowance was a decrease of approximately $0.7 million for the year ended December 31, 2019 and an increase of approximately $1 million for the year ended December 31, 2018. The decrease for the year ended December 31, 2019 is due to a decrease in foreign net operating loss deferred tax assets for which a full valuation allowance of approximately $1.1 million had been established, partially offset by an increase in the valuation allowance for state tax credits related to the D.C. qualified high technology company credit of approximately $0.4 million. The increase for the year ended December 31, 2018 is due to an increase in the valuation allowance for state tax credits related to the D.C. qualified high technology company credit of approximately $1 million. The Company had U.S. income before income taxes of approximately $403 million, $294 million and $167 million for the years ended December 31, 2019, 2018 and 2017, respectively. The Company had foreign losses before income taxes of approximately $12 million, $10 million, and $2 million for the years ended December 31, 2019, 2018 and 2017, respectively. The Company’s provision for income taxes resulted in effective tax rates that varied from the statutory federal income tax rate as follows (in thousands):
| Year Ended December 31,
| 2019 |  | 2018 |  | 2017
Expected federal income tax provision at statutory rate | $ | 82,099 |  |  | $ | 59,643 |  |  | $ | 57,770 |
State income taxes, net of federal benefit | 14,884 |  |  | 10,312 |  |  | 4,776 |
Foreign income taxes, net effect | 1,515 |  |  | (315 | ) |  | (3,540 | )
Increase (decrease) in valuation allowance | (693 | ) |  | 1,214 |  |  | 3,624 |
Tax rate changes | (13 | ) |  | 141 |  |  | (7,340 | )
Research credits | (12,188 | ) |  | (15,373 | ) |  | (20,547 | )
Excess tax benefit | (15,282 | ) |  | (14,227 | ) |  | (7,010 | )
Tax reserves | 3,135 |  |  | 1,870 |  |  | 12,646 |
Other adjustments | 2,529 |  |  | 2,416 |  |  | 1,984 |
Income tax expense | $ | 75,986 |  |  | $ | 45,681 |  |  | $ | 42,363 |
Certain of the Company’s U.K. subsidiaries with foreign losses are disregarded entities for U.S. income tax purposes. Accordingly, the losses from these disregarded entities are included in the Company’s consolidated federal income tax provision at the statutory rate. Federal income taxes attributable to income from these disregarded entities are reduced by foreign taxes paid by those disregarded entities. The Company has net operating loss carryforwards for international income tax purposes of approximately $45 million, which do not expire. The Company has federal net operating loss carryforwards of approximately $28 million that begin to expire in 2020, state net operating loss carryforwards with a tax value of approximately $2 million that begin to expire in 2020 and state income tax credit carryforwards with a tax value of approximately $11 million primarily relating to state research and development credits and the D.C. qualified high technology company tax credit that begin to expire in 2020. The Company realized a cash benefit relating to the use of its tax loss carryforwards of approximately $6 million, $6 million and $7 million in December 31, 2019, 2018 and 2017, respectively. The following table summarizes the activity related to the Company’s unrecognized tax benefits (in thousands):
Unrecognized tax benefit as of December 31, 2016 | $ | 1,843 |
Increase for current year tax positions | 12,620 |
Decrease for prior year tax positions | (34 | )
Expiration of the statute of limitation for assessment of taxes | (66 | )
Unrecognized tax benefit as of December 31, 2017 | 14,363 |
Increase for current year tax positions | 9,561 |
Decrease for prior year tax positions | (70 | )
Expiration of the statute of limitation for assessment of taxes | (1,482 | )
Unrecognized tax benefit as of December 31, 2018 | 22,372 |
Increase for current year tax positions | 3,487 |
Increase for prior year tax positions | 440 |
Expiration of the statute of limitation for assessment of taxes | (832 | )
Unrecognized tax benefit as of December 31, 2019 | $ | 25,467 |
Approximately $25 million and $22 million of the unrecognized tax benefits as of December 31, 2019 and 2018, respectively, would favorably affect the annual effective tax rate, if recognized in future periods. The increase for current year and prior year tax positions of $4 million for the year ended December 31, 2019 is primarily attributable to research credits. The decrease for expiration of the statute of limitation of $1 million for the year ended December 31, 2019 is primarily attributable to a state apportionment methodology reserve. The Company recognized $0.2 million, $0.2 million, and $0.1 million for interest and penalties in its consolidated statement of operations for the years ended December 31, 2019, 2018, 2017 respectively. The Company had liabilities of $0.6 million, $0.4 million, and $0.2 million for interest and penalties in its consolidated balance sheets as of December 31, 2019, 2018, 2017 respectively. The Company does not anticipate the amount of the unrecognized tax benefits will change significantly over the next twelve months. The Company is subject to taxation in the U.S. federal jurisdiction and various states and foreign jurisdictions. The Company’s federal income tax returns for tax years 2013 through 2018 remain open to examination. The Company is under Internal Revenue Service examination for tax year 2013 related to the research and development credit. Most of the Company’s state income tax returns for tax years 2016 through 2018 remain open to examination. For states that have a four-year statute of limitations, the state income tax returns for tax years 2015 through 2018 remain open to examination. The Company’s U.K. income tax returns for tax years 2014 through 2018 remain open to examination. The Company believes that an adequate provision has been made for any adjustments that may result from tax examinations.

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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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