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Income Taxes | 12 Months Ended
--- | ---
Dec. 31, 2020
Income Tax Disclosure [Abstract] |
Income Taxes | INCOME TAXES
Loss before income tax: | Year ended December 31,
(in thousands) | 2020 |  | 2019 |  | 2018
United States | $ | (42,905) |  |  | $ | 1,769 |  |  | $ | (19,780) |
International | 16,688 |  |  | (8,365) |  |  | 2,832 |
Loss before income taxes | $ | (26,217) |  |  | $ | (6,596) |  |  | $ | (16,948) |
Provision for (benefit from) income taxes: | Year ended December 31,
(in thousands) | 2020 |  | 2019 |  | 2018
Current: |  |  |  |  |
Federal | $ | 124 |  |  | $ | (180) |  |  | $ | (305) |
State | 93 |  |  | 108 |  |  | 116 |
International | 2,103 |  |  | 1,525 |  |  | 2,958 |
Deferred: |  |  |  |  |
International | 734 |  |  | (2,125) |  |  | 1,318 |
Total provision for (benefit from) income taxes | $ | 3,054 |  |  | $ | (672) |  |  | $ | 4,087 |
Effective tax rate | (12) | % |  | 10 | % |  | (24) | %
The difference between the tax provision at the statutory federal income tax rate and the provision for (benefit from) income tax as a percentage of loss before income taxes (effective tax rate) for each period was as follows:
| Year ended December 31,
| 2020 |  | 2019 |  | 2018
Statutory U.S. federal income tax rate | 21 | % |  | 21 | % |  | 21 | %
Increase (reduction) in rate resulting from: |  |  |  |  |
Differential in rates on foreign earnings | (11) | % |  | (37) | % |  | (25) | %
Change in valuation allowance | (16) | % |  | 14 | % |  | (9) | %
Change in liabilities for uncertain tax positions | — | % |  | 6 | % |  | 1 | %
Non-deductible stock-based compensation | (2) | % |  | (8) | % |  | (8) | %
Permanent differences | (2) | % |  | 11 | % |  | (6) | %
Adjustments related to tax positions taken during prior years | — | % |  | 6 | % |  | (1) | %
Other | (2) | % |  | (3) | % |  | 3 | %
Effective tax rate | (12) | % |  | 10 | % |  | (24) | %
The Company operates in multiple jurisdictions and its profits are taxed pursuant to the tax laws of these jurisdictions. The Company’s effective income tax rate differs from the U.S. federal statutory rate primarily due to geographical mix of income and losses, full valuation allowance against U.S. federal and state deferred tax assets, foreign withholding taxes and income taxes on earnings from operations in foreign tax jurisdictions. The Company’s effective income tax rate may be affected by changes in its interpretations of tax laws and tax agreements in any given jurisdiction, utilization of net operating loss and tax credit carry forwards, changes in geographical mix of income and expense, and changes in management's assessment of matters such as the ability to realize deferred tax assets, as well as one-time discrete items. During fiscal 2019, the Company recorded a one-time benefit of approximately $2.0 million due to changes in the Company's global tax structure, and a $0.8 million benefit from a valuation allowance release for one of its foreign subsidiaries. This release of the valuation allowance was due to changes in forecasted taxable income resulting from the Company receiving a favorable tax ruling during 2019. The components of deferred taxes included in the Consolidated Balance Sheets are as follows:
| December 31,
(in thousands) | 2020 |  | 2019
Deferred tax assets: |  |  |
Reserves and accruals | $ | 21,823 |  |  | $ | 20,622 |
Net operating loss carryforwards | 39,733 |  |  | 33,811 |
Research and development credit carryforwards | 38,179 |  |  | 36,914 |
Deferred stock-based compensation | 1,202 |  |  | 1,675 |
Intangibles | 7,838 |  |  | 8,224 |
Operating lease liabilities | 7,822 |  |  | 8,892 |
Capitalized research and development expenses | 10,805 |  |  | 10,897 |
Other | 442 |  |  | — |
Gross deferred tax assets | 127,844 |  |  | 121,035 |
Valuation allowance | (99,585) |  |  | (95,518) |
Gross deferred tax assets after valuation allowance | 28,259 |  |  | 25,517 |
Deferred tax liabilities: |  |  |
Depreciation | (6,399) |  |  | (1,272) |
Convertible notes | (4,708) |  |  | (6,275) |
Operating lease right-of-use assets | (6,529) |  |  | (7,076) |
Other | — |  |  | (319) |
Gross deferred tax liabilities | (17,636) |  |  | (14,942) |
Net deferred tax assets | $ | 10,623 |  |  | $ | 10,575 |
The following table summarizes the activities related to the Company’s valuation allowance:
| Year ended December 31,
(in thousands) | 2020 |  | 2019 |  | 2018
Balance at beginning of period | $ | 95,518 |  |  | $ | 77,144 |  |  | $ | 77,756 |
Additions | 6,690 |  |  | 23,929 |  |  | 928 |
Deductions | (2,623) |  |  | (5,555) |  |  | (1,540) |
Balance at end of period | $ | 99,585 |  |  | $ | 95,518 |  |  | $ | 77,144 |
Management regularly assesses the ability to realize deferred tax assets recorded based upon the weight of available evidence, including such factors as recent earnings history and expected future taxable income on a jurisdiction by jurisdiction basis. In the event that the Company changes its determination as to the amount of realizable deferred tax assets, the Company will adjust its valuation allowance with a corresponding impact to the provision for income taxes in the period in which such determination is made. On July 27, 2015, the U.S. Tax Court issued an opinion in Altera Corp. v. Commissioner, 145 T.C. No.3 (2015), concluding that parties in an intercompany cost-sharing arrangement are not required to share stock-based compensation expenses. On June 7, 2019, the Ninth Circuit overturned the earlier Tax Court decision and ruled to include share-based compensation in the cost sharing pool. On July 22, 2019, Altera Corp. filed a petition for an en banc rehearing before the U.S. Court of Appeals for the Ninth Circuit, which was denied on November 12, 2019. Altera filed a petition for a writ of certiorari on February 10, 2020 asking the Supreme Court to review the Ninth Circuit Court of Appeals' decision which was denied on June 22, 2020. The Company has not changed its historical position of including share-based compensation in the cost base consistent with the Ninth Circuit’s ruling. As of December 31, 2020, the Company had $137.1 million, $70.4 million, $28.1 million and $35.0 million of foreign, U.S. federal, California state, and other U.S. states’ net operating loss (“NOL”) carryforwards, respectively. Certain foreign NOL carryforwards expire beginning in 2027, if not utilized, while the majority of the foreign NOLs carryforward indefinitely. $37.8 million of the U.S. federal NOL carryforward expires at various dates beginning in 2021 through 2037, if not utilized, and the remainder carries forward indefinitely. The California NOL carryforward expires at various dates beginning in 2029 through 2040, if not utilized. As of December 31, 2020, the Company had U.S. federal and California state tax credit carryforwards of $14.4 million and $36.5 million, respectively. If not utilized, the U.S. federal tax credit carryforwards will begin to expire in 2031, while the California tax credit carryforward will not expire. The Company has not provided U.S. state income taxes and foreign withholding taxes on approximately $33.7 million of cumulative earnings for certain non-U.S. subsidiaries, because such earnings are intended to be indefinitely reinvested. Determination of the amount of unrecognized deferred tax liability for temporary differences related to investments in these non-U.S. subsidiaries that are essentially permanent in duration is not practicable. The Company applies the provisions of the applicable accounting guidance regarding accounting for uncertainty in income taxes, which require application of a more-likely-than-not threshold to the recognition and derecognition of uncertain tax positions. If the recognition threshold is met, the applicable accounting guidance permits the recognition of a tax benefit measured at the largest amount of such tax benefit that, in the Company’s judgment, is more than fifty percent likely to be realized upon settlement. It further requires that a change in judgment related to the expected ultimate resolution of uncertain tax positions to be recognized in earnings in the period in which such determination is made. The Company will continue to review its tax positions and provide for, or reverse, unrecognized tax benefits as issues arise. As of December 31, 2020, the Company had $16.2 million of unrecognized future tax benefits that would favorably impact the effective tax rate in future periods if recognized. The following table summarizes the activities related to the Company’s gross unrecognized tax benefits:
| Year ended December 31,
(in millions) | 2020 |  | 2019 |  | 2018
Balance at beginning of period | $ | 17.0 |  |  | $ | 18.0 |  |  | $ | 18.8 |
Increase in balance related to tax positions taken during current year | 0.3 |  |  | 0.2 |  |  | 1.0 |
Decrease in balance as a result of a lapse of the applicable statutes of limitations | — |  |  | (0.1) |  |  | (0.1) |
Decrease in balance due to settlement with tax authorities | — |  |  | — |  |  | (1.6) |
Increase in balance related to tax positions taken during prior years | 0.3 |  |  | — |  |  | 0.2 |
Decrease in balance related to tax positions taken during prior years | — |  |  | (1.1) |  |  | (0.3) |
Balance at end of period | $ | 17.6 |  |  | $ | 17.0 |  |  | $ | 18.0 |
The Company recognizes interest and penalties related to unrecognized tax positions in income tax expenses on the Consolidated Statements of Operations. The net interest and penalties charges recorded for the years ended December 31, 2018 through 2020, were not material. The 2017 through 2020 tax years generally remain subject to examination by U.S. federal and most state tax authorities. In addition, the Company remains subject to income tax examination for several other jurisdictions, including in Switzerland for years after 2015, Israel for years after 2014, and France for years after 2016. On March 27, 2020, the “Coronavirus Aid, Relief, and Economic Security Act” was signed into law. The new legislation includes a number of income tax provisions applicable to individuals and businesses. The Company recognized the effect of the tax law changes in the period of enactment, such as the reclassification of the long-term receivable of $0.5 million for the alternative minimum tax credit refund to short-term receivable.

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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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://asc.fasb.org/extlink&oid=116825942&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 http://asc.fasb.org/extlink&oid=84230637&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 http://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 http://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 http://asc.fasb.org/extlink&oid=6424122&loc=d3e41874-109331 + Details
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