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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Note 3—Income Taxes The following are the domestic and foreign components of the Company’s income (loss) before income taxes (in thousands):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
United States | $ | 167,924 |  |  | $ | 225,685 |  |  | $ | 274,354 |
International | 124,896 |  |  | (887,663) |  |  | 197,300 |
Income (loss) before income taxes | $ | 292,820 |  |  | $ | (661,978) |  |  | $ | 471,654 |
The income tax (benefit) provision is comprised of the following (in thousands):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |
U.S. Federal | $ | 13,737 |  |  | $ | 46,700 |  |  | $ | 23,118 |
U.S. State | (5,642) |  |  | 16,036 |  |  | 12,754 |
International | 27,243 |  |  | 24,877 |  |  | 31,227 |
Total current | 35,338 |  |  | 87,613 |  |  | 67,099 |
Deferred: |  |  |  |  |
U.S. Federal | (20,925) |  |  | (18,753) |  |  | (53,328) |
U.S. State | 5,176 |  |  | (7,866) |  |  | (14,843) |
International | (34,337) |  |  | (28,684) |  |  | (20,781) |
Total deferred | (50,086) |  |  | (55,303) |  |  | (88,952) |
Total income tax (benefit) provision | $ | (14,748) |  |  | $ | 32,310 |  |  | $ | (21,853) |
For the years ended December 31, 2023, 2022 and 2021, the Company recorded an income tax (benefit) provision of $(14.7) million, $32.3 million, and $(21.9) million or an effective tax rate of (5.0)%, (4.9)%, and (4.6)%, respectively. A reconciliation of the income tax (benefit) provision at the U.S. federal statutory income tax rate to the Company’s total income tax (benefit) provision is as follows (in thousands):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Income tax provision (benefit) at the federal statutory rate | $ | 61,492 |  |  | $ | (139,015) |  |  | $ | 99,047 |
State and local income taxes, net of federal benefit | 4,329 |  |  | 10,516 |  |  | 11,134 |
Foreign income tax rate differential | (40,506) |  |  | (89,903) |  |  | (26,215) |
Stock-based compensation | 15,167 |  |  | (12,863) |  |  | (83,207) |
Research and development credit | (19,034) |  |  | (19,603) |  |  | (23,396) |
U.S. tax on foreign earnings, net of foreign income deduction (1) | 3,070 |  |  | 3,588 |  |  | (5,155) |
Non-deductible acquisition costs | 749 |  |  | 1,204 |  |  | 5,643 |
Non-deductible goodwill impairment | — |  |  | 274,492 |  |  | — |
Change in valuation allowance | 10,285 |  |  | — |  |  | (108) |
Divestiture of Elo7 | (55,934) |  |  | — |  |  | — |
Other | 5,634 |  |  | 3,894 |  |  | 404 |
Total income tax (benefit) provision | $ | (14,748) |  |  | $ | 32,310 |  |  | $ | (21,853) |
(1)Previously disclosed as “U.S. tax reform” for the year ended December 31, 2021. Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets (liabilities) are as follows (in thousands):
| As of December 31,
| 2023 |  | 2022
Deferred tax assets: |  |  |
Net operating loss carryforwards | $ | 75,967 |  |  | $ | 66,410 |
Research and development credit carryforwards | 3,242 |  |  | — |
Capitalized research expenses | 100,996 |  |  | 63,901 |
Convertible debt | 31,583 |  |  | 40,159 |
Depreciation | — |  |  | 7,051 |
Lease liability | 32,034 |  |  | 33,253 |
Stock-based compensation expense | 25,690 |  |  | 25,151 |
Accrued bonus | 10,616 |  |  | 9,478 |
Excess tax basis in intangible assets | 2,424 |  |  | 1,924 |
Other deferred tax assets | 16,737 |  |  | 13,443 |
Total deferred tax assets | 299,289 |  |  | 260,770 |
Less: valuation allowance | 4,154 |  |  | 3,524 |
Total net deferred tax asset | 295,135 |  |  | 257,246 |
Deferred tax liabilities: |  |  |
Excess book basis in intangible assets | (118,378) |  |  | (147,790) |
Right-of-use asset | (30,556) |  |  | (31,864) |
Depreciation | (21,105) |  |  | — |
Other deferred tax liabilities | (512) |  |  | (821) |
Total deferred tax liabilities | (170,551) |  |  | (180,475) |
Net deferred tax assets | $ | 124,584 |  |  | $ | 76,771 |
As of December 31, 2023, the Company had the following tax credit and operating loss carryforwards available to offset income tax liability and taxable income, respectively, in future years (in thousands):
| December 31, 2023 |  | Expiration Period
U.S. Federal credit carryforwards | $ | 1,512 |  |  | 2032-2033
U.S. State net operating loss carryforwards | 57,072 |  |  | 2031-Unlimited
U.S. State credit carryforwards | 6,547 |  |  | 2026-Unlimited
Non-U.S. net operating loss carryforwards | 290,854 |  |  | Unlimited
Utilization of the net operating losses (“NOLs”) is dependent on generating sufficient taxable income from the Company’s operations in each of the respective jurisdictions to which the NOLs relate, while taking into account tax filing methodologies and limitations and/or restrictions on the Company’s ability to use them. A significant component of the Company’s Non-U.S. NOLs were acquired as part of the acquisition of Depop. Certain U.K. tax laws impose limitations on the utilization of these NOLs by any other entity. All NOLs are also subject to review by relevant tax authorities in the jurisdictions to which they relate. The Company assesses the likelihood of its ability to realize the benefit of its deferred tax assets in each jurisdiction by evaluating all relevant positive and negative evidence at each reporting date. To the extent the Company determines that some or all of its deferred tax assets are not more likely than not to be realized, it establishes a valuation allowance. The following table summarizes the valuation allowance activity for the periods indicated (in thousands):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Balance as of the beginning of period | $ | 3,524 |  |  | $ | 1,834 |  |  | $ | 1,398 |
Additions charged to expense | 10,960 |  |  | 1,796 |  |  | 580 |
Deletions credited to expense | (124) |  |  | — |  |  | (112) |
Currency translation and other balance sheet activity | (10,206) |  |  | (106) |  |  | (32) |
Balance as of the end of period | $ | 4,154 |  |  | $ | 3,524 |  |  | $ | 1,834 |
Unrecognized tax benefits The following table summarizes the unrecognized tax benefit activity for the periods indicated (in thousands):
| As of December 31,
| 2023 |  | 2022 |  | 2021
Balance as of the beginning of period | $ | 35,158 |  |  | $ | 28,842 |  |  | $ | 23,738 |
Additions based on tax positions related to the current year | 10,225 |  |  | 5,206 |  |  | 5,024 |
Additions for tax positions of prior years | 6,278 |  |  | 1,754 |  |  | 122 |
Reductions for tax provisions of prior years | — |  |  | (509) |  |  | — |
Lapse of statute of limitations | (3) |  |  | — |  |  | — |
Settlements | — |  |  | (107) |  |  | — |
Currency translation | 15 |  |  | (28) |  |  | (42) |
Balance as of the end of period | $ | 51,673 |  |  | $ | 35,158 |  |  | $ | 28,842 |
The amount of unrecognized tax benefits included on the Consolidated Balance Sheets as of December 31, 2023, 2022, and 2021 are $51.7 million, $35.2 million, and $28.8 million, respectively. The total amount of unrecognized tax benefits that, if recognized, would favorably affect the effective tax rate is $49.9 million at December 31, 2023. The total amount of unrecognized tax benefits relating to the Company’s tax positions is subject to change based on future events including, but not limited to, the settlements of ongoing audits and/or the expiration of applicable statutes of limitations. The outcomes and timing of such events are highly uncertain. However, the Company’s reasonable estimate of the range of gross unrecognized tax benefits, excluding interest and penalties, that could potentially be reduced during the next 12 months is $7.8 million. The Company is subject to taxation in the United States, New York, and various other states and foreign jurisdictions. As of December 31, 2023, tax year 2014 and later remain open to examination. The Company is under examination by the IRS for calendar year 2014 through 2017. These examinations may result in proposed adjustments to the Company’s income tax liability or tax attributes with respect to years under examination as well as subsequent periods. The benefit (provision) for income taxes involves a significant amount of management judgment regarding interpretation of relevant facts and laws in the jurisdictions in which the Company operates. Future changes in applicable laws, projected levels of taxable income and tax planning could change the effective tax rate and tax balances recorded by the Company. In addition, tax authorities periodically review income tax returns filed by the Company and can raise issues regarding its filing positions, timing and amount of income and deductions, and the allocation of income among the jurisdictions in which the Company operates. A significant period of time may elapse between the filing of an income tax return and the ultimate resolution of an issue raised by a revenue authority with respect to that return. Any adjustments as a result of any examination may result in additional taxes or penalties against the Company. If the ultimate result of these audits differ from original or adjusted estimates, they could have a material impact on the Company’s tax provision. Over the last several years, the Organization for Economic Cooperation and Development (“OECD”) has been developing its “two pillar” project to address the tax challenges arising from digitalization. The OECD project, if broadly implemented by participating countries, will result in significant changes to the international taxation system under which our current tax obligations are determined. Pillar Two of the project calls for a minimum tax rate on corporations of 15% and is expected to be implemented by a significant number of countries starting in 2024. The OECD and implementing countries are expected to continue to make further revisions to the rules, however, the Company expects adverse consequences to our tax liabilities based on rules as currently drafted. The Company will continue to monitor developments to determine any potential impact of Pillar Two in the countries in which it operates.

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