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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The provision (benefit) for income taxes consists of the following for the periods indicated (in thousands):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Current tax provision: |  |  |  |  |
U.S. federal | $ | 73,974 |  |  | $ | 12,419 |  |  | $ | 25,118 |
U.S. state | 15,175 |  |  | 9,748 |  |  | 7,955 |
Non-U.S. | 16,394 |  |  | 23,564 |  |  | 17,033 |
Total current tax provision | 105,543 |  |  | 45,731 |  |  | 50,106 |
Deferred tax benefit: |  |  |  |  |
U.S. federal | (68,194) |  |  | (8,699) |  |  | (46,101) |
U.S. state | (15,589) |  |  | (7,429) |  |  | (14,842) |
Non-U.S. | (2,282) |  |  | (5,564) |  |  | (11,484) |
Total deferred tax (benefit) | (86,065) |  |  | (21,692) |  |  | (72,427) |
Total provision (benefit) for income taxes | $ | 19,478 |  |  | $ | 24,039 |  |  | $ | (22,321) |
The components of income (loss) before income taxes attributable to the U.S. and non-U.S. operations are as follows (in thousands):
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
U.S. | $(49,957) |  | $ | (120,874) |  |  | $ | (199,087) |
Non-U.S. | 15,760 |  |  | 44,984 |  |  | 8,879 |
Loss before income taxes | $(34,197) |  | $ | (75,890) |  |  | $ | (190,208) |
The Company became a tax resident of the United States starting in 2021; therefore, the statutory rate used for purposes of the following reconciliation between the provision (benefit) for income taxes at the statutory tax rate and the total provision (benefit) for income taxes for the year ended December 31, 2022 and 2021 was 21%. For 2020, the Company was a tax resident of Luxembourg; therefore the statutory rate was 25%:
| Year Ended December 31,
| 2022 |  | 2021 |  | 2020
Income tax benefit computed at statutory tax rate | $ | (7,177) |  |  | $ | (15,912) |  |  | $ | (47,194) |
State taxes, net of federal benefit | 327 |  |  | 750 |  |  | (5,441) |
Foreign earnings taxed at different rates | 4,115 |  |  | 2,950 |  |  | 9,858 |
Stock-based compensation | 9,504 |  |  | 1,729 |  |  | 1,023 |
Return to provision true-up | 1,794 |  |  | 114 |  |  | 9,365 |
Research and development tax credits | (3,574) |  |  | (3,067) |  |  | (2,259) |
Deferred distribution taxes | 906 |  |  | 2,209 |  |  | 1,881 |
Foreign Inclusions | 15,691 |  |  | 3,144 |  |  | 5,863 |
Withholding taxes | 4,354 |  |  | 5,729 |  |  | 3,586 |
IRS audit settlement | — |  |  | (4,990) |  |  | — |
Valuation allowance | (6,214) |  |  | 30,768 |  |  | 1,938 |
Other | (248) |  |  | 615 |  |  | (941) |
Total income tax provision (benefit) | $ | 19,478 |  |  | $ | 24,039 |  |  | $ | (22,321) |
The Company’s effective tax rate was (57)% for the year ended December 31, 2022. The effective tax rate differed from the United States statutory rate of 21%, primarily due to foreign income inclusion under global intangible low-taxed income ("GILTI"), non-deductible stock-based compensation, and change in valuation allowance. The Company’s effective tax rate was (32)% for the year ended December 31, 2021. The effective tax rate differed from the United States statutory rate of 21%, primarily due to establishment of a valuation allowance on its disallowed interest expense deferred tax asset and withholding taxes, partially offset by a benefit from the IRS audit settlement in 2021. The Company’s effective tax rate was 12% for the year ended December 31, 2020. The effective tax rate was lower than the Luxembourg statutory rate of 25%, primarily due to U.S. earnings taxed at lower tax rates under the Tax Cuts and Jobs Acts enacted on December 22, 2017. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands):
| Year Ended December 31,
| 2022 |  | 2021
Deferred tax assets: |  |  |
Net operating loss carry forwards | $ | 17,118 |  |  | $ | 21,726 |
Tax credit carry forwards | 28,790 |  |  | 31,910 |
Reserves and accrued costs not currently deductible | 14,465 |  |  | 14,653 |
Deferred revenue | 92,789 |  |  | 76,773 |
Unrealized gains or losses | 4,091 |  |  | 3,591 |
Disallowed interest expense | 64,754 |  |  | 88,204 |
Stock-based compensation | 15,796 |  |  | 9,021 |
Lease liability | 10,446 |  |  | 15,070 |
R&D capitalization | 57,751 |  |  | — |
Depreciable assets | 1,262 |  |  | 173 |
Other | 195 |  |  | 486 |
Gross deferred tax assets | 307,457 |  |  | 261,607 |
Valuation allowance | (124,794) |  |  | (128,108) |
Net deferred tax assets | 182,663 |  |  | 133,499 |
Deferred tax liabilities: |  |  |
Deferred distribution tax | (10,423) |  |  | (8,969) |
Intangible assets | (129,426) |  |  | (170,482) |
Deferred commissions | (39,784) |  |  | (32,537) |
Right of use assets | (8,558) |  |  | (13,102) |
Total deferred tax liabilities | (188,191) |  |  | (225,090) |
Net deferred tax liabilities | $ | (5,528) |  |  | $ | (91,591) |
ASC 740, Income Taxes, provides for the recognition of deferred tax assets if realization of such assets is more likely than not. In assessing the need for any additional valuation allowance for the year ended December 31, 2022, the Company considered all available evidence both positive and negative, including potential for prudent and feasible tax planning strategies. As a result of this analysis for the year ended December 31, 2022, management believes it is more likely than not that the Company’s deferred tax assets, after recording valuation allowances for disallowed interest expense, the net California and Ireland deferred tax assets and operating loss carryforwards in certain non-U.S. jurisdictions, will be realized. A reconciliation of the beginning and ending amount of valuation allowances is as follows (in thousands):
Valuation allowance on deferred tax assets: |  | Balance at Beginning of Period |  | (Charged) Credited to Expenses / Other |  | Balance at Ending of Period
Year ended December 31, 2020 |  | $ | (96,411) |  |  | $ | 12,560 |  |  | $ | (83,851) |
Year ended December 31, 2021 |  | $ | (83,851) |  |  | $ | (44,257) |  |  | $ | (128,108) |
Year ended December 31, 2022 |  | $ | (128,108) |  |  | $ | 3,314 |  |  | $ | (124,794) |
As of December 31, 2022, the Company had U.S. federal and state net operating loss carry forwards of approximately $15.5 million and $8.3 million, respectively. In addition, the Company has California research and development tax credit carry forwards of approximately $50.3 million that do not expire. The utilization of the Company’s U.S. net operating losses is subject to various limitations under Section 382. The Company does not anticipate any expiration of the U.S. net operating loss carry forwards prior to their utilization. As of December 31, 2022, the Company’s non-U.S. subsidiaries had combined net operating loss carry forwards of $103.4 million that can be carried forward indefinitely. The Company provides for taxes on the undistributed earnings of certain non-U.S. subsidiaries which would be subject to withholding taxes if distributed. Additional U.S. or foreign income tax liabilities may arise upon reversal of certain other outside basis differences in our foreign subsidiaries, although the calculation of such additional taxes is not practicable. Deferred distribution taxes were $10.4 million and $9.0 million for the years ended December 31, 2022 and 2021, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
| December 31,
| 2022 |  | 2021 |  | 2020
Beginning balance | $ | 43,044 |  |  | $ | 65,843 |  |  | $ | 62,730 |
Additions for tax positions of prior years | 7,187 |  |  | 237 |  |  | 1,765 |
Reductions for tax positions of prior years | (1,569) |  |  | (2,087) |  |  | (825) |
Additions based on tax positions related to the current year | 3,813 |  |  | 4,432 |  |  | 4,332 |
Reductions due to lapse of statute of limitations | (595) |  |  | (480) |  |  | (442) |
Reductions due to settlements | — |  |  | (24,901) |  |  | (1,717) |
Ending balance | $ | 51,880 |  |  | $ | 43,044 |  |  | $ | 65,843 |
The unrecognized tax benefits related to ASC 740, if recognized, would impact the income tax provision by $25.5 million, $23.2 million and $37.1 million as of December 31, 2022, 2021 and 2020, respectively. The Company has elected to include interest and penalties as a component of income tax expense. Accrued interest and penalties as of December 31, 2022, 2021 and 2020 were approximately $5.2 million, $3.7 million and $6.2 million, respectively. As of December 31, 2022, the gross unrecognized tax benefit was approximately $51.9 million. It is reasonably possible that an additional reduction of up to $10 million of unrecognized tax benefits may occur within the next 12 months due to statute of limitation lapse, a portion of which would impact our effective tax rate. The actual amount could vary significantly depending on the ultimate timing and nature of any settlements and tax interpretations. The Company files U.S. federal income tax returns as well as income tax returns in various states and foreign jurisdictions. As of December 31, 2022, tax years 2017-2022 remain subject to examination in the major tax jurisdictions where the Company operates. In addition, the Company has been informed by certain state and foreign taxing authorities that it was selected for examination. U.S. federal, state and foreign jurisdictions have three to six open tax years at any point in time. The field work for certain state and foreign audits has commenced and are at various stages of completion as of December 31, 2022. Although the outcome of any tax examination is uncertain, the Company believes that it has adequately provided in its financial statements for any additional taxes that it may be required to pay as a result of these examinations. The Company regularly assesses the likelihood of outcomes resulting from these examinations to determine the adequacy of its provision for income taxes and believes its current unrecognized tax benefit to be reasonable. If tax payments ultimately prove to be unnecessary, the recognition of previously unrecognized tax benefit would result in tax benefits in the period that the Company had determined unrecognized tax benefits were no longer necessary. However, if an ultimate tax assessment exceeds its estimate of tax liabilities, an additional tax provision might be required.

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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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