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INCOME TAXES | 12 Months Ended
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Dec. 31, 2024
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of pretax income (loss) for the years ended December 31, 2024, 2023 and 2022 were as follows (in thousands):
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
United States | $ | 53,852 |  |  | $ | 16,285 |  |  | $ | (65,256) |
International | (84,243) |  |  | (59,711) |  |  | (126,714) |
Income (loss) before provision (benefit) for income taxes | $ | (30,391) |  |  | $ | (43,426) |  |  | $ | (191,970) |
The Provision (benefit) for income taxes for the years ended December 31, 2024, 2023 and 2022 consisted of the following components (in thousands):
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
Current taxes: |  |  |  |  |
U.S. federal | $ | 10,336 |  |  | $ | 1,305 |  |  | $ | 161 |
State | 2,577 |  |  | 2,094 |  |  | 704 |
International | 8,572 |  |  | 4,374 |  |  | (7,554) |
Total current taxes | 21,485 |  |  | 7,773 |  |  | (6,689) |
Deferred taxes: |  |  |  |  |
U.S. federal | 40 |  |  | 35 |  |  | 31,132 |
State | 46 |  |  | 106 |  |  | 20,307 |
International | 4,552 |  |  | 1,594 |  |  | (2,340) |
Total deferred taxes | 4,638 |  |  | 1,735 |  |  | 49,099 |
Provision (benefit) for income taxes | $ | 26,123 |  |  | $ | 9,508 |  |  | $ | 42,410 |
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, 2024, 2023 and 2022 were as follows (in thousands):
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
U.S. federal income tax provision (benefit) at statutory rate | $ | (6,382) |  |  | $ | (9,120) |  |  | $ | (40,314) |
Foreign income and losses taxed at different rates (1) | 8,348 |  |  | 6,842 |  |  | 9,035 |
State income taxes, net of federal benefits, and state tax credits | 6,592 |  |  | 3,709 |  |  | 4,133 |
Change in valuation allowances | 3,589 |  |  | 87,993 |  |  | 64,328 |
Effect of income tax rate changes on deferred items | 449 |  |  | (104) |  |  | 443 |
Adjustments related to uncertain tax positions | (1,133) |  |  | (5,117) |  |  | (13,062) |
Non-deductible stock-based compensation expense | 3,527 |  |  | 1,728 |  |  | 2,191 |
Tax (windfalls)/shortfalls on stock-based compensation awards | (370) |  |  | 1,606 |  |  | 2,741 |
Federal research and development credits, net of adjustments | — |  |  | — |  |  | (812) |
Forgiveness of intercompany liabilities | — |  |  | (43) |  |  | 1,468 |
Tax attribute expiration | — |  |  | — |  |  | 5,519 |
Asset impairments | — |  |  | (82,988) |  |  | 7,213 |
Non-deductible or non-taxable items | 8,847 |  |  | 5,002 |  |  | (473) |
Convertible debt payoff | 2,656 |  |  | — |  |  | — |
Provision (benefit) for income taxes | $ | 26,123 |  |  | $ | 9,508 |  |  | $ | 42,410 |
(1)Tax rates in foreign jurisdictions were generally lower than the U.S. federal statutory rate through December 31, 2024. This resulted in an adverse impact to the Provision (benefit) for income taxes in this rate reconciliation for the years ended December 31, 2024, 2023 and 2022 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, 2024 and 2023 (in thousands):
| December 31,
| 2024 |  | 2023
Deferred tax assets: |  |  |
Accrued expenses and other liabilities | $ | 31,104 |  |  | $ | 33,517 |
Stock-based compensation | 2,584 |  |  | 2,153 |
Net operating loss and tax credit carryforwards (1) | 214,944 |  |  | 217,560 |
Property, equipment and software, net | 14,022 |  |  | 8,462 |
Intangible assets, net | 20,368 |  |  | 20,586 |
Right-of-use assets | 628 |  |  | 1,238 |
Investments | 5,802 |  |  | 26,350 |
Convertible senior notes | 2,047 |  |  | 3,353 |
Unrealized foreign currency exchange losses | 1,510 |  |  | 955 |
Capitalized research and development costs | 16,259 |  |  | 12,645 |
Other | 274 |  |  | 171 |
Total deferred tax assets | 309,542 |  |  | 326,990 |
Less: Valuation allowances | (286,827) |  |  | (296,129) |
Deferred tax assets, net of valuation allowance | 22,715 |  |  | 30,861 |
Deferred tax liabilities: |  |  |
Prepaid expenses and other assets | (11,201) |  |  | (11,399) |
Operating lease obligation | (31) |  |  | (1,417) |
Deferred revenue | (7,330) |  |  | (8,931) |
Total deferred tax liabilities | (18,562) |  |  | (21,747) |
Net deferred tax asset (liability) | $ | 4,153 |  |  | $ | 9,114 |
(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. For the years ended December 31, 2024 and 2023, we continue to maintain a valuation allowance against substantially all of our U.S. federal and state and foreign deferred tax assets. As of 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. We had $16.0 million of federal net operating loss carryforwards as of December 31, 2024 which will begin expiring in 2027. We had $20.6 million of state net operating loss carryforwards as of December 31, 2024, which will begin expiring in 2025. As of December 31, 2024, we had $863.4 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, 2024, 2023 and 2022 (in thousands):
| Year Ended December 31,
| 2024 |  | 2023 |  | 2022
Beginning Balance | $ | 33,599 |  |  | $ | 39,172 |  |  | $ | 49,502 |
Increases related to prior year tax positions | 1,450 |  |  | — |  |  | — |
Decreases related to prior year tax positions | (858) |  |  | — |  |  | (124) |
Increases related to current year tax positions | 658 |  |  | 790 |  |  | 3,028 |
Decreases based on settlements with taxing authorities | (1,965) |  |  | — |  |  | (109) |
Decreases due to lapse of statute limitations | (10,234) |  |  | (6,743) |  |  | (12,410) |
Foreign currency translation | (226) |  |  | 380 |  |  | (715) |
Ending Balance | $ | 22,424 |  |  | $ | 33,599 |  |  | $ | 39,172 |
The total amount of unrecognized tax benefits as of December 31, 2024, 2023 and 2022 that, if recognized, would affect the effective tax rate are $11.9 million, $7.6 million and $9.8 million. We recognized $0.7 million, $0.6 million and $0.8 million of interest and penalties within Provision (benefit) for income taxes on our Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022. Total accrued interest and penalties as of December 31, 2024 and 2023 were $1.9 million and $2.0 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 $12.5 million, $6.7 million and $12.5 million for the years ended December 31, 2024, 2023 and 2022, 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 statues of limitations. We are subject to claims for tax assessments by foreign jurisdictions, including a proposed Assess ment for $122.3 million, inclusive of estimated incremental interest from the original Assessment. The subsidiary subject to the Assessment is Groupon S.r.l., one of the Company's Italian subsidiaries formerly with operations relating specifically to the local voucher business in Italy. In December 2024, Groupon S.r.l. received an unfavorable ruling at the second-level Tax Court. The Company continues to believe that the Assessment is without merit and Groupon S.r.l. intends to pursue a prompt appeal to the Italian Supreme Court. If Groupon S.r.l. loses that appeal, Groupon S.r.l. plans to further challenge the Assessment and seek relief in an international mutual agreement procedure that involves the tax authorities of Ireland and Italy. Under Italian tax court procedures, taxpayers are required to deposit “provisional payments” while tax appeals are pending, which are held in trust by tax authorities and returned to the taxpayer if the taxpayer prevails on the appeal. At present, Groupon S.r.l. would be required to deposit provisional amounts equal to two-thirds of the assessed amount. However, Groupon S.r.l. has sought and obtained approval of installment plans whereby the provisional payments may be deposited pro rata in monthly installments over seventy-two months. A third provisional amount (equal to the remaining third of the Assessment) would be enforceable in October 2025. However, contemporaneous with its appeal to the Italian Supreme Court, Groupon S.r.l. intends to seek a full stay of the provisional payment obligations. Groupon S.r.l. expects a hearing on the possible stay of provisional payments to take place in early 2025. If Groupon S.r.l. does not succeed in staying the provisional payment obligation, Groupon S.r.l. will consider its options, including making monthly installment payments up to the amount of its assets, or undertaking further restructuring actions. Additionally, unrelated to the tax matter above, in July 2024, Groupon S.r.l. received final assessments of approximately $30.9 million related to a 2017 distribution made to its parent entity. On October 18, 2024, Groupon S.r.l. lodged an appeal to the first-tier court. The hearing is expected to occur on March 28, 2025. We believe this assessment is also without merit and Groupon S.r.l. intends to vigorously defend against such assessment. No liability has been recorded for either of the Groupon S.r.l. tax assessment matters discussed above as we believe it is more likely than not that we will ultimately prevail in defending the matters. In addition to any potential increases in our liabilities for uncertain tax positions from the ultimate resolution of these assessments, we believe it is reasonably possible that reductions of up to $3.2 million in unrecognized tax benefits may occur within the 12 months following December 31, 2024 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, 2024 and 2023 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.

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