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Income Taxes
 12 Months Ended
Dec. 31, 2021
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income before income taxes consist of the following:
Year Ended December 31,
202120202019
Domestic$(14,544)$61,470 $61,691 
International107,873 106,150 66,418 
Income before income taxes
$93,329 $167,620 $128,109 
The (provision) benefit for income taxes consists of the following:
Year Ended December 31,
202120202019
Current:
Federal$770 $(11,094)$(7,696)
State163 (3,597)(2,486)
Foreign(17,230)(7,688)(12,824)
(16,297)(22,379)(23,006)
Deferred:
Federal15,182 (5,194)(2,389)
State3,660 (1,272)(412)
Foreign903 (9,780)2,069 
19,745 (16,246)(732)
Benefit (provision) for income taxes
$3,448 $(38,625)$(23,738)
A reconciliation of the U.S. statutory federal income tax rate to the Company’s effective income tax rate is as follows:
Year Ended December 31,
202120202019
Federal statutory rate21.0 %21.0 %21.0 %
State income taxes, net of federal benefit(2.7)2.9 2.0 
Stock-based compensation(52.5)(5.2)(2.3)
Non-deductible officer compensation36.6 4.6 — 
Tax credits(6.1)(2.1)(3.6)
Transaction costs3.9 — — 
Foreign tax rate differential(1.1)(2.0)(2.8)
Permanent book/tax differences(1.0)(0.6)0.2 
Income tax reserves0.1 (0.5)0.9 
Expenses associated with IPO— 3.3 — 
Net tax on foreign earnings (GILTI/FDII/FTC)— 0.5 6.1 
Other(1.9)1.1 (3.0)
Effective income tax rate(3.7)%23.0 %18.5 %
The following is a summary of the significant components of the Company’s deferred tax assets and liabilities:
December 31,
20212020
Deferred tax assets:
Accrued compensation$39,125 $31,580 
Net operating loss (“NOL”) and credit carryforwards
28,698 7,573 
Intangible assets19,942 283 
Capped call options and 163(j) interest disallowance15,682 — 
Lease liabilities10,540 10,466 
Other accruals not currently deductible2,006 346 
Allowance for doubtful accounts918 382 
Other comprehensive income354 431 
Other1,497 138 
Total deferred tax assets118,762 51,199 
Less: Valuation allowance(1,899)(1,207)
Net deferred tax assets116,863 49,992 
Deferred tax liabilities:
Intangible assets including goodwill(90,258)— 
Operating lease right-of-use assets(10,196)(10,070)
Deferred revenues(3,421)(7,257)
Prepaid expenses(2,739)(2,301)
Unrealized gains and losses(2,387)— 
Property and equipment(1,500)(1,989)
Total deferred tax liabilities(110,501)(21,617)
Net deferred tax assets (liabilities)$6,362 $28,375 
As of December 31, 2021, the U.S. federal NOL carryforwards with a future benefit of $8,518 can be carried forward indefinitely and the remaining U.S. federal NOL of $19 expires in 2037. The U.S. federal credit carryforward of $2,974 expires in 2041. The foreign tax credit carryforward of $224 expires in 2031. The Company’s state NOL carryforwards and state credit carryforwards with a future benefit of $1,934 expire in 2026 through 2041. The remaining state NOL carryforward of $208 have indefinite expirations. In addition, the Company has foreign NOL carryforwards with a future benefit of $12,788 (net of a $67 valuation allowance), which predominately have indefinite expirations. The Canadian credit carryforward of $2,033 expires in 2030 through 2040.
Some transactions can change the aggregate ownership of certain stockholders, which could cause a shift in the ownership of the Company, which pursuant to Internal Revenue Code (“IRC”) Section 382 could then limit on an annual basis the Company’s ability to utilize its U.S. federal NOL carryforwards (and possibly its state NOL carryforwards as well). If that occurred, the Company’s NOL carryforwards would continue to be available to offset taxable income and tax liabilities in future years (until such NOL carryforwards are either used or expire) subject to any IRC Section 382 annual limitation.
The Company regularly assesses the need for a valuation allowance against its deferred tax assets by considering both positive and negative evidence related to whether it is more likely than not that the deferred tax assets will be realized. In evaluating the need for a valuation allowance, the Company considers a cumulative loss in recent years as a significant piece of negative evidence.
As of December 31, 2021 and 2020, the Company has recorded a valuation allowance against its net deferred tax assets of $1,899 and $1,207, respectively. The valuation allowance is principally related to the losses from a joint venture for which the Company has determined that realization is not more likely than not.
On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “JOBS Act”) was enacted. The JOBS Act requires certain Global Intangible Low‑Taxed Income (“GILTI”) earned by a controlled foreign corporation (“CFC”) to be included in the gross income of the CFC’s U.S. shareholder. The Company has elected the “period cost method” and treats taxes due on future U.S. inclusions in taxable income related to GILTI as a current‑period expense when incurred. The JOBS Act allows a U.S. corporation a deduction equal to a certain percentage of its foreign‑derived intangible income (“FDII”). The Company estimated the impact of the GILTI tax and FDII deduction in determining its 2019 annual effective tax rate that is reflected in its provision for income taxes for the year ended December 31, 2019.
As of December 31, 2021, the Company has accumulated undistributed earnings generated by its foreign subsidiaries of approximately $440,838, of which $272,242 was subject to the one‑time transition tax on foreign earnings required by the JOBS Act and the tax on GILTI. Subsequent to December 31, 2021, the Company repatriated $100,000 and intends to repatriate an additional $50,000 of undistributed previously taxed earnings generated by its foreign subsidiaries as of December 31, 2021, to the U.S. The repatriation will be used to fund a portion of the acquisition of Power Line Systems (see Note 4). The Company expects future U.S. cash generation will be sufficient to meet future U.S. cash needs. The Company intends to indefinitely reinvest the remaining undistributed earnings, as well as future earnings from its foreign subsidiaries, in order to fund its international operations and acquisitions. The Company has not provided for any additional outside basis difference inherent in its foreign subsidiaries, as these amounts continue to be indefinitely reinvested in foreign operations. Determining the amount of unrecognized deferred tax liability related to any additional outside basis difference in these entities is not practicable.
In accordance with the indefinite reversal criteria, the foreign currency translation adjustments recorded in other comprehensive (loss) income related to the foreign currency translations have not been tax effected.
The following is a reconciliation of the total amounts of unrecognized tax benefits:
Year Ended December 31,
202120202019
Unrecognized tax benefit, beginning of year$1,223 $1,763 $638 
Tax positions related to prior years:
Additions160 1,436 1,222 
Reductions(42)(1,723)(86)
Lapse of statute of limitations(10)(253)(11)
Unrecognized tax benefit, end of year$1,331 $1,223 $1,763 
The amount of unrecognized tax benefits as of December 31, 2021, 2020, and 2019 was $1,331, $1,223, and $1,763, respectively, of which $1,273, $1,175, and $1,733, respectively, would impact the Company’s effective tax rate if recognized. Interest expense and penalties related to income taxes resulted in an increase (decrease) of income tax expense of $101, $(20), and $101 for the year ended December 31, 2021, 2020, and 2019, respectively. Interest expense and penalties are included in Benefit (provision) for income taxes in the consolidated statements of operations. Accrued interest and penalties as of December 31, 2021 and 2020 totaled $373 and $272, respectively. The Company records the amount of uncertain taxes expected to be paid in the next 12 months as a current liability and records the remaining amount in Other liabilities in the consolidated balance sheets.
The Company is subject to income tax in the U.S., as well as numerous state and foreign jurisdictions. The Company’s U.S. consolidated federal income tax returns for years 2018 through 2021 remain subject to examination by the Internal Revenue Service. The Company is currently under audit in the U.K. for 2018. The Company’s 2018 through 2021 tax years remain subject to examination by the Irish Revenue Commissioners for Irish tax purposes. In addition, the Company is under audit in various other foreign taxing jurisdictions that are not material to the consolidated financial statements.