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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of pretax income (loss) for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):
Year Ended December 31,
202320222021
United States$16,285 $(65,256)$60,875 
International(59,711)(126,714)27,150 
Income (loss) before provision (benefit) for income taxes
$(43,426)$(191,970)$88,025 
The Provision (benefit) for income taxes for the years ended December 31, 2023, 2022 and 2021 consisted of the following components (in thousands):
Year Ended December 31,
202320222021
Current taxes:
U.S. federal$1,305 $161 $2,354 
State2,094 704 1,629 
International4,374 (7,554)(2,321)
Total current taxes7,773 (6,689)1,662 
Deferred taxes:
U.S. federal35 31,132 (15,254)
State106 20,307 (16,864)
International1,594 (2,340)(1,867)
Total deferred taxes1,735 49,099 (33,985)
Provision (benefit) for income taxes
$9,508 $42,410 $(32,323)
The items accounting for differences between the income tax provision (benefit) computed at the U.S. federal statutory rate and the Provision (benefit) for income taxes for the years ended December 31, 2023, 2022 and 2021 were as follows (in thousands):
Year Ended December 31,
20232022
2021
U.S. federal income tax provision (benefit) at statutory rate$(9,120)$(40,314)$18,485 
Foreign income and losses taxed at different rates (1)
6,842 9,035 5,000 
State income taxes, net of federal benefits, and state tax credits3,709 4,133 4,897 
Change in valuation allowances87,993 64,328 (50,695)
Effect of income tax rate changes on deferred items(104)443 815 
Adjustments related to uncertain tax positions(5,117)(13,062)2,588 
Non-deductible stock-based compensation expense1,728 2,191 2,727 
Tax (windfalls)/shortfalls on stock-based compensation awards1,606 2,741 (1,762)
Federal research and development credits, net of adjustments— (812)(396)
Forgiveness of intercompany liabilities(43)1,468 (62)
Tax attribute expiration— 5,519 — 
Asset impairments
(82,988)7,213 — 
Observable price change on an other equity investment — — (17,955)
Non-deductible or non-taxable items5,002 (473)4,035 
Provision (benefit) for income taxes$9,508 $42,410 $(32,323)
(1)Tax rates in foreign jurisdictions were generally lower than the U.S. federal statutory rate through December 31, 2023. This resulted in an adverse impact to the Provision (benefit) for income taxes in this rate reconciliation for the years ended December 31, 2023, 2022 and 2021 prior to the impact of valuation allowances, due to the net pretax losses from operations in certain foreign jurisdictions with lower tax rates.
The deferred income tax assets and liabilities consisted of the following components as of December 31, 2023 and 2022 (in thousands):
December 31,
20232022
Deferred tax assets:
Accrued expenses and other liabilities$33,517 $37,397 
Operating lease obligation— 5,602 
Stock-based compensation2,153 3,886 
Net operating loss and tax credit carryforwards (1)
217,560 135,743 
Property, equipment and software, net8,462 — 
Intangible assets, net20,586 19,139 
Right-of-use assets
1,238 — 
Investments26,350 20,360 
Convertible senior notes3,353 4,638 
Unrealized foreign currency exchange losses955 — 
Capitalized research and development costs
12,645 9,994 
Other171 312 
Total deferred tax assets326,990 237,071 
Less: Valuation allowances(296,129)(204,462)
Deferred tax assets, net of valuation allowance30,861 32,609 
Deferred tax liabilities:
Prepaid expenses and other assets(11,399)(11,983)
Operating lease obligation
(1,417)— 
Property, equipment and software, net— (1,470)
Right-of-use assets
— (679)
Deferred revenue(8,931)(8,027)
Total deferred tax liabilities(21,747)(22,159)
Net deferred tax asset (liability)$9,114 $10,450 
(1)Includes $83.0 million of tax losses recorded in 2023 due to an impairment of investment in subsidiaries. An offsetting valuation allowance was recorded in 2023.
We recognize deferred tax assets to the extent that they will be realizable through future reversals of existing taxable temporary differences, through taxable income in carryback years for the applicable jurisdictions or based on projections of future income for those jurisdictions that have achieved sustained profitability. In evaluating the need for a valuation allowance, management considers both positive and negative evidence that could affect its view of the future realization of deferred tax assets and places greater weight on recent and objectively verifiable current information.
As of December 31, 2023, we continue to maintain a valuation allowance against substantially all of our U.S. federal and state and foreign deferred tax assets. At December 31, 2022, we were in a cumulative pre-tax loss position, adjusted for certain permanent items, in the U.S. Additionally, we do not have any sources of income that support utilization of our U.S. deferred tax assets. In analyzing all available evidence, management determined that it is not more likely than not that the U.S. deferred tax assets will be realized due to the significant negative evidence outweighing the positive evidence. As a result, for the year ended December 31, 2022, we recognized a valuation allowance against all U.S. federal and state deferred tax assets, which resulted in a $51.9 million charge to income tax expense. At December 31, 2021, we had demonstrated profit, which was considered to be a source of positive evidence. In analyzing all available evidence at the time, management determined there was sufficient positive evidence outweighing negative evidence to conclude that it was more likely than not that a portion of the U.S. deferred tax assets were realizable. As such, for the year ended December 31, 2021, we released $57.7 million of the valuation allowance against a portion of our U.S. federal and state deferred tax assets, resulting in a $50.3 million reduction to expense, and a $7.4 million adjustment to equity.
We had $17.9 million of federal net operating loss carryforwards as of December 31, 2023 which will begin expiring in 2027. We had $50.8 million of state net operating loss carryforwards as of December 31, 2023, which will begin expiring in 2024. As of December 31, 2023, we had $907.0 million of foreign net operating loss carryforwards, a significant portion of which carry forward for an indefinite period.
We are subject to taxation in the United States, state jurisdictions and foreign jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes and recording the related income tax assets and liabilities. We recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not criterion, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.
The following table summarizes activity related to our gross unrecognized tax benefits, excluding interest and penalties, for the years ended December 31, 2023, 2022 and 2021 (in thousands):
Year Ended December 31,
202320222021
Beginning Balance$39,172 $49,502 $48,960 
Increases related to prior year tax positions— — 5,105 
Decreases related to prior year tax positions— (124)(3,138)
Increases related to current year tax positions790 3,028 1,887 
Decreases based on settlements with taxing authorities— (109)— 
Decreases due to lapse of statute limitations(6,743)(12,410)(2,530)
Foreign currency translation380 (715)(782)
Ending Balance$33,599 $39,172 $49,502 
The total amount of unrecognized tax benefits as of December 31, 2023, 2022 and 2021 that, if recognized, would affect the effective tax rate are $7.6 million, $9.8 million and $18.7 million.
We recognized $0.6 million, $0.8 million and $1.0 million of interest and penalties within Provision (benefit) for income taxes on our Consolidated Statements of Operations for the years ended December 31, 2023, 2022 and 2021. Total accrued interest and penalties as of December 31, 2023 and 2022 were $2.0 million and $2.1 million, and are included within Other non-current liabilities in our Consolidated Balance Sheets.
We are currently under audit by several foreign jurisdictions. It is likely that the examination phase of some of those audits will conclude in the next 12 months. There are many factors, including factors outside of our control, which influence the progress and completion of those audits. We recognized income tax benefits of $6.7 million, $12.5 million and $3.2 million for the years ended December 31, 2023, 2022 and 2021, as a result of new information that impacted our estimates of the amounts that are more likely than not of being realized upon settlement of the related tax positions and due to expirations of the applicable statutes of limitations. We are subject to claims for tax assessments by foreign jurisdictions, including a proposed assessment for $120.7 million, inclusive of estimated incremental interest from the original assessment. We believe that the assessment, which primarily relates to transfer pricing on transactions occurring in 2011, is without merit and the subsidiary subject to the proposed assessment has been vigorously defending itself in that matter. In December 2023, the subsidiary received an unfavorable ruling at the lowest court level, but has lodged a second-level appeal, based on what it believes to be meritorious defenses to the assessment, and requested the suspension of a provisional payment demand of approximately $76.5 million. Additionally, unrelated to this matter, in February 2024, the subsidiary received a proposed assessment of approximately $31.7 million related to a 2017 distribution made to its parent entity. We believe this assessment is also without merit and the subsidiary intends to vigorously defend against this assessment. In addition to any potential increases in our liabilities for uncertain tax positions from the ultimate resolution of these assessments, we believe that it is reasonably possible that reductions of up to $5.5 million in unrecognized tax benefits may occur within the 12 months following December 31, 2023 upon closing of income tax audits or the expiration of applicable statutes of limitations.
In general, it is our practice and intention to reinvest the earnings of our non-U.S. subsidiaries in those operations or remit such earnings in a tax-efficient manner. Additionally, an actual repatriation from our non-U.S. subsidiaries could be subject to foreign and U.S. state income taxes. Aside from limited exceptions for which the
related deferred tax liabilities recognized as of December 31, 2023 and 2022 are immaterial, we do not intend to distribute earnings of foreign subsidiaries for which we have an excess of the financial reporting basis over the tax basis of our investments and therefore have not recorded any deferred taxes related to such amounts. The actual tax cost resulting from a distribution would depend on income tax laws and circumstances at the time of distribution. Determination of the amount of unrecognized deferred tax liability related to the excess of the financial reporting basis over the tax basis of our foreign subsidiaries is not practical due to the complexities associated with the calculation