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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes Domestic income before taxes was $48,546,000 in 2022, $121,729,000 in 2021, and $39,425,000 in 2020. Foreign income before taxes was $202,149,000 in 2022, $197,171,000 in 2021, and $147,486,000 in 2020. Income tax expense consisted of the following (in thousands):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Current: |
Federal | $ | 48,355 |  |  | $ | 27,870 |  |  | $ | 160 |
State | 5,689 |  |  | 5,372 |  |  | 921 |
Foreign | 10,243 |  |  | 8,406 |  |  | 13,197 |
| 64,287 |  |  | 41,648 |  |  | 14,278 |
Deferred: |  |  |  |  |
Federal | (40,772) |  |  | (19,266) |  |  | (18,266) |
State | (8,354) |  |  | (769) |  |  | (556) |
Foreign | 20,009 |  |  | 17,406 |  |  | 15,269 |
| (29,117) |  |  | (2,629) |  |  | (3,553) |
| $ | 35,170 |  |  | $ | 39,019 |  |  | $ | 10,725 |
A reconciliation of the U.S. federal statutory corporate tax rate to the Company’s income tax expense, or effective tax rate, was as follows:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Income tax expense at U.S. federal statutory corporate tax rate | 21 | % |  | 21 | % |  | 21 | %
State income taxes, net of federal benefit | 2 |  |  | 1 |  |  | 1 |
Foreign tax rate differential | (7) |  |  | (5) |  |  | (6) |
Tax credit | (1) |  |  | (2) |  |  | (1) |
Discrete tax benefit related to employee stock options | — |  |  | (3) |  |  | (7) |
Discrete tax expense related to tax return filings | 2 |  |  | (1) |  |  | (5) |
Discrete tax benefit related to a rate revaluation on state tax assets | (2) |  |  | — |  |  | — |
Discrete tax benefit related to GILTI adjustments | (3) |  |  | — |  |  | — |
Discrete tax expense related to international tax reserves | 1 |  |  | — |  |  | 1 |
Discrete tax benefit for audit settlements | (1) |  |  | — |  |  | — |
Discrete tax benefit for release of valuation allowance | (1) |  |  | — |  |  | — |
Limitation on executive compensation | 1 |  |  | — |  |  | 1 |
Other | 2 |  |  | 1 |  |  | 1 |
Income tax expense | 14 | % |  | 12 | % |  | 6 | %
Tax Reserves The changes in the reserve for income taxes, excluding gross interest and penalties, were as follows (in thousands):
Balance of reserve for income taxes as of December 31, 2020 | $ | 13,952 |
Gross amounts of decreases in unrecognized tax benefits as a result of tax positions taken in prior periods | (280) |
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken in prior periods | 100 |
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken in the current period | 525 |
Gross amounts of decreases in unrecognized tax benefits as a result of the expiration of the applicable statutes of limitations | (485) |
Balance of reserve for income taxes as of December 31, 2021 | 13,812 |
Gross amounts of decreases in unrecognized tax benefits as a result of tax positions taken in prior periods | (119) |
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken in prior periods | 2,850 |
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken in the current period | 505 |
Gross amounts of decreases in unrecognized tax benefits relating to settlements with taxing authorities | (2,329) |
Gross amounts of decreases in unrecognized tax benefits as a result of the expiration of the applicable statutes of limitations | (1,072) |
Balance of reserve for income taxes as of December 31, 2022 | $ | 13,647 |
The Company’s reserve for income taxes, including gross interest and penalties, was $15,866,000 and as of December 31, 2022, which is classified as a non-current liability. The Company's reserve for income taxes, including interest and penalties, was $15,808,000 as of December 31, 2021, which included $14,780,000 classified as a non-current liability and $1,028,000 recorded as a reduction to non-current deferred tax assets. The amount of gross interest and penalties included in these balances was $2,219,000 and $1,996,000 as of December 31, 2022 and 2021, respectively. If the Company’s tax positions were sustained or the statutes of limitations related to certain positions expired, these reserves would be released and income tax expense would be reduced in a future period. As a result of the expiration of certain statutes of limitations, there is a potential that a portion of these reserves could be released, which would decrease income tax expense by approximately $1,000,000 to $1,500,000 over the next twelve months. The Company has defined its major tax jurisdictions as the United States, Ireland, China, and Korea and within the United States, Massachusetts. The statutory tax rate is 12.5% in Ireland, 25% in China, and 21.5% in Korea, compared to the U.S. federal statutory corporate tax rate of 21%. These differences resulted in a favorable impact to the effective tax rate of 7 percentage points for 2022, 5 percentage points for 2021, and 6 percentage points for 2020. Management has determined that earnings from its legal entity in China will be indefinitely reinvested to provide local funding for growth, and that earnings from all other jurisdictions will not be indefinitely reinvested. Within the United States, the tax years 2019 through 2021 remain open to examination by the Internal Revenue Service ("IRS") and various state taxing authorities. The tax years 2017 through 2021 remain open to examination by various taxing authorities in other jurisdictions in which the Company operates. During 2022 the Company settled IRS audits for the tax years 2017 and 2018 which resulted in a net discrete tax benefit. Additionally, the Company is under audit by the Commonwealth of Massachusetts for the amended returns filed for tax years 2017 and 2018. Management believes the Company is adequately reserved for these audits. The final determination of tax audits could result in favorable or unfavorable changes in our estimates. Any reserves associated with this audit period will not be released until the issue is settled or the audit is concluded. Interest and penalties included in income tax expense were $229,000, $281,000, and $340,000 in 2022, 2021, and 2020, respectively. Cash paid for income taxes totaled $57,016,000 in 2022, $49,435,000 in 2021, and $33,695,000 in 2020. Deferred Tax Assets and Liabilities The tax effects of temporary differences and attributes that give rise to deferred income tax assets and liabilities as of December 31, 2022 and December 31, 2021 were as follows (in thousands):
| December 31,
| 2022 |  | 2021
Deferred tax assets: |  |  |
Intangible asset in connection with change in tax structure | 386,221 |  |  | $ | 404,526 |
Stock-based compensation expense | 21,962 |  |  | 15,279 |
Federal and state tax credit carryforwards | 8,284 |  |  | 11,051 |
Inventory and revenue related | 8,117 |  |  | 7,426 |
Bonuses, commissions, and other compensation | 5,116 |  |  | 7,263 |
Depreciation | 2,119 |  |  | 5,395 |
Foreign net operating losses | 53 |  |  | 751 |
Capitalization of R&D expenses | 16,889 |  |  | — |
Other | 15,102 |  |  | 9,023 |
Total deferred tax assets | 463,863 |  |  | 460,714 |
Valuation allowance | (7,661) |  |  | (8,188) |
| $ | 456,202 |  |  | $ | 452,526 |
Deferred tax liabilities: |  |  |
GILTI tax basis differences in connection with change in tax structure | $ | (298,922) |  |  | $ | (327,725) |
Net deferred taxes | $ | 157,280 |  |  | $ | 124,801 |
Change in Tax Structure and Global Intangible Low-Taxed Income Tax In 2019, the Company made changes to its international tax structure due to legislation by the European Union regarding low tax structures that resulted in an intercompany sale of intellectual property. As a result, the Company recorded an associated deferred tax asset of $437,500,000 in Ireland based on the fair value of the intellectual property that is being realized over 15 years as future tax deductions. From a United States perspective, the sale was disregarded, and any future deductions claimed in Ireland are added back to taxable income as part of Global Intangible Low-Taxed Income ("GILTI") minimum tax. The Company recorded an associated deferred tax liability of $350,000,000, representing the GILTI minimum tax related to the fair value of the intellectual property. Management expects an immaterial impact on its current effective tax rate excluding discrete items in future years as a result of this change. Other Deferred Tax Assets and Liabilities At December 31, 2022, the Company recorded a deferred tax asset resulting from the capitalization of research and development expenditures. Beginning in 2022, the Tax Cuts and Jobs Act eliminates the option to currently deduct research and development expenditures in the period incurred and requires taxpayers to capitalize and amortize such expenditures over five or fifteen years, as applicable, pursuant to Section 174 of the Internal Revenue Code. At December 31, 2022, the Company had foreign net operating loss carryforwards of $180,000, state tax credit carryforwards of $6,050,000, and foreign tax credit carryforwards of $2,234,000. At December 31, 2022, the Company had a valuation allowance for state research and development tax credits of $6,869,000 that was not considered to be realizable. Should these credits be utilized in a future period, the reserve associated with these credits would be reversed in the period when it is determined that the credits can be utilized to offset future state income tax liabilities. As of December 31, 2022, the Company had state research and development tax credit carryforwards of $7,658,000, which will begin to expire for the 2032 tax return. While the deferred tax assets, net of valuation allowance, are not assured of realization, management has evaluated the realizability of these deferred tax assets and has determined that it is more likely than not that these assets will be realized. In reaching this conclusion, we have evaluated certain relevant criteria including the Company’s historical profitability, current projections of future profitability, and the lives of tax credits, net operating losses, and other carryforwards. Should the Company fail to generate sufficient pre-tax profits in future periods, we may be required to establish valuation allowances against these deferred tax assets, resulting in a charge to current operations in the period of determination.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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