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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Taxes | 10. Income Taxes The components of income before income taxes are as follows:
|  | For the Years Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
|  | (Amounts in thousands) |
Domestic |  | $ | 153,446 |  |  | $ | 81,984 |  |  | $ | 27,545 |
Foreign |  |  | 65,694 |  |  |  | 71,559 |  |  |  | 31,672 |
Income before income taxes |  | $ | 219,140 |  |  | $ | 153,543 |  |  | $ | 59,217 |
The components of the income tax provision are as follows:
|  | For the Years Ended December 31, |
|  | 2022 |  |  | 2021 |  |  | 2020 |
|  | (Amounts in thousands) |
Components of the income tax provision (benefit): |  |  |  |  |  |  |  |  |
Current |  | $ | 34,800 |  |  | $ | 20,166 |  |  | $ | 5,193 |
Deferred |  |  | (1,619 | ) |  |  | 5,086 |  |  |  | (5,902 | )
Total |  | $ | 33,181 |  |  | $ | 25,252 |  |  | $ | (709 | )
Jurisdictional components of the income tax provision (benefit): |  |  |  |  |  |  |  |  |
Federal |  | $ | 17,662 |  |  | $ | 8,321 |  |  | $ | (4,741 | )
State |  |  | 1,381 |  |  |  | 1,251 |  |  |  | (3,011 | )
Foreign |  |  | 14,138 |  |  |  | 15,680 |  |  |  | 7,043 |
Total |  | $ | 33,181 |  |  | $ | 25,252 |  |  | $ | (709 | )
At December 31, 2022, the Company had federal net operating loss carryforwards of $42.9 million, state net operating loss carryforwards of $0.8 million, and foreign net operating loss carryforwards of $4.9 million. Federal net operating loss carryforwards of $7.3 million will expire at various dates through 2037. The state net operating loss carryforwards will expire at various dates through 2041, while the foreign net operating loss carryforwards do not expire. The other $35.6 million of federal net operating loss carryforwards have unlimited carryforward periods. At December 31, 2022, the Company had state business tax credits carryforwards of $3.8 million available to reduce future domestic income taxes. The business tax credit carryforwards will expire at various dates through 2042. The net operating loss and business tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service and may be limited in the event of certain changes in the ownership interest of significant shareholders. The components of deferred income taxes are as follows:
|  | December 31, |
|  | 2022 |  |  | 2021 |
|  | (Amounts in thousands) |
Deferred tax assets: |  |  |  |  |  |
Stock-based compensation expense |  | $ | 5,323 |  |  | $ | 5,144 |
Operating leases |  |  | 31,564 |  |  |  | 26,264 |
Capitalized research and development |  |  | 9,102 |  |  |  | — |
Inventory |  |  | 5,983 |  |  |  | 3,082 |
Net operating loss carryforwards |  |  | 9,808 |  |  |  | 10,841 |
Business tax credit carryforwards |  |  | 2,639 |  |  |  | 1,834 |
Other |  |  | 4,440 |  |  |  | 3,504 |
Total deferred tax assets |  |  | 68,859 |  |  |  | 50,669 |
Less: valuation allowance |  |  | (19 | ) |  |  | (718 | )
Net deferred tax assets |  |  | 68,840 |  |  |  | 49,951 |
Deferred tax liabilities: |  |  |  |  |  |
Fixed assets |  |  | (18,965 | ) |  |  | (7,779 | )
Acquired intangible assets |  |  | (43,549 | ) |  |  | (43,227 | )
Operating lease right of use assets |  |  | (28,486 | ) |  |  | (24,114 | )
Conversion option on convertible notes |  |  | — |  |  |  | (6,408 | )
Total deferred tax liabilities |  |  | (91,000 | ) |  |  | (81,528 | )
Total net deferred tax liabilities |  | $ | (22,160 | ) |  | $ | (31,577 | )
The net change in the total valuation allowance for the year ended December 31, 2022 and 2021 was a decrease of approximately $0.7 million and a decrease of $9,000, respectively. The reconciliation of the federal statutory rate to the effective income tax rate for the years ended December 31, 2022, 2021 and 2020 is as follows:
|  | For the Years Ended December 31, 2022 |
|  | 2022 |  |  | 2021 |  |  | 2020 |
|  | Amount |  |  | % |  |  | Amount |  |  | % |  |  | Amount |  |  | % |
|  | (Amounts in thousands, except percentages) |
Income before income taxes |  | $ | 219,140 |  |  |  |  |  | $ | 153,543 |  |  |  |  |  | $ | 59,217 |  |  |  |
Expected tax at statutory rate |  |  | 46,020 |  |  |  | 21.0 | % |  |  | 32,247 |  |  |  | 21.0 | % |  |  | 12,436 |  |  |  | 21.0 | %
Adjustments due to: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Difference between U.S. and foreign tax |  |  | 1,024 |  |  |  | 0.5 | % |  |  | 530 |  |  |  | 0.3 | % |  |  | 618 |  |  |  | 1.0 | %
State income and franchise tax |  |  | 3,509 |  |  |  | 1.6 | % |  |  | 1,462 |  |  |  | 1.0 | % |  |  | 133 |  |  |  | 0.2 | %
Business tax credits |  |  | (5,139 | ) |  |  | (2.3 | %) |  |  | (2,239 | ) |  |  | (1.5 | %) |  |  | (4,660 | ) |  |  | (7.9 | %)
Stock-based compensation expense |  |  | (5,638 | ) |  |  | (2.6 | %) |  |  | (9,049 | ) |  |  | (5.9 | %) |  |  | (9,243 | ) |  |  | (15.6 | %)
U.S. taxation of foreign earnings |  |  | 83 |  |  |  | 0.0 | % |  |  | 30 |  |  |  | 0.0 | % |  |  | 51 |  |  |  | 0.1 | %
Foreign-derived intangible income |  |  | (5,042 | ) |  |  | (2.3 | %) |  |  | (2,547 | ) |  |  | (1.7 | %) |  |  | — |  |  |  | 0.0 | %
Executive compensation |  |  | 5,441 |  |  |  | 2.5 | % |  |  | 3,397 |  |  |  | 2.2 | % |  |  | 1,401 |  |  |  | 2.4 | %
Contingent consideration |  |  | (6,033 | ) |  |  | (2.8 | %) |  |  | 1,232 |  |  |  | 0.8 | % |  |  | — |  |  |  | 0.0 | %
Change in U.S. and foreign tax rates |  |  | 2 |  |  |  | 0.0 | % |  |  | 32 |  |  |  | 0.0 | % |  |  | (2,650 | ) |  |  | (4.5 | %)
Uncertain tax provisions |  |  | 234 |  |  |  | 0.1 | % |  |  | (443 | ) |  |  | (0.3 | %) |  |  | (168 | ) |  |  | (0.3 | %)
Change in valuation allowance |  |  | (688 | ) |  |  | (0.3 | %) |  |  | (48 | ) |  |  | (0.0 | %) |  |  | (12 | ) |  |  | (0.0 | %)
Other |  |  | (592 | ) |  |  | (0.3 | %) |  |  | 648 |  |  |  | 0.4 | % |  |  | 1,385 |  |  |  | 2.3 | %
Income tax provision |  | $ | 33,181 |  |  |  | 15.1 | % |  | $ | 25,252 |  |  |  | 16.4 | % |  | $ | (709 | ) |  |  | (1.2 | %)
The Company’s tax returns are subject to examination by federal, state and foreign tax authorities. The Company’s two major tax jurisdictions are subject to examination for the following periods:
Jurisdiction |  | Fiscal Years Subject to Examination
United States - federal and state |  | 2018-2022
Sweden |  | 2017-2022
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:
|  | For the Years Ended December 31, 2022 |
|  | 2022 |  |  | 2021 |
|  | (Amounts in thousands) |
Balance of gross unrecognized tax benefits, beginning of period |  | $ | 2,786 |  |  | $ | 3,200 |
Gross amounts of increases in unrecognized tax benefits as a result of tax positions taken in the current period |  |  | 146 |  |  |  | 133 |
Gross amounts of increases and (decreases) in unrecognized tax benefits as a result of tax positions taken in the prior period |  |  | 64 |  |  |  | (500 | )
Gross amounts of decreases due to release |  |  | — |  |  |  | (47 | )
Balance of gross unrecognized tax benefits, end of period |  | $ | 2,996 |  |  | $ | 2,786 |
Included in the balance of unrecognized tax benefits as of December 31, 2022, are $3.0 million of tax benefits that, if recognized, would affect the effective tax rate. The Company classifies interest and penalties related to income taxes as components of its income tax provision. In 2022, a net expense of approximately $24,000 was recorded to the income tax provision related to interest and penalties while in 2021 and 2020, net (benefit)/expenses of approximately ($29,000) and $17,000, respectively, were recorded. The amount of interest and penalties recorded in the accompanying consolidated balance sheets was approximately $52,000 and $29,000 as of December 31, 2022 and 2021, respectively. The Company does not anticipate the amount of unrecognized tax benefits to change over the next twelve months. On August 16, 2022, the United States enacted the Inflation Reduction Act of 2022 ("IRA"), which, among other things, implements a 15% alternative minimum tax on global adjusted financial statement income of certain large corporations, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy and will become effective beginning in 2023. The Company evaluated the provisions of the IRA and no provision had, or will have a material effect on our consolidated financial position or results of operations as of December 31, 2022. As of December 31, 2022, the Company has accumulated undistributed earnings generated by its foreign subsidiaries of approximately $148.2 million. Because $5.7 million of such earnings have previously been subject to the one-time transition tax on foreign earnings required by the Tax Cuts and Jobs Act enacted in December 2017, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of our foreign investments would generally be limited to foreign and state taxes. At December 31, 2022, the Company has not provided for taxes on outside basis differences of its foreign subsidiaries as it is not practicable and the Company has the ability and intent to indefinitely reinvest the undistributed earnings of its foreign subsidiaries, and there are no needs for such earnings in the United States that would contradict its plan to indefinitely reinvest.

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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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