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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The following are the domestic and foreign components of our income (loss) before income taxes (in thousands):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Domestic | $ | 34,518 |  |  | $ | (49,383) |  |  | $ | (119,195) |
Foreign | (3,024) |  |  | 1,710 |  |  | (420) |
Total income (loss) before income taxes | $ | 31,494 |  |  | $ | (47,673) |  |  | $ | (119,615) |
The details for the provision for (benefit from) for income taxes by jurisdiction are as follows (in thousands):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Current |  |  |  |  |
Federal | $ | 8,984 |  |  | $ | 647 |  |  | $ | (194) |
State | 3,621 |  |  | 1,143 |  |  | 760 |
Foreign | 224 |  |  | 63 |  |  | 78 |
Total current provision | 12,829 |  |  | 1,853 |  |  | 644 |
Deferred |  |  |  |  |
Federal | 5,481 |  |  | 1,142 |  |  | (9,605) |
State | (769) |  |  | (1,935) |  |  | (1,990) |
Total deferred provision | 4,712 |  |  | (793) |  |  | (11,595) |
Total provision for (benefit from) income tax | $ | 17,541 |  |  | $ | 1,060 |  |  | $ | (10,951) |
The provision for income taxes for the year ended December 31, 2023 and 2022 reflected the impact of a change in U.S. tax law effective January 1, 2022, which requires the capitalization and amortization of research and development expenditures incurred after December 31, 2021. In August 2022, the Inflation Reduction Act of 2022, or IRA, was enacted. The IRA introduced a 15% alternative minimum tax based on the financial statement income of certain large corporations, effective for tax years beginning after December 31, 2022. The Company considered the applicable tax law changes concluding there is no impact to the Company’s tax provision for the twelve months ended December 31, 2023. The provision for (benefit from) income taxes for December 31, 2023, 2022, and 2021, differed from the amounts computed by applying the U.S. Federal income tax rate of 21% to income (loss) before income taxes as a result of the following (in thousands):
| Year Ended December 31,
| 2023 |  | 2022 |  | 2021
Provision for (benefit from) income taxes at statutory rate | $ | 6,614 |  |  | $ | (10,012) |  |  | $ | (25,120) |
State income taxes, net of federal benefit | 1,796 |  |  | (1,424) |  |  | (2,309) |
Rate differential on foreign earnings | (130) |  |  | (104) |  |  | (68) |
Research and development credits | (4,894) |  |  | (1,346) |  |  | (887) |
Change in valuation allowance | 814 |  |  | 304 |  |  | 809 |
Stock-based compensation | 4,538 |  |  | 2,021 |  |  | (3,065) |
Nondeductible stock-based compensation | 6,053 |  |  | 10,012 |  |  | 18,267 |
Unrecognized tax benefits | 2,498 |  |  | 975 |  |  | 703 |
Non-deductible expenses | 350 |  |  | 630 |  |  | 287 |
Other | (98) |  |  | 4 |  |  | 432 |
Total provision for (benefit from) income taxes | $ | 17,541 |  |  | $ | 1,060 |  |  | $ | (10,951) |
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, 2023 and 2022, (in thousands):
| As of December 31,
| 2023 |  | 2022
Deferred tax assets |  |  |
Deferred revenue | $ | 220 |  |  | $ | 316 |
Accrued expenses | 8,557 |  |  | 7,995 |
Stock-based compensation | 6,554 |  |  | 9,293 |
Impairment on investment | 1,445 |  |  | 1,445 |
| As of December 31,
| 2023 |  | 2022
Net operating loss carryforwards | 14,492 |  |  | 15,117 |
Tax credit carryforwards | 9,462 |  |  | 12,839 |
Lease liabilities | 2,359 |  |  | 2,934 |
Interest expense carryforwards | 1,560 |  |  | 6,004 |
Capital loss carryforwards | 455 |  |  | 453 |
Capitalized research expenses | 21,355 |  |  | 6,674 |
Total deferred tax assets | 66,459 |  |  | 63,070 |
Valuation allowance | (16,320) |  |  | (14,644) |
Net deferred tax assets | 50,139 |  |  | 48,426 |
Deferred tax liabilities |  |  |
Depreciation and amortization | (15,231) |  |  | (12,780) |
Right of use asset | (2,228) |  |  | (2,900) |
State taxes | (3,665) |  |  | (3,366) |
Net deferred tax liabilities | (21,124) |  |  | (19,046) |
Net deferred tax assets and liabilities | $ | 29,015 |  |  | $ | 29,380 |
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,
| 2023 |  | 2022 |  | 2021
Beginning balance | $ | 14,644 |  |  | $ | 14,170 |  |  | $ | 12,950 |
Net increase in current year | 799 |  |  | 91 |  |  | 1,312 |
Net increase (decrease) in valuation prior period | 877 |  |  | 383 |  |  | (14) |
Net decrease in valuation allowance from acquisitions | — |  |  | — |  |  | (78) |
Ending balance | $ | 16,320 |  |  | $ | 14,644 |  |  | $ | 14,170 |
Net changes in the valuation allowance in the years ended December 31, 2023, 2022, and 2021 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, 2023 and 2022, we had federal net operating loss, or NOL, carryforwards of $17.2 million and $16.8 million, respectively, which will begin to expire in 2032. At December 31, 2023, and 2022, we had state NOL carryforwards of $38.2 million and $59.9 million, respectively, which will begin to expire in 2028. At December 31, 2023 and 2022, we had foreign NOL carryforwards of $30.3 million and $33.6 million, respectively, which can be carried forward indefinitely and are not subject to expiration. At December 31, 2023, our federal tax credit carryforwards were immaterial. At December 31, 2022, we had federal tax credit carryforwards of $7.1 million, which will begin to expire in 2039. At December 31, 2023 and 2022, we had state tax credit carryforwards of $12.6 million and $10.8 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, 2023, 2022, and 2021, 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, 2023, 2022, and 2021 (in thousands):
| Gross Unrealized Tax Benefits
Balance at December 31, 2020 | $ | 7,231 |
Additions for tax positions related to the current year | 887 |
Reductions for tax positions related to prior years | (245) |
Balance at December 31, 2021 | $ | 7,873 |
Additions for tax positions related to the current year | 999 |
Additions for tax positions related to prior years | 48 |
Balance at December 31, 2022 | $ | 8,920 |
Additions for tax positions related to the current year | 2,181 |
Additions for tax positions related to prior years | 418 |
Balance at December 31, 2023 | $ | 11,519 |
If recognized, $11.5 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, 2023 and 2022, 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 2020 through 2022 and state income tax returns for the tax years 2008 through 2022 remain open to examination. We are under examination in one state which is not expected to have an impact on our results of operations, cash flows and financial condition.

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