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Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
TAXES TAXES
Our domestic/foreign pre-tax income consists of the following components for 2023, 2022 and 2021 (in thousands):
For the Year Ended December 31,
202320222021
Pre-Tax Income by Jurisdiction   
Domestic$242,780 $129,072 $77,943 
Foreign(8,170)(11,509)(20,387)
Total$234,610 $117,563 $57,556 
Our income tax provision consists of the following components for 2023, 2022 and 2021 (in thousands):
For the Year Ended December 31,
202320222021
Current   
Federal$45,816 $657 $(291)
State(229)931 797 
Foreign source withholding tax12,444 5,754 22,415 
 58,031 7,342 22,921 
Deferred   
Federal(41,922)(17,022)(43,250)
State615 527 792 
Foreign(9,759)— — 
Foreign source withholding tax16,592 34,655 34,905 
 (34,474)18,160 (7,553)
Total$23,557 $25,502 $15,368 
The deferred tax assets and liabilities were comprised of the following components at December 31, 2023 and 2022 (in thousands):
December 31,
 20232022
Net operating losses$112,634 $114,975 
Deferred revenue, net48,590 3,457 
Capitalized research and development21,213 9,423 
Amortization and depreciation21,101 19,608 
Debt amortization16,093 24,029 
Other employee benefits8,434 10,542 
Share-based compensation
6,649 4,803 
Lease liability3,339 3,402 
Tax credit carryforward23 27,212 
Other— 2,504 
Deferred tax asset
238,076 219,955 
Less: valuation allowance(104,830)(122,218)
Net deferred tax asset133,246 97,737 
Right of use asset(2,610)(3,464)
Other
(1,697)— 
Deferred tax liability
(4,307)(3,464)
Net deferred tax asset
$128,939 $94,273 
The following is a reconciliation of income taxes at the federal statutory rate with income taxes recorded by the Company for the years ended December 31, 2023, 2022 and 2021:
For the Year Ended December 31,
202320222021
Tax at U.S. statutory rate21.0 %21.0 %21.0 %
Non-deductible officers' compensation1.4 %1.5 %8.4 %
Other permanent differences0.8 %1.2 %1.9 %
State tax provision0.2 %1.1 %2.6 %
Non-creditable withholding taxes0.1 %0.4 %4.4 %
Foreign derived intangible income deduction(7.1)%(5.3)%(14.7)%
Change in valuation allowance (b)
(2.2)%2.4 %10.3 %
Share-based compensation
(1.3)%0.3 %(1.2)%
Effect of rates different than statutory(0.8)%(0.1)%(2.2)%
Research and development tax credits(0.6)%(1.7)%(1.3)%
Uncertain tax positions(0.4)%1.5 %5.5 %
Amended return benefit (a)
— %— %(7.7)%
Other(1.1)%(0.6)%— %
Total tax provision
10.0 %21.7 %27.0 %
(a) In 2021, a net discrete benefit of was recorded that primarily related to an amendment of prior year returns to utilize a tax asset generated in the current year.
(b) In 2023, the Company recorded a partial release of the valuation allowance it has in France due to income projected driven by recently signed agreements.
Valuation Allowances and Net Operating Losses
We establish a valuation allowance for any portion of our deferred tax assets for which management believes it is more likely than not that we will be unable to utilize the assets to offset future taxes. Given the binary nature of our business, at this time we believe it is more likely than not that the majority of our state net operating losses and net operating losses in certain subsidiaries in France, as well as our non-wholly owned subsidiaries in the United States and United Kingdom will not be utilized; therefore we have maintained a near full valuation allowance against our state, French and United Kingdom net operating losses as of December 31, 2023. We also maintain a valuation allowance against certain temporary differences other than the net operating losses in these jurisdictions.
At December 31, 2023, we had $8.6 million in U.S net operating loss carryforwards, which can be indefinitely carried forward, as well as non-U.S. net operating loss carryforwards amounting to $120.7 million which can be indefinitely carried forward under French statutes. In addition, we had U.S. state net operating loss carryforwards of $1.5 billion, of which $63.0 million can be indefinitely carried forward, while the remaining $1.5 billion will expire in varying amounts from 2023 to 2042.
The Company recognizes deferred tax balances related to the undistributed earnings of subsidiaries when it expects that it will recover those undistributed earnings in a taxable manner, such as through receipt of dividends or sale of the investments. On December 31, 2023, the Company does not have distributable earnings in foreign subsidiaries that would be subject to deferred taxes.
Uncertain Income Tax Positions
As of December 31, 2023, 2022 and 2021, we had $14.4 million, $16.1 million and $15.7 million, respectively, of unrecognized tax benefits that, if recognized, would impact the Company's effective tax rate. The total amount of unrecognized tax benefits could change within the next twelve months for a number of reasons including audit settlements, tax examination activities and the recognition and measurement considerations under this guidance.
During 2023, we reduced the reserve previously established for the amended returns by $0.7 million for the benefit available in the current year had it not been included on the amended returns and reduced the reserve previously recorded for foreign withholding taxes by $1.1 million due to favorable guidance from the taxing authorities in the United States.
During 2022, we established reserves of $1.1 million related to uncertainty arising from our ability to credit foreign withholding taxes in jurisdictions without a tax treaty with the United States. We also reduced the reserve previously established for the amended returns by $1.0 million for the benefit available in the current year had it not been included on the amended returns.
During 2021, after finalizing our amended return position we increased the reserve established in 2020 by $12.8 million. We also reversed reserves of $1.1 million previously established on 2017 research and development and manufacturing deduction credits as a result of the lapsing of stature of limitations for that tax year.
The following is a roll forward of our total gross unrecognized tax benefits, which if reversed would impact the effective tax rate, for the fiscal years 2023 through 2021 (in thousands):
December 31,
202320222021
Balance as of January 1$16,052 $15,694 $3,803 
Tax positions related to current year:
Additions91 1,264 46 
Tax positions related to prior years:
Additions— 45 12,831 
Reductions(1,758)(951)(4)
Lapses in statues of limitations— — (982)
Balance as of December 31$14,385 $16,052 $15,694 
Our policy is to recognize interest and/or penalties related to income tax matters in income tax expense.
The Company and its subsidiaries are subject to United States federal income tax, foreign income and withholding taxes and income taxes from multiple state jurisdictions. Our federal income tax returns for 2006 to the present, with the exception of 2011 and 2012, are currently open and will not close until the respective statutes of limitations have expired. The 2014, 2015 and 2018-2020 Federal income tax returns are currently under audit by the IRS. The statutes of limitations generally expire three years following the filing of the return or in some cases three years following the utilization or expiration of net operating loss carry forwards. The statute of limitations applicable to our open federal returns will expire at the end of 2026. The Company is subject to French corporate income tax on certain subsidiaries. The statute of limitations applicable to our open French returns will expire in 2026. Excluding the Korea Competent Authority Proceeding and the Finland Competent Authority Proceeding described in the section below, specific tax treaty procedures remain open for certain jurisdictions for 2014 to the present. Many of our subsidiaries have filed state income tax returns on a separate company basis. To the extent these subsidiaries have unexpired net operating losses, their related state income tax returns remain open. These returns have been open for varying periods, some exceeding ten years. The total amount of state net operating losses is $1.5 billion.
Foreign Taxes
We pay foreign source withholding taxes on patent license royalties when applicable. We apply foreign source withholding tax payments against our United States federal income tax obligations to the extent we have foreign source income to support these credits. In 2023, 2022 and 2021, we paid $12.0 million, $5.5 million and $21.7 million in foreign source withholding taxes, respectively, and applied these payments as credits against our United States federal tax obligation.
Between 2014 and 2023, we paid approximately $138.1 million in foreign taxes to foreign governments that have tax treaties with the U.S., for which we have claimed foreign tax credits against our U.S. tax obligations, and for which the tax treaty procedures are still open. It is possible that as a result of tax treaty procedures, the U.S. government may reach an agreement with the related foreign governments that will result in a partial refund of foreign taxes paid with a related reduction in our foreign tax credits. Due to foreign currency fluctuations, any such agreement could result in foreign currency gain or loss.
On November 8, 2019, the Company received notification that its request for competent authority pertaining to Article 25 (Mutual Agreement Procedure) of the United States-Republic of Finland Income Tax Convention had been reviewed by the IRS and an agreement has been reached (the “Finland Competent Authority Proceeding”). As a result of this agreement, the Company does not anticipate any tax consequences.