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Income Taxes | 12 Months Ended
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Dec. 31, 2021
Income Tax Disclosure [Abstract] |
Income Taxes | Note 11—Income Taxes The following are the domestic and foreign components of the Company’s income before income taxes (in thousands):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Domestic |  | $ | 193,048 |  |  | $ | 212,531 |  |  | $ | 162,252 |
Foreign |  |  | (71,012 | ) |  |  | (68,628 | ) |  |  | (46,032 | )
Income before income taxes |  | $ | 122,036 |  |  | $ | 143,903 |  |  | $ | 116,220 |
The following are the components of the provision for (benefit from) income taxes (in thousands):
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
Current: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  | $ | 10,332 |  |  | $ | (50,096 | ) |  | $ | 9,180 |
State and local |  |  | (10,417 | ) |  |  | (19,650 | ) |  |  | 7,800 |
Foreign |  |  | 2,435 |  |  |  | 2,550 |  |  |  | 1,412 |
Total current provision |  |  | 2,350 |  |  |  | (67,196 | ) |  |  | 18,392 |
Deferred: |  |  |  |  |  |  |  |  |  |  |  |
Federal |  |  | (21,287 | ) |  |  | (20,900 | ) |  |  | (6,316 | )
State and local |  |  | 3,193 |  |  |  | (9,079 | ) |  |  | (5,339 | )
Foreign |  |  | 18 |  |  |  | (1,239 | ) |  |  | 1,165 |
Total deferred provision |  |  | (18,076 | ) |  |  | (31,218 | ) |  |  | (10,490 | )
Total provision for (benefit from) income taxes |  | $ | (15,726 | ) |  | $ | (98,414 | ) |  | $ | 7,902 |
A reconciliation of the statutory tax rate to the effective tax rate for the periods presented is as follows:
|  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |  |  | 2019 |
U.S. federal statutory income tax rate |  |  | 21.0 | % |  |  | 21.0 | % |  |  | 21.0 | %
State and local income taxes, net of federal benefit |  |  | (5.3 | ) |  |  | (15.7 | ) |  |  | 1.7 |
Foreign income at other than U.S. rates (1) |  |  | 14.2 |  |  |  | 10.9 |  |  |  | 10.5 |
Stock-based compensation |  |  | (29.9 | ) |  |  | (59.6 | ) |  |  | (20.5 | )
Meals and entertainment |  |  | 0.2 |  |  |  | 0.2 |  |  |  | 0.7 |
Nondeductible compensation |  |  | 1.7 |  |  |  | 0.6 |  |  |  | (1.3 | )
Research and development credit |  |  | (15.3 | ) |  |  | (14.1 | ) |  |  | (5.0 | )
Other permanent items |  |  | 0.5 |  |  |  | 0.1 |  |  |  | (0.3 | )
Benefit from carryback of NOLs |  |  | — |  |  |  | (11.8 | ) |  |  | — |
Effective income tax rate |  | (12.9%) |  |  | (68.4)% |  |  |  | 6.8 | %
__________
| (1) | For the years ended December 31, 2021, 2020, and 2019, includes the impact of the valuation allowance associated with the United Kingdom (“U.K.”). For additional information, see discussion below.
Set forth below are the tax effects of temporary differences that give rise to a significant portion of the deferred tax assets and deferred tax liabilities (in thousands):
|  | As of December 31, |
|  | 2021 |  |  | 2020 |
Deferred tax assets (liabilities): |  |  |  |  |  |  |  |
Reserves and allowances |  | $ | 6,161 |  |  | $ | 5,521 |
Accrued expenses |  |  | 8,103 |  |  |  | 8,977 |
Net operating losses |  |  | 142,708 |  |  |  | 58,813 |
Research and development tax credit |  |  | 53,472 |  |  |  | 30,138 |
Stock-based compensation |  |  | 16,621 |  |  |  | 13,584 |
Prepaid expenses |  |  | (1,674 | ) |  |  | (1,365 | )
Property and equipment |  |  | (21,924 | ) |  |  | (14,375 | )
Intangibles (1) |  |  | 219,492 |  |  |  | 184,965 |
Capitalized software development costs |  |  | (3,565 | ) |  |  | (2,836 | )
Operating lease assets |  |  | (46,435 | ) |  |  | (55,685 | )
Operating lease liabilities |  |  | 56,415 |  |  |  | 64,359 |
Other |  |  | 484 |  |  |  | 487 |
Valuation allowance |  |  | (361,614 | ) |  |  | (242,415 | )
Total deferred tax assets, net |  | $ | 68,244 |  |  | $ | 50,168 |
| (1) | As of December 31, 2021 and 2020, includes intangibles associated with our international restructuring, net of amortization, offset by a reserve for uncertain tax position. See discussion below.
As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact management’s view with regard to future realization of deferred tax assets. During 2021, management recorded an additional valuation allowance of $119.2 million against its U.K. net deferred tax assets, based on the history of cumulative losses and the conclusion that future taxable profit may not be available for the utilization of the deferred tax assets for U.K. income tax purposes. As of December 31, 2021, the Company had federal, state, and foreign net operating loss carryforwards of approximately $5.4 million, $53.1 million, and $592.4 million, respectively. The federal, state, and foreign net operating loss carryforwards are subject to limitations under applicable federal, state, and foreign tax law. Federal net operating loss carryforward of $0.9 million will expire in 2037 if not utilized, and $4.5 million will carry forward indefinitely. State net operating loss carryforwards will begin to expire in 2040. Our foreign net operating losses carry forward indefinitely. As of December 31, 2021, the Company had federal, state, and foreign research and development tax credits of approximately $51.2 million, $28.0 million and $0.9 million, respectively, which can be carried forward as prescribed under applicable federal, state. and foreign tax law. Federal research and development tax credits will begin to expire in 2033. State and foreign research and development tax credits carry forward indefinitely. As of December 31, 2021, unremitted earnings of the subsidiaries outside of the United States were approximately $3.2 million, on which no state taxes have been paid. The Company’s intention is to indefinitely reinvest these earnings outside the United States Upon distribution of those earnings in the form of a dividend or otherwise, the Company would be subject to both state income taxes and withholding taxes payable to various foreign countries. The amounts of such tax liabilities that might be payable upon repatriation of foreign earnings are not material. As of December 31, 2021, the Company had gross unrecognized tax benefits of approximately $86.3 million, $84.7 million of which is a reduction to deferred tax assets and the remaining $1.6 million which would affect the Company’s effective tax rate if recognized. As of December 31, 2020, the Company had gross unrecognized tax benefits of approximately $66.9 million, $63.1 million of which is a reduction to deferred tax assets and the remaining $3.8 million which would affect the Company’s effective tax rate if recognized. The following table presents changes in gross unrecognized tax benefits (in thousands):
|  | Year Ended December 31, |
|  | 2021 (1) |  |  | 2020 (1) |  |  | 2019 (1) |
Beginning balance |  | $ | 66,875 |  |  | $ | 53,213 |  |  | $ | 4,330 |
Increases related to prior year tax positions |  |  | 13,075 |  |  |  | 5,378 |  |  |  | — |
Decreases related to prior year tax positions |  |  | — |  |  |  | — |  |  |  | (20 | )
Increases related to current year tax positions |  |  | 6,381 |  |  |  | 9,206 |  |  |  | 49,100 |
Settlements |  |  | — |  |  |  | (520 | ) |  |  | (197 | )
Expiration of statute of limitations |  |  | — |  |  |  | (402 | ) |  |  | — |
Ending balance |  | $ | 86,331 |  |  | $ | 66,875 |  |  | $ | 53,213 |
______________ (1)Includes the impact of a statutory rate change in the U.K Interest and penalties related to the Company’s unrecognized tax benefits accrued as of December 31, 2021 were not material. The Company files U.S. federal, state, and foreign tax returns. The Company is currently under examination by the Internal Revenue Service for the year ended December 31, 2018. Additionally, the Company is currently under examination by the Illinois Department of Revenue for the years ended December 31, 2018 and 2019. The Company does not expect to reduce its unrecognized tax benefits during the next twelve months. The Company remains subject to examination for its federal and state tax returns for the periods 2016 through 2020, and 2018 through 2020, respectively. The majority of the Company’s foreign subsidiaries remain subject to examination by local taxing authorities for 2016 and subsequent years.

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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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