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INCOME TAXES | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of the provision for income taxes attributable to operations consist of the following (in millions):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |
Federal | $ | 126.3 |  |  | $ | 116.3 |  |  | $ | 61.3 |
State | 36.6 |  |  | 31.2 |  |  | 24.6 |
Foreign | 0.9 |  |  | 0.7 |  |  | 1.3 |
Total current | 163.8 |  |  | 148.2 |  |  | 87.2 |
Deferred: |  |  |  |  |
Federal | (31.7) |  |  | (20.4) |  |  | 22.9 |
State | (2.9) |  |  | (9.6) |  |  | 8.5 |
Foreign | (2.6) |  |  | (1.2) |  |  | (7.2) |
Total deferred | (37.2) |  |  | (31.2) |  |  | 24.2 |
Total provision for income taxes | $ | 126.6 |  |  | $ | 117.0 |  |  | $ | 111.4 |
The components of deferred tax assets and liabilities consist of the following (in millions):
| December 31,
| 2023 |  | 2022
Deferred tax assets: |  |  |
Allowance for credit losses | $ | 5.8 |  |  | $ | 3.4 |
Accrued compensation | 11.9 |  |  | 4.6 |
Stock compensation | 15.3 |  |  | 20.4 |
Net operating losses | 34.7 |  |  | 26.8 |
Accrued reserve and other | 5.8 |  |  | 6.7 |
Lease liabilities | 21.8 |  |  | 26.4 |
Capitalized research and development costs | 92.4 |  |  | 45.4 |
Research and development credits | 4.5 |  |  | 6.1 |
Total deferred tax assets, prior to valuation allowance | 192.2 |  |  | 139.8 |
Valuation allowance | (9.0) |  |  | (5.2) |
Total deferred tax assets, net of valuation allowance | 183.2 |  |  | 134.6 |
Deferred tax liabilities: |  |  |
Deferred commission costs, net | (42.3) |  |  | (36.1) |
Lease right-of-use assets | (16.0) |  |  | (18.2) |
Prepaid expenses | (4.1) |  |  | (3.2) |
Property and equipment, net | (25.1) |  |  | (25.8) |
Intangible assets, net | (128.1) |  |  | (117.8) |
Total deferred tax liabilities | (215.6) |  |  | (201.1) |
Net deferred tax liabilities | $ | (32.4) |  |  | $ | (66.5) |
For both the years ended December 31, 2023 and 2022, the Company has not recognized deferred tax liabilities for temporary differences related to investments in foreign subsidiaries that were deemed permanently reinvested. Determination of the amount of unrecognized deferred income tax liabilities on these earnings is not practicable because such liability, if any, depends on certain circumstances existing if and when remittance occurs. A deferred tax liability will be recognized if and when the Company no longer plans to permanently reinvest these undistributed earnings. As of both December 31, 2023 and 2022, a valuation allowance has been established for certain deferred tax assets due to the uncertainty of realization. The valuation allowance as of both December 31, 2023 and 2022 includes an allowance for acquired net operating losses and foreign deferred tax assets. 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 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. The Company has established a valuation allowance for certain acquired net operating losses where Section 382 limitations will impact the ability of the Company to utilize the net operating losses before they expire. The Company’s change in valuation allowance was an increase of approximately $3.8 million for the year ended December 31, 2023 and a decrease of approximately $0.5 million for the year ended December 31, 2022. The increase for the year ended December 31, 2023 was primarily due to an increase in foreign net operating loss deferred tax assets for which a full valuation allowance has been established. The decrease for the year ended December 31, 2022 was primarily due to an international restructuring. The Company had U.S. income before income taxes of approximately $526.7 million, $493.2 million and $408.8 million for the years ended December 31, 2023, 2022 and 2021, respectively. The Company had foreign losses before income taxes of approximately $25.4 million, $6.7 million and $4.8 million for the years ended December 31, 2023, 2022 and 2021, 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 millions):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Expected federal income tax provision at statutory rate | $ | 105.3 |  |  | $ | 102.1 |  |  | $ | 84.8 |
State income taxes, net of federal benefit | 27.4 |  |  | 21.5 |  |  | 21.0 |
Increase (decrease) in valuation allowance | 1.9 |  |  | (0.5) |  |  | (5.0) |
Research credits | (20.2) |  |  | (17.5) |  |  | (13.1) |
Excess tax benefit | (5.9) |  |  | (1.8) |  |  | (10.9) |
Tax reserves | 4.2 |  |  | 1.5 |  |  | (12.8) |
Nondeductible compensation | 8.8 |  |  | 11.4 |  |  | 10.4 |
International restructuring | 0.1 |  |  | (3.9) |  |  | 34.9 |
Other adjustments | 5.0 |  |  | 4.2 |  |  | 2.1 |
Income tax expense | $ | 126.6 |  |  | $ | 117.0 |  |  | $ | 111.4 |
The Company has net operating loss carryforwards for international income tax purposes of approximately $77.3 million that do not expire. The Company has federal net operating loss carryforwards of approximately $71.3 million that begin to expire in 2033, state net operating loss carryforwards with a tax value of approximately $0.4 million that begin to expire in 2033 and state income tax credit carryforwards with a tax value of approximately $8.0 million primarily relating to state research and development credits and the D.C. qualified high technology company tax credit that begin to expire in 2024. The Company realized a cash benefit relating to the use of its tax loss carryforwards of approximately $5.9 million, $12.6 million and $14.1 million in December 31, 2023, 2022 and 2021, respectively. The following table summarizes the activity related to the Company’s unrecognized tax benefits (in millions):
Unrecognized tax benefit as of December 31, 2020 | $ | 28.9 |  |
Increase for current year tax positions | 3.1 |  |
Decrease for prior year tax positions | (5.4) |  |
Decrease for settlements with taxing authorities | (9.9) |  |
Expiration of the statute of limitation for assessment of taxes | (1.9) |  |
Unrecognized tax benefit as of December 31, 2021 | 14.8 |  |
Increase for current year tax positions | 3.4 |  |
Increase for prior year tax positions | 0.3 |  |
Expiration of the statute of limitation for assessment of taxes | (2.3) |  |
Unrecognized tax benefit as of December 31, 2022 | 16.2 |  |
Increase for current year tax positions | 4.4 |  |
Increase for prior year tax positions | 1.7 |  |
Expiration of the statute of limitation for assessment of taxes | (2.4) |  |
Unrecognized tax benefit as of December 31, 2023 | $ | 19.9 |  |
Approximately $19.9 million and $16.2 million of the unrecognized tax benefits as of December 31, 2023 and 2022, respectively, would favorably affect the annual effective tax rate if recognized in future periods. The increase for current year tax positions of $4.4 million and increase for prior year tax positions of $1.7 million for the year ended December 31, 2023 were primarily attributable to research credits and state apportionment reserves. The decrease for expiration of the statute of limitation of $2.4 million for the year ended December 31, 2023 was attributable to research credits. The Company recognized $0.7 million, recognized $0.1 million and reversed $0.4 million for interest and penalties in its consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021, respectively. The Company had liabilities of $1.4 million, $0.7 million, and $0.6 million for interest and penalties in its consolidated balance sheets as of December 31, 2023, 2022 and 2021, respectively. The Company does not anticipate the amount of the unrecognized tax benefits will change significantly over the next 12 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 2015 and 2020 through 2022 remain open to examination. Most of the Company’s state income tax returns for tax years 2020 through 2022 remain open to examination. For states that have a four-year statute of limitations, the state income tax returns for tax years 2019 through 2022 remain open to examination. The Company’s U.K. income tax return for tax year 2022 remains 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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