XML 47 R29.htm IDEA: XBRL DOCUMENT v3.22.4
Income Taxes
 12 Months Ended
Dec. 31, 2022
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The following are the domestic and foreign components of our (loss) income before income taxes (in thousands):
Year Ended December 31,
202220212020
Domestic
$(49,383)$(119,195)$25,272 
Foreign
1,710 (420)(12,947)
Total (loss) income before income taxes
$(47,673)$(119,615)$12,325 
The details for the provision for (benefit from) for income taxes by jurisdiction are as follows (in thousands):
Year Ended December 31,
202220212020
Current
Federal
$647 $(194)$846 
State
1,143 760 243 
Foreign
63 78 15 
Total current provision
1,853 644 1,104 
Deferred
Federal
1,142 (9,605)2,322 
State
(1,935)(1,990)(997)
Foreign
— — — 
Total deferred provision
(793)(11,595)1,325 
Total provision for (benefit from) income tax
$1,060 $(10,951)$2,429 
The provision for (benefit from) income taxes for December 31, 2022, 2021, and 2020, differed from the amounts computed by applying the U.S. Federal income tax rate of 21% to (loss) income before income taxes as a result of the following (in thousands):
Year Ended December 31,
202220212020
(Benefit from) provision for income taxes at statutory rate
$(10,012)$(25,120)$2,588 
State income taxes, net of federal benefit
(1,424)(2,309)(891)
Rate differential on foreign earnings
(104)(68)(1,217)
Research and development credits
(1,346)(887)(1,340)
Change in valuation allowance
304 809 5,011 
Stock-based compensation
2,021 (3,065)(2,162)
Nondeductible stock-based compensation 10,012 18,267 — 
Unrecognized tax benefits
975 703 978 
Non-deductible expenses
630 287 (52)
Other4 432 (486)
Total provision for (benefit from) income taxes
$1,060 $(10,951)$2,429 
The tax effects of temporary differences that give rise to significant portions of our deferred tax assets and liabilities consisted of the following as of December 31, 2022 and 2021, (in thousands):
As of December 31,
20222021
Deferred tax assets
Deferred revenue$316 $697 
Accrued expenses7,995 5,321 
Stock-based compensation9,293 7,631 
Impairment on investment1,445 1,445 
Net operating loss carryforwards15,117 17,206 
Tax credit carryforwards12,839 12,112 
Lease liabilities2,934 — 
Interest expense carryforwards6,004 10,851 
Capital loss carryforwards453 452 
Capitalized research expenses6,674 — 
Total deferred tax assets63,070 55,715 
Valuation allowance(14,644)(14,170)
Net deferred tax assets48,426 41,545 
Deferred tax liabilities
Depreciation and amortization(12,780)(10,865)
Right of use asset(2,900)— 
State taxes(3,366)(3,026)
Net deferred tax liabilities(19,046)(13,891)
Net deferred tax assets and liabilities$29,380 $27,654 
We evaluated the realizability of net deferred tax assets and determined it is more likely than not that separate state net operating losses, state net operating losses from the acquisition of LegalInc, capital loss carryovers from the acquisition of Earth Class Mail, the deferred tax assets for Pulse IP, LLC and Pulse Business, LLC, and foreign deferred tax assets will not be realized based on the available objective evidence and have recorded a valuation allowance on such deferred tax assets.
The following table summarizes the valuation allowance:

 
Year Ended December 31,
 202220212020
Beginning balance
$14,170 $12,950 $7,816 
Net increase in current year91 1,312 4,646 
Net increase (decrease) in valuation prior period383 (14)528 
Net decrease in valuation allowance from acquisitions— (78)(40)
Ending balance
$14,644 $14,170 $12,950 
Net changes in the valuation allowance in the years ended December 31, 2022, 2021, and 2020 include changes recorded through earnings relating to losses primarily from foreign operations and to a lesser extent valuation allowances established relating to acquired businesses.
At December 31, 2022 and 2021, we had federal net operating loss, or NOL, carryforwards of $16.8 million and $29.8 million, respectively, which will begin to expire in 2032. At December 31, 2022, and 2021, we had state NOL carryforwards of $59.9 million and $58.8 million, respectively, which will begin to expire in 2027. At December 31, 2022 and 2021, we had foreign NOL carryforwards of $33.6 million and $31.8 million, respectively, which can be carried forward indefinitely and are not subject to expiration. At December 31, 2022 and 2021, we had federal tax credit carryforwards of $7.1 million and $7.6 million, respectively, which will begin to expire in 2035. At December 31, 2022 and 2021, we had state tax credit carryforwards of $10.8 million and $9.6 million, respectively, which carry forward indefinitely. Our domestic entities may be subject to an annual limitation on the utilization of NOL and credit carryforwards based on changes in ownership as defined by Section 382 of the Internal Revenue Code of 1986. In 2021
we acquired Earth Class Mail and in 2022 we acquired Revvsales Inc. Both were structured as stock acquisitions. Since there was a change in ownership, the acquired NOL carryforwards are subject to an annual Section 382 limitation on the utilization of the NOL carryforwards.
We have had foreign operations since 2013. We have not provided for U.S. income taxes on the undistributed earnings and other outside temporary differences of foreign subsidiaries as they are considered indefinitely reinvested outside the U.S. At December 31, 2022, 2021, and 2020, the amount of temporary differences related to undistributed earnings and other outside temporary differences upon which U.S. income taxes are not material to our consolidated financial statements.
The following table summarizes the changes in unrecognized tax benefits for the years ended December 31, 2022, 2021, and 2020 (in thousands):
Gross
Unrealized Tax
Benefits
Balance at December 31, 2019$6,256 
Additions for tax positions related to the current year916 
Additions for tax positions related to prior years59 
Balance at December 31, 2020$7,231 
Additions for tax positions related to the current year887 
Reductions for tax positions related to prior years(245)
Balance at December 31, 2021$7,873 
Additions for tax positions related to the current year999 
Additions for tax positions related to prior years48 
Balance at December 31, 2022$8,920 
If recognized, $8.9 million of unrecognized tax benefits, excluding interest and penalties, would reduce our annual effective tax rate. Due to the uncertain and complex application of tax laws and regulations, it is possible that the ultimate resolution of uncertain positions may result in liabilities that could be materially different from these estimates. In such an event, we will record additional tax expense or benefit in the period in which resolution occurs. Our policy is to recognize interest and penalties related to income tax matters in income tax expense. At December 31, 2022 and 2021, accrued interest and penalties related to income tax positions were not material to our consolidated financial statements. We do not anticipate that unrecognized tax benefits will materially change within the next twelve months.
We are subject to taxation and file income tax returns in the U.S. federal, state, and foreign jurisdictions. The federal income tax returns for the years 2019 through 2021 and state income tax returns for the tax years 2008 through 2021 remain open to examination.