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INCOME TAXES
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXESIn August 2022, the U.S. enacted the Inflation Reduction Act (the “IRA”), which included revisions to the Internal Revenue Code of 1986, as amended (the “Code”). The IRA introduced a 15% corporate alternative minimum income tax (“CAMT”) for corporations whose average adjusted financial income for any consecutive three-year period ending after December 31, 2021 that exceeds $1.0 billion. Further, the IRA also extended the investment tax credits for clean energy and expanded the incentives to clean energy manufacturing. The Company is not currently subject to the CAMT based on the current operating results and interpretations of the IRA. The conclusion may change as additional implementation guidance from the U.S. Department of Treasury becomes available.
The domestic and foreign components of income before income taxes consisted of the following:
Years Ended December 31,
202220212020
(In thousands)
United States$417,636 $102,886 $112,727 
Foreign34,412 18,042 6,683 
Income before income taxes$452,048 $120,928 $119,410 
The income taxes provision for (benefit from) the years presented is as follows:
Years Ended December 31,
202220212020
(In thousands)
Current:
Federal$34,499 $— $— 
State9,719 488 636 
Foreign10,605 6,232 1,896 
54,823 6,720 2,532 
Deferred:
Federal(6,245)(28,398)(13,445)
State3,803 (4,380)(3,672)
Foreign2,305 1,537 — 
(137)(31,241)(17,117)
Income taxes provision for (benefit from)$54,686 $(24,521)$(14,585)
A reconciliation of the income taxes provision (benefit) and the amount computed by applying the statutory federal income tax rate of 21% to income before income taxes for the years presented is as follows:
Years Ended December 31,
202220212020
(In thousands)
Income tax provision (benefit) at statutory federal rate$94,926 $27,681 $25,076 
State taxes, net of federal benefit9,980 489 (3,098)
Foreign tax rate and tax law differential4,905 1,073 611 
Tax credits(19,864)(15,632)(5,835)
Stock-based compensation(45,551)(80,950)(50,818)
Other permanent items4,149 178 (253)
Other nondeductible/nontaxable items(62)2,316 1,525 
Uncertain tax positions6,073 6,911 1,530 
Foreign-derived intangible income deduction(9,161)— — 
Section 162(m)9,291 25,812 11,469 
Convertible notes settlements— 8,223 — 
Warrant mark-to-mark adjustment— (622)5,208 
Income tax provision (benefit)$54,686 $(24,521)$(14,585)
A summary of significant components of the Company’s deferred tax assets and liabilities as of December 31, 2022 and 2021 is as follows:
December 31,
20222021
(In thousands)
Deferred tax assets:
Allowances and reserves$40,166 $18,764 
Net operating loss and tax credit carryforwards26,748 65,699 
Stock-based compensation20,230 12,935 
Deferred revenue40,120 27,778 
Fixed assets, goodwill and intangibles (1)
609 7,906 
Sec. 163(j) interest carryforward— 10,749 
Convertible notes and related hedges49,405 — 
Capitalized research and development expense47,870 — 
Other11,099 1,609 
Subtotal236,247 145,440 
Total deferred tax assets236,247 145,440 
Deferred tax liabilities:
Unremitted foreign earnings(3,755)(2,226)
Deferred cost of goods sold(32,449)(23,713)
Total deferred tax liabilities(36,204)(25,939)
Net deferred tax asset$200,043 $119,501 
(1)    The fixed assets, goodwill and intangibles amount for the year ended December 31, 2021 is presented net of deferred tax liabilities related to goodwill.
The Company's accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company's deferred tax assets. Assessing the realizability of deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. The Company's management forecasts taxable income by considering all available positive and negative evidence including its history of operating income or losses and its financial plans and estimates that are used to manage the business. These assumptions require significant judgment about future taxable income. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are reduced.
The Company has California net operating loss carryforwards of approximately $10.4 million, as of December 31, 2022. The state net operating loss carryforwards, if not utilized, will expire beginning in 2041.
The Company has approximately $7.0 million of federal research credit and $18.0 million of state research credit carryforwards. The federal credits begin to expire in 2031 and the state credits can be carried forward indefinitely.
Utilization of some of the federal credit carryforwards and state net operating loss and credit carryforwards are subject to annual limitations due to the “change in ownership” provisions of the Code and similar state provisions. The Company believes that no such change has occurred through December 31, 2022.
The accounting for uncertain tax positions prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. The Company is required to recognize in the financial statements the impact of a tax position, if that position is more-likely than-not of being sustained on audit, based on the technical merits of the position. The Company recorded a net charge for unrecognized tax benefits in 2022 of $0.9 million.
The Company does not have any tax positions for which it is reasonably possible the total amount of gross unrecognized tax benefits will increase or decrease over the next year. The unrecognized tax benefits may increase or change during the next year for items that arise in the ordinary course of business.
A tabular reconciliation of the total amounts of unrecognized tax benefits for the years presented is as follows (in thousands):
Years Ended December 31,
202220212020
Unrecognized tax benefits—at beginning of year$20,904 $8,421 $6,589 
Increases (decreases) in balances related to tax positions taken in prior years(4,786)4,391 — 
Increases in balances related to tax positions taken in current year6,562 8,301 2,006 
Settlements(657)— — 
Lapses in statutes of limitations(255)(209)(174)
Unrecognized tax benefits—at end of year$21,768 $20,904 $8,421 
The Company includes interest and penalties related to unrecognized tax benefits within the income tax provision for (benefit from). In the years ended December 31, 2022, 2021 and 2020, the total amount of gross interest and penalties accrued in each year was immaterial. Both the unrecognized tax benefits and the associated interest and penalties that are not expected to result in payment or receipt of cash within one year are classified as other non-current liabilities in the consolidated balance sheets. In connection with tax matters, the Company’s interest and penalty expense recognized in 2022, 2021 and 2020 in the consolidated statements of operations was immaterial.
The Company’s tax returns continue to remain effectively subject to examination by U.S. federal authorities for the years 2006 through 2022 and by California state authorities for the years 2006 through 2022 due to use and carryovers of net operating losses and tax credits.