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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The domestic and foreign components of income before income taxes consisted of the following:
Years Ended December 31,
202420232022
(In thousands)
United States$80,903 $465,463 $417,636 
Foreign39,256 47,676 34,412 
Income before income taxes$120,159 $513,139 $452,048 
The income tax provision the years presented is as follows:
Years Ended December 31,
202420232022
(In thousands)
Current:
Federal$61,256 $96,151 $34,499 
State6,319 13,937 9,719 
Foreign11,137 11,303 10,605 
78,712 121,391 54,823 
Deferred:
Federal(58,588)(50,211)(6,245)
State(4,535)1,287 3,803 
Foreign1,912 1,736 2,305 
(61,211)(47,188)(137)
Income tax provision$17,501 $74,203 $54,686 
A reconciliation of the income tax provision 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,
202420232022
(In thousands)
Income tax provision at statutory federal rate$25,233 $107,760 $94,926 
State taxes, net of federal benefit7,406 18,107 9,980 
Change in valuation allowance1,973 — — 
Foreign tax rate and tax law differential6,502 5,965 4,905 
Tax credits(7,598)(29,229)(19,864)
Non-taxable income related to Section 45X tax credits(33,083)(11,229)— 
Stock-based compensation13,408 (13,969)(45,551)
Other permanent items335 (964)4,149 
Other nondeductible/nontaxable items(219)(73)69 
Uncertain tax positions2,746 8,432 6,073 
Foreign-derived intangible income deduction(5,188)(15,391)(9,161)
GILTI and other foreign inclusions9,101 — — 
Section 162(m)4,618 5,445 9,291 
Unremitted foreign earnings1,654 1,829 1,837 
Prior year changes in estimates(9,387)(2,480)(1,968)
Income tax provision$17,501 $74,203 $54,686 
A summary of significant components of the Company’s deferred tax assets and liabilities as of December 31, 2024 and 2023 is as follows:
December 31,
20242023
(In thousands)
Deferred tax assets:
Allowances and reserves$56,819 $53,066 
Accrued liabilities30,230 1,957 
Net operating loss and tax credit carryforwards17,945 23,267 
Stock-based compensation17,504 15,811 
Deferred revenue66,353 53,656 
Fixed assets and intangibles1,670 — 
Convertible notes and related hedges27,053 38,773 
Capitalized research and development expense104,002 83,098 
Capitalized inventory13,865 7,916 
Other8,496 5,441 
Gross deferred tax assets343,937 282,985 
Less valuation allowance(1,973)— 
Total deferred tax assets341,964 282,985 
Deferred tax liabilities:
Fixed assets and intangibles— (2,833)
Unremitted foreign earnings(6,800)(5,189)
Deferred cost of goods sold(26,397)(27,782)
Other(208)— 
Total deferred tax liabilities(33,405)(35,804)
Net deferred tax asset$308,559 $247,181 
As of December 31, 2024, the Company recorded a valuation allowance of $2.0 million against certain of its net operating losses on one of its foreign operations, as it is more likely than not that such amounts will not be fully realized.
The Company's accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of the Company's deferred tax assets. Assessing the realizability of deferred tax assets is dependent upon several factors, including the likelihood and amount, if any, of future taxable income in relevant jurisdictions during the periods in which those temporary differences become deductible. The Company's management forecasts taxable income by considering all available positive and negative evidence including its history of operating income or losses and its financial plans and estimates which are used to manage the business. These assumptions require significant judgment about future taxable income. The amount of deferred tax assets considered realizable is subject to adjustment in future periods if estimates of future taxable income are reduced.
Years Ended December 31,
20242023
(In thousands)
Valuation allowance, beginning of period$— $— 
Additions1,973 — 
Reversals— — 
Valuation allowance, end of period$1,973 $— 
As of December 31, 2024, the Company evaluated its undistributed foreign earnings and identified $79.2 million in earnings that it does not consider to be permanently reinvested that may be subject to withholding taxes in local jurisdictions when they are distributed. The Company has recorded a provision of approximately $6.8 million for the taxes that would fall due when such earnings are repatriated.
The Company has approximately $6.0 million of federal tax credit and $10.3 million of state tax credit carryforwards. The federal credits begin to expire in 2031 and the state credits can be carried forward indefinitely. As of December 31, 2024, the Company has foreign net operating losses of $5.3 million from the acquisition of GreenCom, which can be carried over 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 Internal Revenue Code of 1986, as amended (the “Code”), and similar state provisions. The Company believes that no such change has occurred through December 31, 2024.
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 2024 of $0.4 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.
As of December 31, 2024, the total amount of gross unrecognized tax benefits was $27.7 million, of which $26.0 million, if recognized, would impact the Company’s effective tax rate.
A tabular reconciliation of the total amounts of unrecognized tax benefits for the years presented is as follows (in thousands):
Years Ended December 31,
202420232022
Unrecognized tax benefits—at beginning of year$27,218 $21,768 $20,904 
Decreases in balances related to tax positions taken in prior years(702)(417)(4,786)
Increases in balances related to tax positions taken in current year1,490 5,985 6,562 
Settlements— — (657)
Lapses in statutes of limitations(346)(118)(255)
Unrecognized tax benefits—at end of year$27,660 $27,218 $21,768 
The Company includes interest and penalties related to unrecognized tax benefits within the income tax provision. In the years ended December 31, 2024, 2023 and 2022, the total amount of gross interest and penalties accrued was $6.1 million, $2.9 million and $0.8 million, respectively. 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 2024, 2023 and 2022 in the consolidated statements of operations was $2.3 million, $3.8 million and $0.9 million, respectively.
The Company’s tax returns continue to remain effectively subject to examination by U.S. federal authorities for the years 2006 and onwards and by California state authorities for the years 2006 and onwards due to use and carryovers of net operating losses and tax credits. The Company is currently under audit in India and it is reasonably possible that its existing gross unrecognized tax benefits may be reduced by up to $5.1 million within the next 12 months.
In August 2022, the U.S. enacted the IRA, which included revisions to 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, exceeds $1.0 billion. Further, the IRA also extended the investment tax credits for clean energy and expanded the incentives to clean energy manufacturing.
For the year ended December 31, 2024, the Company is not subject to the CAMT based on its current operating results and interpretations of the latest IRA guidance. For the years ended December 31, 2024 and 2023, benefits recognized from the AMPTC of $157.5 million and $53.5 million, respectively, were recorded as a prepaid income tax of $94.9 million (included in Prepaid Expenses and Other Current Assets) and reduction of income tax payable of $62.7 million on the consolidated balance sheet for the year ended December 31, 2024, reduction to income tax payable of $53.5 million (included in Accrued Liabilities) on the consolidated balance sheet for the year ended December 31, 2023, and as a reduction to cost of revenues of $157.5 million and $53.5 million on the consolidated statement of operations for the years ended December 31, 2024 and 2023, respectively.
In December 2021, the Organization for Economic Co-operation and Development Inclusive Framework on Base Erosion Profit Shifting released Model Global Anti-Base Erosion rules (“Model Rules”) under Pillar Two. The Model Rules set forth the “common approach” for a Global Minimum Tax at 15 percent for multinational enterprises with a turnover of more than 750 million euros. Rules under Pillar Two were effective from January 1, 2024. The adoption of Pillar Two rules did not have a significant impact on the Company’s consolidated financial statements in 2024.