XML 34 R24.htm IDEA: XBRL DOCUMENT v3.23.1
Income Taxes
 3 Months Ended
Mar. 31, 2023
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
For purposes of interim reporting, our annual effective income tax rate is estimated in accordance with ASC 740-270, "Interim Reporting." This rate is applied to the pre-tax book income of the entities expected to be benefited during the year. Discrete items that impact the tax provision are recorded in the period incurred.

For the three months ended March 31, 2023, we recorded a benefit from income taxes of $1.2 million, resulting in an effective income tax rate of (9.4)%. For the three months ended March 31, 2022, we recorded a benefit from income taxes of $0.6 million resulting in an effective income tax rate of (7.5)%. For the three months ended March 31, 2023, our effective tax rate was below the 21.0% statutory rate primarily due to research and development tax credits claimed and the foreign derived intangible income deduction, partially offset by the impact of state income taxes and other nondeductible expenses. For the three months ended March 31, 2022, our effective tax rate was below the 21.0% statutory rate primarily due to research and development tax credits claimed, tax windfall benefits from employee stock-based payment transactions and the foreign derived intangible income deduction, partially offset by the impact of state taxes, foreign withholding taxes and other nondeductible expenses.

We recognize a valuation allowance if, based on the weight of available evidence, both positive and negative, it is more likely than not that some portion, or all, of net deferred tax assets will not be realized. Our valuation allowance for state research and development tax credit carryforwards was $2.6 million as of December 31, 2022 and increased to $2.7 million as of March 31, 2023.

We apply guidance for uncertainty in income taxes that requires the application of a more likely than not threshold to the recognition and de-recognition of uncertain tax positions. If the recognition threshold is met, this guidance permits us to recognize a tax benefit measured at the largest amount of the tax benefit that, in our judgment, is more likely than not to be realized upon settlement. We recorded an increase to the unrecognized tax benefits liability of $0.7 million primarily for research and development tax credits claimed during the three months ended March 31, 2023. We recorded an increase to the unrecognized tax benefits liability of $0.6 million for research and development tax credits claimed during the three months ended March 31, 2022.

Our tax returns are subject to on-going review and examination by various tax authorities. Tax authorities may not agree with the treatment of items reported in our tax returns, and therefore the outcome of tax reviews and examinations can be unpredictable. On October 13, 2021, the Internal Revenue Service commenced an examination of our federal income tax return for 2018 and on August 12, 2022, the Internal Revenue Service expanded the examination to include our federal income tax return for 2019, both of which are ongoing. The anticipated completion date of the Internal Revenue Service examinations cannot be estimated at this time.

As of March 31, 2023 and December 31, 2022, our condensed consolidated balance sheets included a $0.3 million accrual for total interest expense related to unrecognized tax benefits. We recognize interest and penalties related to unrecognized tax benefits as a component of income tax expense.

In August 2022, the Inflation Reduction Act of 2022 was enacted in the United States which, among other provisions, includes a minimum 15.0% tax on companies that have a three-year average annual adjusted financial statement income of more than $1.0 billion and a 1.0% excise tax on the value of net corporate stock repurchases. Both provisions became effective on January 1, 2023 and the provisions did not have a material impact on our financial condition or results of operations as of March 31, 2023.