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Income Taxes

12 Months Ended

Dec. 31, 2020

Note 17 — Income Taxes

The amounts of income (loss) before income taxes attributable to domestic and foreign operations were as follows:


	Year ended December 31,
	2020		2019		2018

	(in thousands)
Domestic	$	(10,292)	$	(78,486)	$	(286,561)
Foreign		1,828		530		(147,273)
Total	$	(8,464)	$	(77,956)	$	(433,834)

Significant components of the expense (benefit) for income taxes consisted of the following:


	Year ended December 31,
	2020		2019		2018

	(in thousands)
Current:
Federal	$	—	$	—	$	(1,682)
Foreign		22		304		2,518
State and local		204		113		38
Total current expense (benefit) for income taxes		226		417		874
Deferred:
Federal		136		162		205
Foreign		(320)		116		(27,932)
State and local		(115)		82		107
Total deferred expense (benefit) for income taxes		(299)		360		(27,620)
Total expense (benefit) for income taxes	$	(73)	$	777	$	(26,746)

The income tax expense was reconciled to the tax expense computed at the U.S. federal statutory tax rate as follows:


	Year ended December 31,
	2020		2019		2018

	(in thousands)
Income tax expense (benefit) at U.S. statutory rates	$	(1,777)	$	(16,396)	$	(91,105)
State taxes, net of U.S. federal impact		(121)		(835)		(2,848)
Effect of international operations		(131)		785		11,847
Research and development tax credit		726		(1,692)		(2,230)
Net change in valuation allowance		388		15,098		7,747
Change in accrual for unrecognized tax benefits		(6)		1,232		2,868
Share-based compensation		2,248		1,947		1,848
Effect of 2017 Tax Act		—		—		(1,690)
Asset impairment		728		495		46,872
Partial extinguishment of 2023 Notes		(2,292)		—		—
Other		164		143		(55)
Total expense (benefit) for income taxes	$	(73)	$	777	$	(26,746)

Deferred income taxes reflect the effect of temporary differences between the carrying amounts of assets and liabilities recognized for financial reporting purposes and the amounts recognized for tax purposes. The tax effects of the temporary differences were as follows:


	December 31,
	2020		2019

	(in thousands)
Deferred tax assets:
Inventory valuation	$	10,949	$	11,170
Net operating losses		51,260		63,342
Credit carry forwards		54,160		55,103
Warranty and installation accruals		1,045		1,391
Share-based compensation		4,587		6,296
Customer deposits and deferred revenue		10,982		5,986
Operating leases		2,281		3,181
Other		4,741		3,501
Total deferred tax assets		140,005		149,970
Valuation allowance		(118,443)		(130,053)
Net deferred tax assets		21,562		19,917

Deferred tax liabilities:
Purchased intangible assets		7,227		9,345
Convertible Senior Notes		13,674		8,831
Operating leases		2,241		3,172
Depreciation		2,220		2,668
Total deferred tax liabilities		25,362		24,016
Net deferred taxes	$	(3,800)	$	(4,099)

The Company is no longer permanently reinvesting future earnings from certain foreign jurisdictions and has accrued for foreign tax withholdings of $0.7 million on its unremitted earnings as of December 31, 2020.

At December 31, 2020, the Company had U.S. federal NOL carryforwards of approximately $219.3 million, of which $6.9 million has an indefinite carryforward period, with the remaining expiring in varying amounts between 2034 and 2037, if not utilized. At December 31, 2020, the Company had U.S. federal research and development credits of $28.8 million that will expire between 2021 and 2040. The Company also has $9.4 million of foreign tax credits that expire in 2027. Additionally, the Company has state and local NOL carryforwards of approximately $122.7 million (a net deferred tax asset of $7.7 million, net of federal tax benefits and before the valuation allowance) that will expire between 2021 and 2040. Finally, the Company has state credits of $28.4 million, some of which are indefinite and others that will expire between 2024 and 2035.

The Company makes assessments to estimate if sufficient taxable income will be generated in the future to use existing deferred tax assets. As of December 31, 2020, the Company continued to have a cumulative three year loss with respect to its U.S. operations. As such, the Company maintains a valuation allowance against its U.S. deferred tax assets. During 2020, the Company’s valuation allowance decreased by approximately $11.6 million.

A roll-forward of the Company’s uncertain tax positions for all U.S. federal, state, and foreign tax jurisdictions was as follows:


	December 31,
	2020		2019		2018

	(in thousands)
Balance at beginning of year	$	12,369	$	11,137	$	8,269
Additions for tax positions related to current year		1,217		3,075		2,154
Additions for tax positions related to prior years		47		21		1,721
Reductions for tax positions related to prior years		(1,166)		(1,814)		(934)
Reductions due to the lapse of the statute of limitations		—		—		(26)
Settlements		(104)		(50)		(47)
Balance at end of year	$	12,363	$	12,369	$	11,137

If the amount of unrecognized tax benefits at December 31, 2020 were recognized, the Company’s income tax provision would decrease by $1.4 million. The gross amount of interest and penalties accrued in income tax payable in the Consolidated Balance Sheets was approximately $0.4 million at both December 31, 2020 and 2019.

The Company, or one of its subsidiaries, files income tax returns in the United States federal jurisdiction, and various state, local, and foreign jurisdictions. All material consolidated federal income tax matters have been concluded for years through 2017 subject to subsequent utilization of NOLs generated in such years. All material state and local income tax matters have been reviewed through 2012. The majority of the Company’s foreign jurisdictions have been reviewed through 2015. The Company’s major foreign jurisdictions’ statutes of limitation remain open with respect to the tax years 2015 through 2019 for China, Germany, and Singapore, and 2019 for Taiwan. The Company does not anticipate that its uncertain tax position will change significantly within the next twelve months subject to the completion of the ongoing tax audits and any resultant settlement.

- 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.

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