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Income Taxes
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes
Note 13. Income Taxes
Net loss before provision for income taxes consisted of the following (in thousands):
Year ended December 31,
202320222021
United States$(190,912)$(898,036)$(394,392)
International34,067 23,983 20,670 
Total net loss before provision for income taxes$(156,845)$(874,053)$(373,722)
The provision for income taxes consisted of the following (in thousands):
Year ended December 31,
202320222021
Current
Federal$— $— $— 
State1,792 1,104 746 
Foreign5,972 4,710 3,580 
Total current$7,764 $5,814 $4,326 
Deferred
Federal$— $— $— 
State— — — 
Foreign631 (701)(1,798)
Total deferred631 (701)(1,798)
Total income tax provision$8,395 $5,113 $2,528 
Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminated the right to deduct research and development expenditures for tax purposes in the period the expenses were incurred and instead requires all U.S. and foreign research and development expenditures to be amortized over five and fifteen tax years, respectively. Due to this required capitalization of research and development expenditures, the Company has recorded current income tax expense of $1.8 million for the year ended December 31, 2023. The current income tax provision is primarily for foreign and state taxes currently payable that we anticipate paying as a result of statutory limitations on our ability to offset expected taxable income with net operating loss carry forwards in certain states.
The provision for income taxes differed from the amounts computed by applying the U.S. federal income tax rate to pretax loss as a result of the following (in thousands):
 Year ended December 31,
 202320222021
Federal tax benefit at statutory rate$(32,937)$(183,551)$(78,482)
State tax, net of federal tax benefit1,415 848 314 
Research and development credits(11,574)(12,830)(10,135)
Share-based compensation10,956 5,828 (45,501)
Loss on debt extinguishment— 19 365 
Other permanent differences1,674 3,143 835 
Global intangible low-taxed income3,035 — — 
Foreign tax rate differential548 (2,497)(4,104)
Net operating losses not recognized35,278 194,153 139,236 
Release of valuation allowance associated with acquisitions— — — 
Total income tax provision$8,395 $5,113 $2,528 
In general, it is the Company’s practice and intention to reinvest the earnings of its non-U.S. subsidiaries in those operations. Because the Company’s non-U.S. subsidiary earnings have previously been subject to the one-time transition tax on foreign earnings required by the 2017 Tax Act, any additional taxes due with respect to such earnings or the excess of the amount for financial reporting over the tax basis of its foreign investments would generally be limited to foreign withholding taxes and/or U.S. state income taxes.
The types of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows (in thousands):
Year ended December 31,
20232022
Deferred tax assets
Net operating loss and credit carry-forwards$463,400 $491,323 
Research and development credits87,111 71,756 
Research and development expenditure capitalization130,792 75,821 
Basis difference in investments40,655 107,756 
Sales tax accrual67 90 
Share-based compensation21,014 14,986 
Acquired intangibles76,171 50,156 
Accrued liabilities17,994 16,550 
Gross deferred tax assets837,204 828,438 
Valuation allowance(674,720)(669,690)
Total deferred tax assets162,484 158,748 
Deferred tax liabilities
Deferred sales commissions(117,875)(117,724)
Lease right of use assets(8,255)(7,045)
Property and equipment(35,753)(32,746)
Net deferred tax assets$601 $1,233 
As of December 31, 2023, the Company has federal net operating loss carryforwards of approximately $1.8 billion, of which $66.1 million will expire in 2037, while the remaining portion does not expire. As of December 31, 2023, the Company had foreign net operating loss carryforwards of approximately $27.1 million that will carryforward indefinitely. As of December 31, 2023, the Company had state net operating loss carryforwards of approximately $1.3 billion that will begin to expire in 2024. The Company also has research credit carryforwards for federal and California tax purposes of approximately $77.0 million and $49.5 million, respectively, available to reduce future income subject to income taxes. The federal research credit carry-forwards will begin to expire in 2028 and the California research credits carry forward indefinitely.
The Internal Revenue Code of 1986, as amended, imposes restrictions on the utilization of net operating losses in the event of an “ownership change” of a corporation. Accordingly, a company’s ability to use net operating losses may be limited as prescribed under Internal Revenue Code Section 382 (“IRC Section 382”). Events which may cause limitations in the amount of the net operating losses that the Company may use in any one year include, but are not limited to, a cumulative ownership change of more than 50% over a three-year period. Utilization of the federal and state net operating losses may be subject to substantial annual limitation due to the ownership change limitations provided by the IRC Section 382 and similar state provisions.
The Company’s management believes that, based on a number of factors, it is more likely than not, that all or some portion of the deferred tax assets will not be realized; and accordingly, for the year ended December 31, 2023, the Company has provided a valuation allowance against the Company’s U.S. net deferred tax assets. The net change in the valuation allowance for the years ended December 31, 2023 and 2022 was an increase of $5.0 million and $244.1 million, respectively.
The following shows the changes in the gross amount of unrecognized tax benefits as of December 31, 2023 (in thousands):
202320222021
Unrecognized tax benefits, beginning of the year$26,412 $20,010 $14,158 
Increases related to prior year tax positions— — — 
Decreases related to prior year tax positions(418)— — 
Increases related to current year tax positions5,982 6,402 5,852 
Unrecognized tax benefits, end of year$31,976 $26,412 $20,010 
In accordance with ASC 740-10, Income Taxes, the Company has adopted the accounting policy that interest and penalties recognized are classified as part of its income taxes.
The Company does not anticipate that its total unrecognized tax benefits will significantly change due to settlement of examination or the expiration of statute of limitations during the next 12 months. Included in the balance of unrecognized tax benefits as of December 31, 2023 are $0.3 million of tax benefit that, if recognized, would affect the effective tax rate. Otherwise, as a result of the full valuation allowance as of December 31, 2023, current adjustments to the unrecognized tax benefit will not have an impact on our effective income tax rate. Any adjustments made after the valuation allowance is released will have an impact on the tax rate.
The Company files U.S. and foreign income tax returns with varying statutes of limitations. Due to the Company’s net carry-over of unused operating losses and tax credits, all years from 2003 forward remain subject to future examination by tax authorities.