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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes The continuing operations income tax (expense) benefit consisted of the following (in thousands):
| Year ended December 31,
| 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |
Federal | $ | (42,698) |  |  | $ | 8,435 |  |  | $ | (15,112) |
State | (12,184) |  |  | 248 |  |  | (4,300) |
Foreign | (16,066) |  |  | (15,931) |  |  | (18,631) |
Total current | (70,948) |  |  | (7,248) |  |  | (38,043) |
Deferred: |  |  |  |  |
Federal | 12,667 |  |  | 17,132 |  |  | 6,022 |
State | (1,577) |  |  | 5,044 |  |  | 67 |
Foreign | 1,901 |  |  | (729) |  |  | (6,396) |
Total deferred | 12,991 |  |  | 21,447 |  |  | (307) |
Income tax (expense) benefit from continuing operations | $ | (57,957) |  |  | $ | 14,199 |  |  | $ | (38,350) |
A reconciliation of the statutory federal income tax rate with the Company’s continuing operations effective income tax rate is as follows:
| Year ended December 31,
| 2022 |  | 2021 |  | 2020
Statutory tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net | 5.0 |  |  | (1.3) |  |  | 1.8 |
Foreign rate differential | 1.0 |  |  | (0.3) |  |  | 2.8 |
Foreign income inclusion | 5.4 |  |  | 0.7 |  |  | 5.2 |
Foreign tax credit | (5.1) |  |  | (0.8) |  |  | (4.3) |
Reserve for uncertain tax positions | (3.2) |  |  | (2.4) |  |  | 11.5 |
Valuation allowance | — |  |  | (1.7) |  |  | 9.9 |
Impact on deferred taxes of enacted tax law and rate changes | 1.4 |  |  | (0.5) |  |  | 3.3 |
Tax credits and incentives | (5.0) |  |  | (1.5) |  |  | (7.2) |
Mark-to market on investment in Consensus | 22.1 |  |  | (18.0) |  |  | — |
Return to provision adjustments | 1.1 |  |  | 0.5 |  |  | 2.4 |
Executive compensation | 1.5 |  |  | 0.7 |  |  | 2.7 |
Other | (1.0) |  |  | (0.4) |  |  | (0.2) |
Effective tax rates | 44.2 | % |  | (4.0) | % |  | 48.9 | %
The effective tax rate for continuing operations for the year ended December 31, 2022 differs from the federal statutory rate primarily due to a book-tax difference related to the loss recognized for accounting purposes related to the Company’s shares held in Consensus stock. The Company recognized a deferred tax liability resulting in tax expense of $13.4 million on the outside basis difference between the book basis exceeding the tax basis of the Investment in Consensus on October 7, 2022 due to future disposals of the shares being subject to tax based on guidance and requirements set out by the Internal Revenue Service. Additional reasons the effective tax rate differs from the federal statutory tax rate is due to income earned in the United States also being subject to income taxes in various state jurisdictions with statutory tax rates that can range from 2.5 percent to 11.5 percent. This increase in the effective income tax rate is offset by a decrease in the net reserve for uncertain tax positions during 2022 and a tax benefit claimed in the United States related to a deduction for foreign-derived intangible income. The decrease in the reserve for uncertain tax positions is primarily due to the lapse of the statute of limitations for U.S. tax reserves. The effective tax rate for continuing operations for 2021 differs from the federal statutory rate primarily due to a book-tax difference related to the $298.5 million of book income recognized related to the Company’s shares held in Consensus stock. The income was not subject to tax since the Company had the ability to dispose of the investment in a tax-free manner based on guidance and requirements set out by the Internal Revenue Service. Additionally, the Company recorded a decrease in the net reserve for uncertain tax positions during 2021 and a reduction in the valuation allowance on deferred tax assets related to realized and unrealized capital losses. The decrease in the reserve for uncertain tax positions is primarily due to the lapse of the statute of limitations for U.S. tax reserves. The reduction in the valuation allowance is primarily due to an increase in unrealized capital gains on investments held by the Company which can provide a source of capital gain income in future years to realize the benefit of the capital losses. The effective tax rate for continuing operations for 2020 differs from the federal statutory rate primarily due to the Company recording a net increase in the reserve for uncertain tax positions during 2020 and recording a valuation allowance for a capital loss recognized due to the sale of assets related to its Voice business unit in Australia and New Zealand and the impairment of certain U.S. investments. Deferred tax assets and liabilities result from differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Temporary differences and carryforwards which give rise to deferred tax assets and liabilities from continuing operations are as follows (in thousands):
| Years Ended December 31,
| 2022 |  | 2021
Deferred tax assets: |  |  |
Net operating loss and other carryforwards | $ | 19,513 |  |  | $ | 28,393 |
Tax credit carryforwards | 4,222 |  |  | 2,801 |
Accrued expenses | 10,702 |  |  | 12,548 |
Allowance for bad debt | 1,445 |  |  | 2,116 |
Share-based compensation expense | 3,885 |  |  | 3,545 |
Operating lease liabilities | 16,756 |  |  | 21,771 |
Basis difference in fixed assets | 14,642 |  |  | — |
Deferred revenue | 2,994 |  |  | 4,331 |
State taxes | 4,447 |  |  | 3,771 |
Other | 3,920 |  |  | 4,351 |
| 82,526 |  |  | 83,627 |
Less: valuation allowance | (1,699) |  |  | (1,812) |
Total deferred tax assets | $ | 80,827 |  |  | $ | 81,815 |
Deferred tax liabilities: |  |  |
Basis difference in property and equipment | $ | — |  |  | $ | (8,337) |
Operating lease right-of-use assets | (14,008) |  |  | (16,696) |
Basis difference in intangible assets | (101,797) |  |  | (117,244) |
Unrealized gains on investments | (24,123) |  |  | (11,291) |
Prepaid insurance | (2,744) |  |  | (3,121) |
Convertible debt | — |  |  | (21,972) |
Other | (8,639) |  |  | (6,219) |
Total deferred tax liabilities | (151,311) |  |  | (184,880) |
Net deferred tax liabilities | $ | (70,484) |  |  | $ | (103,065) |
The Company had approximately $80.8 million and $81.8 million in deferred tax assets from continuing operations as of December 31, 2022 and 2021, respectively, related primarily to net operating loss, operating lease liabilities, interest expense and capital loss carryforwards, tax credit carryforwards, capitalized research and development expenses and accrued expenses treated differently between its financial statements and its tax returns. Based on the weight of available evidence, the Company assesses whether it is more likely than not that some portion or all of a deferred tax asset will not be realized. If necessary, the Company records a valuation allowance sufficient to reduce the deferred tax asset to the amount that is more likely than not to be realized. The deferred tax assets should be realized through future operating results and the reversal of temporary differences. The Company had a valuation allowance on deferred tax assets from continuing operations of $1.7 million and $1.8 million as of December 31, 2022 and 2021, respectively. The valuation allowance related to net operating loss and capital loss carryforward in certain foreign jurisdictions decreased $0.1 million primarily as a result of re-measurement due to tax rate changes. The rollforward of the valuation allowance on the deferred tax assets from continuing operations is as follows (in thousands):
| Year ended December 31,
| 2022 |  | 2021 |  | 2020
Beginning balance | $ | 1,812 |  |  | $ | 8,262 |  |  | $ | 563 |
Charges to costs and expenses | — |  |  | 178 |  |  | 9,456 |
Write-offs and recoveries | (113) |  |  | (6,628) |  |  | (1,757) |
Ending balance | $ | 1,699 |  |  | $ | 1,812 |  |  | $ | 8,262 |
As of December 31, 2022, the Company had federal net operating loss carryforwards (“NOLs”) of $22.8 million, after considering substantial restrictions on the utilization of these NOLs due to “ownership changes”, as defined in the Internal Revenue Code of 1986, as amended. The Company estimates that all of the above-mentioned federal NOLs will be available for use before their expiration. $20.7 million of the NOLs expire through the year 2037 and $2.1 million of the NOLs carry forward indefinitely depending on the year the loss was incurred. As of December 31, 2022 and 2021, the Company’s deferred tax assets include interest expense limitation carryovers of $6.4 million and $23.3 million, respectively, which last indefinitely. The Company also has federal capital loss limitation carryforwards as of December 31, 2022 and 2021 of $24.1 million and $28.7 million, respectively that begin to expire in 2031. In addition, as of December 31, 2022 and 2021, we had available state research and development tax credit carryforwards of $3.5 million and $5.1 million, respectively, which last indefinitely. The Company had no foreign tax credit carryforwards as of December 31, 2022 and 2021. The Company has not provided for deferred taxes on approximately $307.8 million of undistributed earnings from foreign subsidiaries as of December 31, 2022. The Company has not provided any additional deferred taxes with respect to items such as foreign withholding taxes, state income tax or foreign exchange gain or loss that would be due when cash is actually repatriated to the U.S. because those foreign earnings are considered permanently reinvested in the business or may be remitted substantially free of any additional taxes. Because of the various avenues in which to repatriate the earnings, it is not practicable to determine the amount of the unrecognized deferred tax liability related to the undistributed earnings if eventually remitted. Certain taxes are prepaid during the year and, where appropriate, included within ‘Prepaid expenses and other current assets’ on the Consolidated Balance Sheet. The Company’s prepaid taxes were $3.2 million and $0.8 million at December 31, 2022 and 2021, respectively. Income (loss) from continuing operations before income taxes included income from domestic operations of $71.8 million, $279.7 million, $(2.0) million for the years ended December 31, 2022, 2021 and 2020, respectively, and income from foreign operations of $59.4 million, $71.7 million and $80.4 million for the years ended December 31, 2022, 2021 and 2020, respectively. Uncertain Income Tax Positions Tax positions are evaluated in a two-step process. The Company first determines whether it is more likely than not that a tax position will be sustained upon examination. If a tax position meets the more-likely-than-not recognition threshold, it is then measured to determine the amount of benefit to recognize in the financial statements. The tax position is measured as the largest amount of benefit that is greater than 50% likely of being realized upon ultimate settlement. The Company classifies gross interest and penalties and unrecognized tax benefits that are not expected to result in payment or receipt of cash within one year as non-current liabilities in the Consolidated Balance Sheets. As of December 31, 2022, the total amount of unrecognized tax benefits for continuing operations was $34.2 million, of which $32.7 million, if recognized, would affect the Company’s effective tax rate. As of December 31, 2021, the total amount of unrecognized tax benefits for continuing operations was $39.5 million, of which $35.6 million, if recognized, would affect the Company’s effective tax rate. As of December 31, 2020, the total amount of unrecognized tax benefits for continuing operations was $46.0 million, of which $44.9 million, if recognized, would affect the Company’s effective tax rate. The aggregate changes in the balance of unrecognized tax benefits, which excludes interest and penalties, for 2022, 2021 and 2020, is as follows (in thousands):
| Year ended December 31,
| 2022 |  | 2021 |  | 2020
Beginning balance | $ | 39,527 |  |  | $ | 46,032 |  |  | $ | 43,687 |
Increases related to tax positions during a prior year | — |  |  | 3,448 |  |  | 3,953 |
Decreases related to tax positions taken during a prior year | (2,816) |  |  | (5,511) |  |  | (244) |
Increases related to tax positions taken in the current year | 819 |  |  | 4,675 |  |  | 4,264 |
Settlements | — |  |  | — |  |  | (5,628) |
Decreases related to expiration of statute of limitations | (3,322) |  |  | (9,117) |  |  | — |
Ending balance | $ | 34,208 |  |  | $ | 39,527 |  |  | $ | 46,032 |
The Company includes interest and penalties related to unrecognized tax benefits within ‘Income tax expense’ on the Consolidated Statements of Operations. As of December 31, 2022, 2021 and 2020, the total amount of interest and penalties accrued was $6.3 million, $5.7 million, $7.2 million, respectively, which is classified as a liability for uncertain tax positions on the Consolidated Balance Sheets. In connection with the liability for unrecognized tax benefits, the Company recognized interest and penalty expense (benefit) in 2022, 2021 and 2020 of $0.7 million, $(1.5) million and $2.8 million, respectively. Uncertain income tax positions are reasonably possible to significantly change during the next 12 months as a result of completion of income tax audits and expiration of statutes of limitations. At this point it is not possible to provide an estimate of the amount, if any, of significant changes in reserves for uncertain income tax positions as a result of the completion of income tax audits that are reasonably possible to occur in the next 12 months. In addition, the Company cannot currently estimate the amount of, if any, uncertain income tax positions which will be released in the next 12 months as a result of expiration of statutes of limitations due to ongoing audits. As a result of ongoing federal, state and foreign income tax audits (discussed below), it is reasonably possible that the Company’s entire reserve for uncertain income tax positions for the periods under audit will be released. It is also reasonably possible that the Company’s reserves will be inadequate to cover the entire amount of any such income tax liability. Income Tax Audits: The Company is in various stages of audit by the U.S. Internal Revenue Service (“IRS”) for its 2012 through 2016 tax years. On February 24, 2021, the Company received a Notice of Deficiency for tax years 2012 through 2014 which disallowed certain deductions for domestic production. The Company disagrees with the Notice and has filed a petition with the United States Tax Court on May 24, 2021 and has continued to work with the IRS to reach a conclusion. As of December 31, 2022, the audits are ongoing. The Company is under audit by the California Franchise Tax Board (“FTB”) for its tax years 2012 and 2013. The FTB, however, has agreed to suspend its audit for 2012 and 2013 pending the outcome of the IRS audit for such tax years. In August 2018, the FTB notified the Company that it will commence an audit of tax years 2015 and 2016. The Company responded to the inquiries from the FTB. The tax years remain open pending the outcome of the IRS audit for such tax years. As of December 31, 2022, the audits are ongoing. In June 2019, the New York State Department of Taxation and Finance (“NYS”) notified the Company that it will commence an audit for tax year 2015. In April 2020, the NYS notified the Company that it would also commence an audit for tax years 2016 and 2017. The tax years remain open pending the outcome of the IRS audit for such tax years. On October 2022, the Company signed an additional extension of the statute of limitations for tax years 2015 to 2017 to September 2023. As of December 31, 2022, the audits are ongoing. We conduct business on a global basis and as a result, one or more of our subsidiaries files income tax returns in the U.S. federal and in multiple state, local, and foreign tax jurisdictions. As noted previously, our U.S. federal income tax returns for years 2012 through 2016 are under various stages of audit by the IRS. We are also under audit for various U.S. state and local tax purposes as noted above for our significant jurisdictions. With limited exception, our significant foreign tax jurisdictions are no longer subject to an income tax audit by the various tax authorities for tax years prior to 2017. It is reasonably possible that these audits may conclude in the next twelve months and that the uncertain tax positions the Company has recorded in relation to these tax years may change compared to the liabilities recorded for these periods. If the recorded uncertain tax positions were inadequate to cover the associated tax liabilities, the Company would be required to record additional tax expense in the relevant period, which could be material. If the recorded uncertain tax positions were adequate to cover the associated tax liabilities, the Company would be required to record any excess as reduction in tax expense in the relevant period, which could be material. However, it is not currently possible to estimate the amount, if any, of such change.

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- Definition The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 21 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32857-109319 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 11.C) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330215-122817 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 17 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32809-109319 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB TOPIC 6.I.5.Q1) -URI https://asc.fasb.org/extlink&oid=122134291&loc=d3e330036-122817 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 10 -Section 50 -Paragraph 14 -URI https://asc.fasb.org/extlink&oid=121826272&loc=d3e32705-109319 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 270 -Section 50 -Paragraph 1 -URI https://asc.fasb.org/extlink&oid=6424409&loc=d3e44925-109338 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -URI https://asc.fasb.org/topic&trid=2144680 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 740 -SubTopic 30 -Section 50 -Paragraph 2 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(h)(2)) -URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690 + Details
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