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Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of Income before income taxes consist of the following:
Year Ended December 31,
202220212020
Domestic$98,188 $(14,544)$61,470 
International100,087 107,873 106,150 
Income before income taxes
$198,275 $93,329 $167,620 
The (Provision) benefit for income taxes consists of the following:
Year Ended December 31,
202220212020
Current:
Federal$(2,307)$770 $(11,094)
State(1,387)163 (3,597)
Foreign(22,715)(17,230)(7,688)
(26,409)(16,297)(22,379)
Deferred:
Federal3,547 15,182 (5,194)
State60 3,660 (1,272)
Foreign1,519 903 (9,780)
5,126 19,745 (16,246)
(Provision) benefit for income taxes
$(21,283)$3,448 $(38,625)
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,
202220212020
Federal statutory rate21.0 %21.0 %21.0 %
State income taxes, net of federal benefit1.0 (2.7)2.9 
Stock-based compensation(21.4)(52.5)(5.2)
Non-deductible officer compensation11.0 36.6 4.6 
Tax credits(2.9)(6.1)(2.1)
Withholding taxes2.8 5.8 2.0 
Foreign tax rate differential(2.0)(6.9)(4.0)
Net tax on foreign earnings (GILTI/FDII/FTC)0.9 — 0.5 
Transaction costs0.5 3.9 — 
Income tax reserves(0.1)0.1 (0.5)
Permanent book/tax differences— (1.0)(0.6)
Expenses associated with IPO— — 3.3 
Other(0.1)(1.9)1.1 
Effective income tax rate10.7 %(3.7)%23.0 %
For the year ended December 31, 2022, the effective tax rate was higher as compared to the year ended December 31, 2021, primarily due to the 2021 effective tax rate impact, net of officer compensation limitation provisions, related to the 2021 compensation charge of $90,721 to Deferred compensation plan expenses to record reallocated deferred compensation plan liabilities at fair value (see Note 12). For the years ended December 31, 2022, 2021, and 2020, the Company recognized tax benefits of $20,501, $14,890, and $954, respectively, associated with windfall tax benefits from stock‑based compensation, net of the impact from officer compensation limitation provisions. The effective tax rate for the year ended December 31, 2021 was lower as compared to the year ended December 31, 2020 primarily due to the tax benefits noted above.
The following is a summary of the significant components of the Company’s deferred tax assets and liabilities:
December 31,
20222021
Deferred tax assets:
Accrued compensation$35,298 $39,125 
Net operating loss (“NOL”) and credit carryforwards
14,960 28,698 
Convertible debt and 163(j) limitation13,349 15,682 
Lease liabilities8,920 10,540 
Other accruals not currently deductible1,122 2,006 
Allowance for doubtful accounts1,856 918 
Deferred revenues2,914 — 
Other2,383 1,851 
Total deferred tax assets80,802 98,820 
Less: Valuation allowance(3,321)(1,899)
Net deferred tax assets77,481 96,921 
Deferred tax liabilities:
Intangible assets including goodwill(51,994)(70,316)
Operating lease right-of-use assets(8,381)(10,196)
Deferred revenues— (3,421)
Prepaid expenses(2,877)(2,739)
Unrealized gains and losses(9,422)(2,387)
Property and equipment(3,406)(1,500)
Total deferred tax liabilities(76,080)(90,559)
Net deferred tax assets (liabilities)$1,401 $6,362 
The Company had deferred tax assets for tax credits and net operating losses, net of unrecognized tax positions, primarily related to:
Jurisdiction:December 31, 2022Begin to Expire
U.S. Federal NOL$1,963 Indefinite
U.S. Federal research and development credits592 2035
U.S. Federal foreign tax credits267 2029
U.S. State NOL676 2031
U.S. State research and development credits416 2030
United Kingdom (“U.K.”) NOL
6,864 Indefinite
U.K. research and development credits526 Indefinite
Canadian research and development credit1,551 2029
As of December 31, 2022 and 2021, the Company recorded a valuation allowance against net deferred tax assets related to NOLs and tax attributes in certain jurisdictions of $3,321 and $1,899, respectively. During the year ended December 31, 2022, the Company increased the valuation allowance by $1,422, which was primarily related to the increase in the outside basis difference on equity method investments.
During the year ended December 31, 2022, the Company repatriated $150,000 of undistributed previously taxed earnings generated by its foreign subsidiaries to the U.S. The repatriations were used to fund the acquisition of Power Line Systems (see Note 4). The cash repatriations did not have a material impact on Provision for income taxes for the year ended December 31, 2022.
We have provided for any applicable income taxes associated with current year distributions, as well as any earnings that are expected to be distributed in the future, in the calculation of the income tax provision. No additional provision has been made for U.S. and non‑U.S. income taxes on the undistributed earnings of subsidiaries that are expected to be indefinitely reinvested. As of December 31, 2022, certain subsidiaries had approximately $439,845 of cumulative undistributed earnings that have been deemed permanently reinvested. A liability could arise if our intention to indefinitely reinvest such earnings were to change and amounts are distributed by such subsidiaries or if such subsidiaries are ultimately disposed. The potential tax implications of unremitted earnings are driven by the facts at the time of the distribution. It is not practicable to estimate the additional income taxes related to indefinitely reinvested earnings or the basis differences related to investments in subsidiaries.
A reconciliation of the beginning and ending amount of the gross unrecognized tax benefits is as follows:
Year Ended December 31,
202220212020
Gross unrecognized tax benefits, beginning of year$1,331 $1,223 $1,763 
Increases for tax positions of prior years— 160 1,436 
Decreases for tax positions of prior years(121)(42)— 
Increases for tax positions related to the current year— — — 
Decreases relating to settlements with taxing authorities(35)— (1,723)
Reductions as a result of lapse of the statute of limitations(265)(10)(253)
Gross unrecognized tax benefits, end of year$910 $1,331 $1,223 
As of December 31, 2022, 2021, and 2020, the Company had total unrecognized tax benefits including interest and penalties of $1,194, $1,704, and $1,495, respectively, of which $1,181, $1,273, and $1,175, respectively, would impact the Company’s effective tax rate if recognized. The Company records accrued interest and penalties, where applicable, related to unrecognized tax benefits as part of the (Provision) benefit for income taxes. Interest expense and penalties related to unrecognized tax benefits resulted in a (decrease) increase of the (Provision) benefit for income taxes of $(89), $101, $(20) for the years ended December 31, 2022, 2021, and 2020, respectively. The cumulative accrued interest and penalties related to unrecognized tax benefits were $284, $373, and $272 as of December 31, 2022, 2021, and 2020, respectively.
The Company is subject to income tax in the U.S., as well as numerous state and foreign jurisdictions. The Company is currently under audit in the U.K. for years 2018 through 2021. In addition, the Company is under audit in various other foreign taxing jurisdictions that are not material to the consolidated financial statements. The Company’s U.S. consolidated federal income tax returns for years 2019 through 2022 may be subject to examination by the Internal Revenue Service. The Company also may be subject to examination by other significant jurisdictions, including the Irish Revenue Commissioners for Irish tax purposes for years 2018 through 2022 and by the Inland Revenue Department for New Zealand Tax purposes for years 2018 through 2022.