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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 domestic and foreign components of the Company's income (loss) before provision for income taxes are as follows:
| 2023 |  | 2022 |  | 2021
Domestic | $ | 291,203 |  |  | $ | (151,551) |  |  | $ | (4,176) |
Foreign | 546 |  |  | (1,113) |  |  | 117 |
Net income (loss) before income taxes | $ | 291,749 |  |  | $ | (152,664) |  |  | $ | (4,059) |
The provision for income tax expense (benefit) consists of the following:
Current: |  | 2023 |  | 2022 |  | 2021
Domestic |  | $ | 79,840 |  |  | $ | 10,498 |  |  | $ | — |
State and local |  | 27,596 |  |  | 2,601 |  |  | 1,523 |
Foreign |  | 192 |  |  | — |  |  | (38) |
Current federal, state and local, tax expense |  | $ | 107,628 |  |  | $ | 13,099 |  |  | $ | 1,485 |
Deferred: |  | 2023 |  | 2022 |  | 2021
Domestic |  | $ | (34,535) |  |  | $ | 18,558 |  |  | $ | (7,142) |
State and local |  | (8,261) |  |  | 4,034 |  |  | (1,878) |
Foreign |  | 116 |  |  | (1,073) |  |  | (461) |
Deferred federal, state and local, tax expense |  | $ | (42,680) |  |  | $ | 21,519 |  |  | $ | (9,481) |
Income tax expense (benefit) |  | $ | 64,948 |  |  | $ | 34,618 |  |  | $ | (7,996) |
The reconciliation of the U.S. federal statutory rate to the effective rate on net income (loss) before taxes is as follows:
| 2023 |  | 2022 |  | 2021
U.S. Statutory federal rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State taxes, net of federal benefit | 4.7 | % |  | (3.9) | % |  | (12.5) | %
Tax effect of Pepsi valuation premium | — | % |  | (38.9) | % |  | — | %
Stock based compensation | (3.4) | % |  | (0.9) | % |  | 50.5 | %
Change in valuation allowance | (0.3) | % |  | 0.4 | % |  | 219.8 | %
Change in deferred balances | 0.3 | % |  | — | % |  | (80.6) | %
Other | (0.1) | % |  | (0.4) | % |  | (0.9) | %
Effective tax rate | 22.2 | % |  | (22.7) | % |  | 197.3 | %
The Tax Cuts and Jobs Act introduced a provision to tax global intangible low-taxed income (“GILTI”) of foreign subsidiaries and a measure to tax certain intercompany payments under the base erosion anti-abuse tax “BEAT” regime. For the years ended December 31, 2023 and 2022, the Company did not generate intercompany transactions that met the BEAT threshold but does have to include GILTI relating to the Company’s foreign subsidiaries. The Company elected to account for GILTI as a current period cost. Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts for income tax purposes. Deferred tax assets and liabilities consisted of the following:
| December 31, 2023 |  | December 31, 2022
Net operating loss carryforwards | $ | 3,441 |  |  | $ | 4,774 |
Charitable contributions | — |  |  | 17 |
Deferred revenue | 45,907 |  |  | — |
Fixed assets | (3,338) |  |  | (1,158) |
Pepsi valuation premium | (68,250) |  |  | (70,637) |
Right of use liability | 157 |  |  | 154 |
Right of use asset | (275) |  |  | (146) |
Distributor termination fees | 40,429 |  |  | 46,859 |
Stock-based compensation | 4,892 |  |  | 5,236 |
Inventory allowance | 9,221 |  |  | 5,423 |
Intangibles | (2,495) |  |  | (2,516) |
Total deferred tax assets (liabilities) | 29,689 |  |  | (11,994) |
Valuation allowance | (2,496) |  |  | (3,424) |
Net deferred tax assets (liabilities) | $ | 27,193 |  |  | $ | (15,418) |
At December 31, 2023, the Company has approximately $1.9 million of Federal net operating loss carryforwards and $1.9 million of state net operating loss ("NOL") carryforwards, which will begin to expire in 2027. The Federal and State NOLs are subject to limitation under Section 382 due to a December 2008 ownership change of greater than 50% over a three-year testing period. The ownership change resulted in approximately $4.5 million of NOLs that will not be realized. The $4.5 million has been removed from the available NOL carryforward and US NOL deferred tax asset. The Company had foreign NOL carryforwards of approximately $16.7 million, some of which will begin to expire in 2024. The Company considers the earnings of its foreign entities to be permanently reinvested outside the U.S. based on estimates that future cash generation will be sufficient to meet future domestic cash needs. Accordingly, deferred taxes have not been recorded for the undistributed earnings of the Company’s foreign subsidiaries. All other outside basis differences not related to earnings were impractical to account for at this period of time and are currently considered as being permanent in duration. As required by the authoritative guidance on accounting for income taxes, the Company evaluates the realizability of deferred tax assets on a jurisdictional basis at each reporting date. Accounting for income taxes requires that a valuation allowance be established when it is more likely than not that all or a portion of the deferred taxes will not be realized. In circumstances where there is sufficient negative evidence indicating that the deferred tax assets are not more likely than not realizable, the Company establishes a valuation allowance. Through the year ended December 31, 2020, the Company maintained a full valuation allowance on its worldwide net deferred tax assets. During the fourth quarter of 2021, the Company concluded that it is more likely than not that its U.S. deferred tax assets would be realized. This conclusion was based on the US profitability and NOL utilization in 2020 and 2021 as well as future forecasts of U.S. profitability. During the fourth quarter of 2022, the Company concluded that is more likely than not that is Celsius Europe deferred tax assets would be realized, based on Finland profitability and NOL utilization in 2021 and 2022. For the year ended December 31, 2021, the Company reported a release of its U.S. valuation allowance for deferred tax assets of approximately $6.0 million. For the year ended December 31, 2022, the Company reported a release of non-U.S. valuation of $0.5 million. The Company continues to maintain a valuation allowance on certain of its foreign net operating losses as it is not more likely than not that the losses in those specific jurisdictions will be realized. A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
| 2023 |  | 2022
Gross unrecognized tax benefit, beginning of period | $ | 702 |  |  | $ | 1,080 |
Additions based on tax positions related to the current year | 555 |  |  | — |
Additions based on tax positions related to the prior years | — |  |  | — |
Reductions due to lapse in statute of limitations and settlements | — |  |  | (378) |
Gross unrecognized tax benefit, end of period | $ | 1,257 |  |  | $ | 702 |
The Company recognizes only those tax positions that meet the more-likely-than-not recognition threshold and establishes tax reserves for uncertain tax positions that do not meet this threshold. To the extent these unrecognized tax benefits are ultimately recognized, approximately $1.3 million will impact the Company’s effective tax rate in future periods. Tax positions will potentially decrease by $0.2 million within the next twelve months. Interest and penalties associated with income tax matters are included in the provision for income taxes. As of December 31, 2023, the Company had uncertain tax positions of approximately $1.3 million, inclusive of $0.1 million of interest and penalties. The Company files U.S., state, and foreign income tax returns in jurisdictions with various statutes of limitations. Below is a summary of the filing jurisdictions and open tax years:
| Open Years
U.S. Federal | 2020-2022
U.S State and local | 2019-2022
Non-U.S. | 2017-2022

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