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INCOME TAXES | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | NOTE 3—INCOME TAXES U.S. and foreign earnings (loss) from continuing operations before income taxes are as follows:
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
| (In thousands)
U.S. | $ | 651,406 |  |  | $ | 184,835 |  |  | $ | 547,969 |
Foreign | (273,915) |  |  | 71,313 |  |  | 82,983 |
Total | $ | 377,491 |  |  | $ | 256,148 |  |  | $ | 630,952 |
The components of the provision (benefit) for income taxes are as follows:
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
| (In thousands)
Current income tax provision (benefit): |  |  |  |  |
Federal | $ | 5,703 |  |  | $ | 15 |  |  | $ | (2,044) |
State | 4,069 |  |  | 3,192 |  |  | 1,640 |
Foreign | 35,542 |  |  | 34,865 |  |  | 28,293 |
Current income tax provision | 45,314 |  |  | 38,072 |  |  | 27,889 |
Deferred income tax (benefit) provision: |  |  |  |  |
Federal | 76,185 |  |  | (32,723) |  |  | 31,025 |
State | 6,076 |  |  | (18,627) |  |  | (10,451) |
Foreign | (112,214) |  |  | (6,619) |  |  | (5,190) |
Deferred income tax (benefit) provision | (29,953) |  |  | (57,969) |  |  | 15,384 |
Income tax provision (benefit) | $ | 15,361 |  |  | $ | (19,897) |  |  | $ | 43,273 |
The tax effects of cumulative temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below. The valuation allowance is primarily related to deferred tax assets for foreign net operating losses and U.S. foreign tax credits.
| December 31,
| 2022 |  | 2021
| (In thousands)
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 60,143 |  |  | $ | 85,613 |
Tax credit carryforwards | 137,481 |  |  | 128,731 |
Disallowed interest carryforwards | 64,463 |  |  | 52,104 |
Capitalized research expenses | 49,113 |  |  | — |
Stock-based compensation | 20,653 |  |  | 15,491 |
Accrued expenses | 17,871 |  |  | 116,415 |
Exchangeable notes | 44,585 |  |  | 52,177 |
Other | 25,340 |  |  | 33,211 |
Total deferred tax assets | 419,649 |  |  | 483,742 |
Less valuation allowance | (71,132) |  |  | (86,071) |
Net deferred tax assets | 348,517 |  |  | 397,671 |
Deferred tax liabilities: |  |  |
Intangible assets | (76,169) |  |  | (165,551) |
Right-of-use assets | (16,125) |  |  | (21,784) |
Property and equipment | (11,239) |  |  | (4,923) |
Other | (668) |  |  | (737) |
Total deferred tax liabilities | (104,201) |  |  | (192,995) |
Net deferred tax assets | $ | 244,316 |  |  | $ | 204,676 |
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when the taxes are paid or recovered. Pursuant to the Tax Cuts and Jobs Act of 2017, beginning in 2022, the Company is required to capitalize and amortize research expenses for income tax purposes. At December 31, 2022, the Company has federal and state net operating losses (“NOLs”) of $11.5 million and $213.0 million, respectively. If not utilized, $4.3 million of the federal NOLs can be carried forward indefinitely, and $7.2 million will expire at various times between 2033 and 2037. Of the state NOLs, $3.1 million can be carried forward indefinitely and $209.9 million will expire at various times between 2024 and 2042. Federal and state NOLs of $4.3 million and $182.8 million, respectively, can be used against future taxable income without restriction and the remaining NOLs are subject to limitations under Section 382 of the Internal Revenue Code, separate return limitations, and applicable state law. At December 31, 2022, the Company has foreign NOLs of $185.1 million available to offset future income. Of these foreign NOLs, $114.9 million can be carried forward indefinitely and $70.2 million will expire at various times between 2023 and 2039. During 2022, the Company recognized tax benefits related to NOLs of $9.7 million. At December 31, 2022, the Company has federal and foreign disallowed interest carryforwards of $213.2 million and $67.9 million, respectively, that can be carried forward indefinitely and can be used against future taxable income. At December 31, 2022, the Company has tax credit carryforwards of $164.0 million. Of this amount, $127.4 million relates to federal, state, and foreign tax credits for research activities, of which $76.6 million will expire at various times between 2030 and 2042. Our credit carryforwards also include $34.3 million of foreign tax credits, of which $31.8 million will expire primarily in 2027. The Company regularly assesses the realizability of deferred tax assets considering all available evidence, including, to the extent applicable, the nature, frequency, and severity of prior cumulative losses, forecasts of future taxable income, tax filing status, the duration of statutory carryforward periods, available tax planning and historical experience. During the year ended December 31, 2022, we recorded a $14.9 million net decrease to the valuation allowance primarily related to a reversal of $22.6 million of valuation allowances on certain foreign deferred tax assets due to the refinancing of various intercompany loans which are expected to generate interest income. The reversal was partially offset by $7.7 million of additional valuation allowances. At December 31, 2022, the Company had a valuation allowance of $71.1 million related to the portion of credits, NOLs, and other deferred tax assets for which it is more likely than not that the tax benefit will not be realized. A reconciliation of the income tax provision to the amounts computed by applying the statutory federal income tax rate to earnings before income taxes is shown as follows:
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
| (In thousands)
Income tax provision at the federal statutory rate of 21% | $ | 79,273 |  |  | $ | 53,791 |  |  | $ | 132,500 |
State income taxes, net of effect of federal tax benefit | 16,953 |  |  | 4,530 |  |  | 8,803 |
Stock-based compensation | (30,440) |  |  | (63,751) |  |  | (112,203) |
Research credits | (12,611) |  |  | (25,830) |  |  | (21,306) |
Foreign-derived intangible income deduction | (12,646) |  |  | — |  |  | — |
Change in valuation allowance | (22,621) |  |  | 8,523 |  |  | 29,787 |
Foreign income taxed at a different statutory rate | (4,104) |  |  | 5,808 |  |  | 4,884 |
Withholding taxes | 8,922 |  |  | 1,057 |  |  | 2,933 |
Change in uncertain tax positions | (10,694) |  |  | (948) |  |  | (5,770) |
Other, net | 3,329 |  |  | (3,077) |  |  | 3,645 |
Income tax provision (benefit) | $ | 15,361 |  |  | $ | (19,897) |  |  | $ | 43,273 |
The 2022 income tax provision benefited primarily from (a) the release of a valuation allowance on certain foreign deferred tax assets as we expect to be able to use those deferred tax assets in the foreseeable future, (b) favorable outcomes of tax audits, and (c) a lower tax rate on U.S. income derived from foreign sources. The benefits were partially offset by higher state income taxes due to higher taxable income in the U.S. The 2021 and 2020 income tax provisions benefited primarily from (a) excess tax benefits generated by the exercise and vesting of stock-based awards and (b) research credits. In 2020, this benefit was partially offset by an increase in valuation allowances on foreign tax credits. A reconciliation of the beginning and ending amount of unrecognized tax benefits, including penalties but excluding interest, is as follows:
| December 31,
| 2022 |  | 2021 |  | 2020
| (In thousands)
Balance at January 1 | $ | 50,830 |  |  | $ | 45,624 |  |  | $ | 53,324 |
Additions based on tax positions related to the current year | 5,781 |  |  | 8,107 |  |  | 7,818 |
Additions for tax positions of prior years | 1,938 |  |  | 1,353 |  |  | 1,772 |
Reductions for tax positions of prior years | (12,287) |  |  | (1,028) |  |  | — |
Settlements | (2,139) |  |  | (2,348) |  |  | (16,512) |
Expiration of applicable statute of limitations | (783) |  |  | (878) |  |  | (778) |
Balance at December 31 | $ | 43,340 |  |  | $ | 50,830 |  |  | $ | 45,624 |
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in the income tax provision. Our income tax provision for the years ended December 31, 2022, 2021, and 2020, includes a decrease of interest and penalties of $0.3 million, $0.3 million, and $1.7 million, respectively. At December 31, 2022 and 2021, noncurrent income taxes payable include accrued interest and penalties of $1.2 million and $1.5 million, respectively. Match Group is routinely under audit by federal, state, local, and foreign authorities in the area of income tax. These audits include questioning the timing and the amount of income and deductions and the allocation of income and deductions among various tax jurisdictions. The Internal Revenue Service (“IRS”) has substantially completed its audit of the Company’s federal income tax returns for years through December 31, 2019. The statute of limitations for years 2013 through 2019 has been extended to December 31, 2023. Returns filed in various other jurisdictions are open to examination for tax years beginning with 2014. Although we believe that we have adequately reserved for our uncertain tax positions, the final tax outcome of these matters may vary significantly from our estimates. At December 31, 2022 and 2021, unrecognized tax benefits, including interest, were $44.2 million and $51.8 million, respectively. If unrecognized tax benefits at December 31, 2022 are subsequently recognized, $31.3 million, net of related deferred tax assets and interest, would reduce income tax expense. The comparable amount as of December 31, 2021 was $46.0 million. The Company believes that it is reasonably possible that its unrecognized tax benefits could decrease by approximately $7.0 million by December 31, 2023, primarily due to settlements and expirations of statutes of limitations. Generally, our ability to distribute the $172.7 million cash and cash equivalents held by our foreign subsidiaries at December 31, 2022 is limited to that subsidiary’s distributable reserves and after considering other corporate legal restrictions.

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