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INCOME TAXES | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES
Income before income tax: | Year Ended December 31,
(in thousands) | 2023 |  | 2022 |  | 2021
Domestic | $ | (1,734) |  |  | $ | 24,680 |  |  | $ | (5,688) |
Foreign | 20,875 |  |  | 19,805 |  |  | 14,559 |
Income before income taxes | $ | 19,141 |  |  | $ | 44,485 |  |  | $ | 8,871 |
Provision for (benefit from) income taxes: | Year Ended December 31,
(in thousands) | 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |
Federal | $ | 19,441 |  |  | $ | 4,443 |  |  | $ | 4 |
State | 4,582 |  |  | 3,236 |  |  | 85 |
Foreign | 3,980 |  |  | 3,730 |  |  | 2,469 |
Deferred: |  |  |  |  |
Federal | (81,632) |  |  | — |  |  | — |
State | (12,416) |  |  | — |  |  | — |
Foreign | 1,192 |  |  | 4,894 |  |  | (6,941) |
Total provision for (benefit from) income taxes | $ | (64,853) |  |  | $ | 16,303 |  |  | $ | (4,383) |
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 income (loss) before income taxes (effective tax rate) for each period was as follows:
|  | Year Ended December 31,
|  | 2023 |  | 2022 |  | 2021
Statutory U.S. federal income tax rate |  | 21 | % |  | 21 | % |  | 21 | %
Increase (reduction) in rate resulting from: |  |  |  |  |  |
State Taxes |  | (4) | % |  | 7 | % |  | — | %
Differential in rates on foreign earnings |  | (13) | % |  | 1 | % |  | 42 | %
Change in valuation allowance |  | (350) | % |  | 15 | % |  | (113) | %
Change in liabilities for uncertain tax positions |  | — | % |  | — | % |  | (2) | %
Non-deductible stock-based compensation |  | 6 | % |  | 4 | % |  | 11 | %
Permanent differences |  | (5) | % |  | (1) | % |  | — | %
Adjustments related to tax positions taken during prior years |  | 12 | % |  | (8) | % |  | (3) | %
Research and development credits |  | (6) | % |  | (2) | % |  | (10) | %
Other |  | — | % |  | — | % |  | 3 | %
Effective tax rate |  | (339) | % |  | 37 | % |  | (49) | %
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, valuation allowance release on U.S. federal and certain state deferred tax assets, 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, 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 2023, the Company recorded a one-time benefit of $67.7 million due to the release of the valuation allowance on deferred tax assets in U.S. Federal and state jurisdictions due to its improved earnings in recent years and projected earnings. The components of deferred taxes are as follows:
| As of December 31,
(in thousands) | 2023 |  | 2022
Deferred tax assets: |  |  |
Reserves and accruals | $ | 24,908 |  |  | $ | 27,376 |
Net operating loss carryforwards | 14,376 |  |  | 16,032 |
Research and development credit carryforwards | 30,117 |  |  | 28,952 |
Deferred stock-based compensation | 1,863 |  |  | 1,376 |
Intangibles | 5,651 |  |  | 6,384 |
Operating lease liabilities | 6,216 |  |  | 7,423 |
Capitalized research and development expenses | 64,075 |  |  | 36,210 |
Other | 3,110 |  |  | 1,139 |
Gross deferred tax assets | 150,316 |  |  | 124,892 |
Valuation allowance | (37,084) |  |  | (101,020) |
Gross deferred tax assets after valuation allowance | 113,232 |  |  | 23,872 |
Deferred tax liabilities: |  |  |
Depreciation | (3,506) |  |  | (5,971) |
Operating lease right-of-use assets | (5,019) |  |  | (6,125) |
Gross deferred tax liabilities | (8,525) |  |  | (12,096) |
Net deferred tax assets | $ | 104,707 |  |  | $ | 11,776 |
The following table summarizes the activities related to the Company’s valuation allowance:
| Year Ended December 31,
(in thousands) | 2023 |  | 2022 |  | 2021
Balance at beginning of period | $ | 101,020 |  |  | $ | 90,247 |  |  | $ | 99,585 |
Additions | 477 |  |  | 10,773 |  |  | 310 |
Deductions | (64,413) |  |  | — |  |  | (9,648) |
Balance at end of period | $ | 37,084 |  |  | $ | 101,020 |  |  | $ | 90,247 |
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 2023, the Company determined the deferred tax assets in the U.S federal and certain state jurisdictions would more-likely-than-not be realizable and released the valuation allowance against those assets accordingly. In the event 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. As of December 31, 2023, the Company had $89.3 million and $28.7 million of foreign and U.S. state net operating loss (“NOL”) carryforwards, respectively. The Company has now fully utilized their available U.S. federal NOLs. Certain foreign NOLs expire beginning in 2026, if not utilized, while the majority of the foreign NOLs carryforward indefinitely. Certain U.S. states NOL carryforward expires at various dates beginning in 2027, if not utilized. As of December 31, 2023, the Company had U.S. federal and California state tax credit carryforwards of $1.7 million and $37.0 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. In the event the Company experiences an ownership change within the meaning of Section 382 of the Internal Revenue Code (“IRC”), the Company’s ability to utilize net operating losses, tax credits and other tax attributes may be limited. The Company has not provided U.S. state income taxes and foreign withholding taxes, on approximately $58.8 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 permanently 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, 2023, the Company had $12.5 million of unrecognized future tax benefits. Of these, $5.8 million would favorably impact the effective tax rate in future periods if recognized, and $6.7 million will have no or minimal impact on the effective tax rate in future periods if recognized due to a valuation allowance on such unrecognized tax benefits. The following table summarizes the activities related to the Company’s gross unrecognized tax benefits:
| Year Ended December 31,
(in millions) | 2023 |  | 2022 |  | 2021
Balance at beginning of period | $ | 11.1 |  |  | $ | 13.8 |  |  | $ | 17.6 |
Increase in balance related to tax positions taken during current year | 0.4 |  |  | 0.3 |  |  | 0.3 |
Decrease in balance as a result of a lapse of the applicable statutes of limitations | — |  |  | — |  |  | (0.2) |
Increase in balance related to tax positions taken during prior years | 1.0 |  |  | — |  |  | — |
Decrease in balance related to tax positions taken during prior years | — |  |  | (3.0) |  |  | (3.9) |
Balance at end of period | $ | 12.5 |  |  | $ | 11.1 |  |  | $ | 13.8 |
The Company recognizes interest and penalties related to unrecognized tax positions in income tax expense on the Consolidated Statements of Operations. The net interest and penalties charges recorded for the years ended December 31, 2021 through 2023, were not material. The 2019 through 2022 tax years generally remain subject to examination by U.S. federal and most state tax authorities.Net operating losses generated on a tax return basis by the Company for the 2015 to 2020 tax years and research and development credits for 2011 to 2022 tax years remain open to examination. In addition, the Company remains subject to income tax examination for several other jurisdictions, including in Switzerland for years after 2018, Israel for years after 2019, and France for years after 2016.

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