XML 30 R21.htm IDEA: XBRL DOCUMENT v3.22.1
Income Taxes
 3 Months Ended
Mar. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The Company computed the year-to-date income tax provision by applying the estimated annual effective tax rate to the year-to-date pre-tax income and adjusted for discrete tax items in the period. The Company's provision for income taxes was $14.1 million and a benefit from income taxes of $1.2 million for the three months ended March 31, 2022 and 2021, respectively.

The provision for income taxes for the three months ended March 31, 2022 was primarily attributable to federal, state and foreign income taxes. In addition, a requirement of the Tax Cuts and Jobs Act of 2017 (TCJA) to capitalize certain research expenditures became effective January 1, 2022, which resulted in an increase in the federal and state income tax liability.

For the three months ended March 31, 2022, the difference between the U.S. statutory rate and the Company's effective tax rate was primarily due to the requirement to capitalize research expenditures in accordance with TCJA, which was partially offset by the utilization of U.S. deferred tax assets which have a full valuation allowance.

For the three months ended March 31, 2021, the difference between the U.S. statutory rate and the Company's effective tax rate was primarily due to the full valuation allowance on its U.S. and Irish deferred tax assets and a one-time benefit resulting for the acquisition of DocSend. For the periods presented, the effective tax rate was also impacted by earnings realized in foreign jurisdictions with statutory tax rates lower than the federal statutory tax rate.

The Company periodically evaluates the realizability of its net deferred tax assets based on all available evidence, both positive and negative. The realization of net deferred tax assets is dependent on the Company's ability to generate sufficient future taxable income during periods prior to the expiration of tax attributes to fully utilize these assets. As of March 31, 2022, the Company continues to maintain valuation allowances on all of its deferred tax assets in the U.S. and on a portion of its deferred tax assets in one of its foreign jurisdictions.

Given the Company’s recent history of earnings, management believes that there is a reasonable possibility that, within the next twelve months, sufficient positive evidence may become available to allow management to reach a conclusion that a significant portion of all of the valuation allowance recorded against the U.S. deferred tax assets will be reversed. The reversal would result in an income tax benefit for the quarterly and annual fiscal period in which the Company releases the valuation allowance. However, the exact timing and amount of the valuation allowance release are subject to change on the basis of the level of profitability that the Company actually achieves.

The Company is subject to income tax audits in the U.S. and foreign jurisdictions. The Company records liabilities related to uncertain tax positions and believes that it has provided adequate reserves for income tax uncertainties in all open tax years.

Unrecognized tax benefits increased by approximately $4.8 million for the three months ended March 31, 2022, of which $0.8 million, if recognized, would affect the Company's effective tax rate. Additionally, unrecognized tax benefits decreased by
approximately $0.4 million for the three months ended March 31, 2022, due to a statute of limitations lapse related to prior period tax positions.

It is reasonably possible that there could be changes to the amount of uncertain tax positions due to activities of the taxing authorities, settlement of audit issues, reassessment of existing uncertain tax positions, or the expiration of applicable statutes of limitations; however, the Company is not able to estimate the impact of these items at this time.