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Income Taxes
 12 Months Ended
Dec. 31, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
Loss before income taxes included in the consolidated statements of operations was as follows:
 Year Ended December 31,
 202020192018
 (in thousands)
United States$(72,846)$(41,111)$(39,754)
Foreign(24,017)(12,692)(15,325)
Loss before income taxes$(96,863)$(53,803)$(55,079)
Income tax expense included in the consolidated statements of operations was as follows:
 Year Ended December 31,
 202020192018
 (in thousands)
Current:
Federal$8 $260 $124 
State and local122 109 126 
Foreign1,149 255 228 
Total current tax expense1,279 624 478 
Deferred:
Federal9 9 (285)
State and local2 2 16 
Foreign696 (593)257 
Total deferred tax expense (benefit)707 (582)(12)
Income tax expense$1,986 $42 $466 
The reconciliation of the federal statutory rate of 21% to the effective income tax rate for the years ended December 31, 2020, 2019 and 2018 was as follows:
 Year Ended December 31,
 202020192018
Federal statutory rate21.0 %21.0 %21.0 %
State taxes, net of federal benefit(0.1)(0.2)(0.2)
Permanent differences(4.0)(2.8)0.2 
Stock-based compensation12.1 22.3 9.3 
Federal research and development credit1.1 1.3 1.2 
Foreign rate differential(1.4)(1.4)(1.1)
Change in valuation allowance(30.0)(41.0)(32.8)
Other(0.8)0.7 1.5 
Effective income tax rate(2.1)%(0.1)%(0.9)%
Net deferred tax assets and liabilities, as set forth in the table below, reflect the impact of temporary differences between the amounts of assets and liabilities recorded for financial statement purposes and such amounts measured in accordance with tax laws:
 As of December 31,
 20202019
 (in thousands)
Deferred tax assets:
Accruals and reserves$1,272 $323 
Net operating loss carryforwards117,478 85,969 
Deferred revenue7,951 14,401 
Depreciation3,330 2,335 
Research and development credits6,201 4,665 
Operating lease liabilities20,967 19,657 
Stock-based compensation4,755 3,806 
Tax credits1,148 1,181 
Other2,105 61 
Gross deferred tax assets165,207 132,398 
Valuation allowance(110,350)(94,581)
Total deferred tax assets54,857 37,817 
Deferred tax liabilities:
Intangible assets(5,717)(2,249)
Operating lease ROU assets(16,233)(14,792)
Convertible senior notes(17,961)(9,959)
Deferred contract acquisition and fulfillment costs(15,908)(11,565)
Other(543)(20)
Total deferred tax liabilities(56,362)(38,585)
Net deferred tax liabilities$(1,505)$(768)
As of December 31, 2020, we have evaluated the need for a valuation allowance on deferred tax assets. In assessing whether the deferred tax assets are realized, management considered whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Due to our history of generating losses in the United States, the United Kingdom and Ireland, we continue to record a full valuation allowance against our deferred tax assets in these jurisdictions. If we achieve future profitability, a significant portion of these deferred tax assets could be available to offset future income taxes.
The valuation allowance increased by $15.8 million for the year ended December 31, 2020, primarily due to additional operating losses generated during the year.
We plan to permanently reinvest the undistributed earnings of our foreign subsidiaries. If we repatriate these earnings, we may be required to pay U.S. state and local taxes, as well as foreign withholding taxes.
As of December 31, 2020, we had federal and state net operating loss carryforwards of $376.7 million and $290.2 million, respectively. Of our federal net operating losses, $257.2 million will carry forward indefinitely. The remaining federal and state net operating loss carryforwards expire at various dates beginning in 2021. As of December 31, 2020, we had foreign net operating loss carryforwards of $157.8 million that can be carried forward indefinitely. We also had federal, state and international research and development credit carryforwards of $4.0 million, $1.9 million and $0.3 million as of December 31, 2020, respectively. These credit carryforwards expire at various dates beginning in 2023.
We are currently subject to the annual limitation under Sections 382 and 383 of the Internal Revenue Code. We will not be precluded from realizing the net operating loss carryforwards and tax credits but may be limited in the amount we could utilize in any given tax year in the event that the federal and state taxable income exceeds the limitation imposed by Section 382. The amount of the annual limitation is determined based on our value immediately prior to the ownership change. Subsequent ownership changes may further affect the limitation in future years.
We file income tax returns in all jurisdictions in which we operate. In the normal course of business, we are subject to examination by federal, state, and foreign tax authorities, where applicable. The statute of limitations for these jurisdictions is generally three to seven years. However, to the extent we utilize net operating losses or other similar
carryforward attributes such as credits, the statute remains open to the extent of the net operating losses or credits that are utilized. We have no tax returns under examination as of December 31, 2020. As of December 31, 2020 and 2019, we had no reserves for unrecognized tax benefits.