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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Taxes [Abstract]  
Income Tax Disclosure [Text Block] Income Taxes
Income before income taxes is categorized geographically as follows:
Year Ended December 31,
202220212020
(In millions)
United States$558.5 $489.4 $457.8 
Foreign321.7 292.8 292.4 
Total income before income taxes$880.2 $782.2 $750.2 
The provision for income taxes consisted of the following:
Year Ended December 31,
202220212020
(In millions)
Current expense (benefit):
Federal$145.1 $97.5 $(124.0)
State 41.7 32.2 10.5 
Foreign, including withholding tax26.3 29.8 29.2 
213.1 159.5 (84.3)
Deferred expense (benefit):
Federal (18.0)3.9 4.3 
State(4.8)(0.2)17.4 
Foreign16.1 (165.8)(2.1)
(6.7)(162.1)19.6 
Total income tax expense (benefit) $206.4 $(2.6)$(64.7)
The difference between income tax expense (benefit) and the amount resulting from applying the federal statutory rate of 21% to Income before income taxes is attributable to the following:
Year Ended December 31,
202220212020
(In millions)
Income tax expense at federal statutory rate$184.8 $164.3 $157.6 
State taxes, net of federal benefit29.2 25.5 23.2 
Effect of non-U.S. operations(9.5)(23.3)(27.7)
Stock-based compensation4.7 1.3 (8.6)
Remeasurement of unrecognized tax benefits(1.5)(5.1)(204.7)
Intercompany non-U.S. intellectual property transfer— (165.5)— 
Other(1.3)0.2 (4.5)
Total income tax expense (benefit)
$206.4 $(2.6)$(64.7)
During the fourth quarter of 2021, as part of a legal entity reorganization, the Company completed an internal transfer of certain of its non-U.S. intellectual property which had no book value. This transfer created amortizable tax basis for the receiving entity based on the $1.20 billion fair value of the intellectual property, which resulted in the recognition of a $165.5 million deferred tax asset and a corresponding income tax benefit. During 2020, the Company recognized an income tax benefit as a result of the remeasurement of certain previously unrecognized income tax benefits. The majority of these income tax benefits related to the worthless stock deduction taken in 2013. These remeasurements were based on written confirmations from the IRS, indicating no examination adjustments would be proposed related to the worthless stock deduction or certain
other matters reviewed as part of the audit of the Company’s federal income tax returns for 2010 through 2014, and the lapse of statutes of limitations related to other unrecognized income tax benefits.
The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows:
As of December 31,
20222021
(In millions)
Deferred tax assets:
Intellectual property$147.0 $165.5 
Deferred revenues, accruals and reserves 73.7 68.6 
Research and development costs12.0 — 
Tax credit carryforwards 3.8 3.5 
Net operating loss carryforwards3.4 4.7 
Other1.8 1.7 
Total deferred tax assets241.7 244.0 
Valuation allowance(5.5)(5.5)
Net deferred tax assets236.2 238.5 
Deferred tax liabilities:
Property and equipment(0.5)(6.6)
Other(1.1)(1.2)
Total deferred tax liabilities(1.6)(7.8)
Total net deferred tax assets$234.6 $230.7 
With the exception of deferred tax assets related to certain state and foreign net operating loss and foreign tax credit carryforwards, management believes it is more likely than not that the tax effects of the deferred tax liabilities together with future taxable income, will be sufficient to fully recover the remaining deferred tax assets.
As part of the Tax Cuts and Jobs Act of 2017, domestic and foreign research and development expenses, including costs related to internally developed software, are required to be amortized for income tax purposes, over five and fifteen years, respectively, beginning with our 2022 tax year. As a result, the Company recognized a deferred tax asset of $12.0 million in 2022.
As of December 31, 2022, the Company’s deferred tax assets included $55.9 million of state net operating loss carryforwards, before applying tax rates for the respective jurisdictions. The tax credit carryforwards as of December 31, 2022 consisted primarily of foreign tax credit carryforwards. The state net operating loss carryforwards expire in various years from 2023 through 2034. The foreign tax credits will expire in 2028.
A reconciliation of the beginning and ending balances of the total amounts of gross unrecognized tax benefits is as follows:
As of December 31,
20222021
(In millions)
Beginning balance$16.0 $23.7 
Increases in tax positions for prior years0.1 0.1 
Decreases in tax positions for prior years— (1.3)
Increases in tax positions for current year1.4 1.1 
Decreases in tax positions due to settlement with taxing authorities— (1.2)
Lapse in statute of limitations(2.4)(6.4)
Ending balance$15.1 $16.0 
As of December 31, 2022, approximately $14.8 million of unrecognized tax benefits, including penalties and interest, could affect the Company’s tax provision and effective tax rate. The Company does not expect the balance of unrecognized tax benefits to change materially during the next twelve months.
In accordance with its accounting policy, the Company recognizes accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. These accruals were not material in any period presented.
The Company’s major taxing jurisdictions are the U.S., the Commonwealth of Virginia, and Switzerland. The Company’s U.S. federal income tax returns are currently under examination by the IRS for 2010 through 2013. The Company’s U.S. federal tax returns for 2019, and the years thereafter, also remain subject to examination. The Company’s other material tax returns are not currently under examination by their respective taxing jurisdictions. Because the Company has previously used net operating loss carryforwards and other tax attributes to offset its taxable income in income tax returns for the U.S. and Virginia, such attributes can be adjusted by these taxing authorities until the statute of limitations closes on the year in which such attributes were utilized. The open years for examination in Switzerland are the 2012 tax year and forward.