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INCOME TAXES | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
INCOME TAXES | INCOME TAXES The components of (loss) income from continuing operations before income taxes consisted of the following (in thousands):
| Year ended December 31,
| 2022 |  | 2021 |  | 2020
(Loss) income before income taxes: |  |  |  |  |
United States | $ | (84,784) |  |  | $ | (29,985) |  |  | $ | 123,817 |
Foreign | (27,815) |  |  | (178,158) |  |  | (30,500) |
| $ | (112,599) |  |  | $ | (208,143) |  |  | $ | 93,317 |
The (benefit) provision for income taxes from continuing operations consisted of the following (in thousands):
| Year ended December 31,
| 2022 |  | 2021 |  | 2020
(Benefit) provision for income taxes: |  |  |  |  |
Current: |  |  |  |  |
Federal | $ | (3,582) |  |  | $ | 5,033 |  |  | $ | 677 |
State | 2,573 |  |  | 1,836 |  |  | 1,310 |
Foreign | 4,744 |  |  | 7,661 |  |  | 7,355 |
Total current | 3,735 |  |  | 14,530 |  |  | 9,342 |
Deferred: |  |  |  |  |
Federal | (10,333) |  |  | (38,027) |  |  | 1,957 |
State | (4,045) |  |  | 97 |  |  | (15) |
Foreign | (3,873) |  |  | (7,558) |  |  | (6,558) |
Total deferred | (18,251) |  |  | (45,488) |  |  | (4,616) |
Total | $ | (14,516) |  |  | $ | (30,958) |  |  | $ | 4,726 |
A reconciliation of the Company's effective tax rate for continuing operations to the U.S. statutory federal rate is as follows:
| Year ended December 31,
| 2022 |  | 2021 |  | 2020
U.S. statutory income tax rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State income taxes, net of federal benefit | 1.8 |  |  | (0.7) |  |  | 1.1 |
Foreign income taxes | (1.4) |  |  | 0.5 |  |  | 0.2 |
Stock-based compensation | (2.4) |  |  | (0.1) |  |  | 1.0 |
Tax credits | 2.2 |  |  | 1.6 |  |  | (2.8) |
Uncertain tax positions | 1.3 |  |  | 0.5 |  |  | 0.5 |
Valuation allowance | (3.8) |  |  | 2.5 |  |  | (20.3) |
Non-deductible goodwill impairment | — |  |  | (11.7) |  |  | — |
Other permanent adjustments | (2.6) |  |  | 0.9 |  |  | 1.8 |
Permanent foreign exchange adjustments | (1.4) |  |  | 0.5 |  |  | 1.8 |
Other, net | (1.8) |  |  | (0.1) |  |  | 0.8 |
Effective income tax rate | 12.9 | % |  | 14.9 | % |  | 5.1 | %
The following is a summary of the significant components of deferred income tax assets and liabilities (in thousands):
| December 31,
| 2022 |  | 2021
Assets: |  |  |
Net operating loss carryforwards | $ | 413,773 |  |  | $ | 437,669 |
Capital loss carryforwards | 99,505 |  |  | 79,716 |
Tax credit carryforwards | 28,902 |  |  | 23,450 |
Capitalized research and development expenses | 40,668 |  |  | 18,106 |
Deferred revenue | 3,510 |  |  | 3,472 |
Accrued expenses | 9,068 |  |  | 7,505 |
Inventory | 2,820 |  |  | 3,102 |
Stock-based compensation | 1,709 |  |  | 1,689 |
Fixed assets | 2,506 |  |  | 2,710 |
Lease liabilities | 12,829 |  |  | 15,250 |
Mark-to-market investments | — |  |  | 1,714 |
Other temporary differences | 1,324 |  |  | 3,839 |
| 616,614 |  |  | 598,222 |
Valuation allowance | (488,550) |  |  | (471,515) |
Total deferred tax assets | 128,064 |  |  | 126,707 |
Liabilities: |  |  |
Intangible assets | (55,037) |  |  | (65,647) |
Operating lease right-of-use assets | (8,519) |  |  | (10,370) |
Interest rate swap | (6,168) |  |  | — |
Unremitted foreign income | (8,441) |  |  | (11,519) |
Total deferred tax liabilities | (78,165) |  |  | (87,536) |
Total net deferred tax assets | $ | 49,899 |  |  | $ | 39,171 |
The deferred tax assets and liabilities based on tax jurisdictions are presented in the Company's consolidated balance sheets as follows:
| December 31,
| 2022 |  | 2021
Deferred income taxes - net noncurrent assets | $ | 53,649 |  |  | $ | 47,287 |
Deferred income taxes - net noncurrent liabilities | (3,750) |  |  | (8,116) |
| $ | 49,899 |  |  | $ | 39,171 |
At December 31, 2022, the Company had U.S. federal net operating losses ("NOLs") of $152.5 million. The Company also had U.S. state NOLs of $18.8 million. In addition, the Company had $1.6 billion of Israel NOLs through the ECI Acquisition. The U.S. federal NOL carryforwards expire between 2023 and 2037. The U.S. state NOLs begin to expire in 2023, and the Company also has indefinite-lived state NOLs. The Israel NOLs do not expire. The Company also has available federal, state and foreign income tax credit carryforwards of $28.9 million. The federal foreign tax credit carryforwards expire between 2030 and 2032. The state tax credits, which are primarily research and development credits, begin to expire in 2023, while others can be carried forward until exhausted. The foreign income tax credits expire in various periods. The Company has provided for income taxes on the undistributed earnings of its non-U.S. subsidiaries as of December 31, 2022, excluding Ireland and Israel. These subsidiaries, excluding Ireland and Israel, are cost-plus or limited risk distributors that are not anticipated to need to use excess funds locally. Accordingly, the Company is required to recognize and record deferred taxes in 2022. The deferred taxes, which are primarily future withholding taxes, are recorded on the entire outside basis differences related to the foreign subsidiaries, the largest of these differences being undistributed earnings. Undistributed profits of Ireland and Israel, as well as other outside basis differences in foreign subsidiaries, were indefinitely reinvested in foreign operations. Quantification of the deferred tax liability, if any, associated with indefinitely reinvested earnings and outside basis differences was not practicable. Under the provisions of the Internal Revenue Code, the net operating losses and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service. Net operating losses and tax credit carryforwards may become subject to an annual limitation in the event of certain cumulative changes in the ownership of significant shareholders over a three-year period in excess of 50%, as defined under sections 382 and 383 of the Internal Revenue Code, as well as similar state provisions. As a result of the Sonus and GENBAND merger in 2017, the Company has $112.3 million of U.S. federal net operating loss carryforwards remaining as of December 31, 2022 with an annual section 382 limitation of $9.7 million. The Company believes these NOLs are fully realizable. As a result of the ECI Acquisition, the Company has $41.9 million of U.S. federal NOLs remaining as of December 31, 2022 with an annual section 382 limitation of $1.1 million. The Company does not believe all of these NOLs are realizable and, therefore, have recorded a partial valuation allowance against these NOLs. The Company performed an analysis to determine if, based on all available evidence, it considered it more likely than not that some portion or all of the recorded deferred tax assets will not be realized in a future period. Accordingly, the Company has recorded a valuation allowance against its U.S. deferred tax assets of $25.5 million at December 31, 2022 and $30.5 million at December 31, 2021. The Company also maintains a valuation allowance against certain of its foreign deferred tax assets, predominantly Israel, amounting to approximately $463 million at December 31, 2022 and $441 million at December 31, 2021. The deferred tax assets recognized with no valuation allowance at December 31, 2022 and 2021 primarily relate to other foreign subsidiaries where recoverability is concluded to be more likely than not based on the Company's cost-plus compensation policy, as well as NOLs and tax credits in the U.S. that are expected to be utilized prior to expiration. A reconciliation of the Company's unrecognized tax benefits is as follows (in thousands):
| Year ended December 31,
| 2022 |  | 2021 |  | 2020
Unrecognized tax benefits at January 1 | $ | 17,813 |  |  | $ | 14,054 |  |  | $ | 2,932 |
Increases related to current year tax positions | 156 |  |  | 4,017 |  |  | 485 |
Increases related to prior period tax positions | 40 |  |  | 3,168 |  |  | 11,209 |
Decreases related to the lapse of the applicable statute of limitations | (560) |  |  | (3,087) |  |  | (122) |
Decreases related to prior period tax positions | $ | (5,448) |  |  | $ | (339) |  |  | $ | (450) |
Unrecognized tax benefits at December 31 | $ | 12,001 |  |  | $ | 17,813 |  |  | $ | 14,054 |
The Company accounts for interest and penalties related to uncertain tax positions as part of its provision for income taxes. The Company had $14.9 million, $21.0 million and $15.3 million of unrecognized tax benefits, including penalties and interest, at December 31, 2022, 2021 and 2020, respectively. Of these amounts, $11.2 million, $12.7 million and $13.9 million represent the amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate for the years ended December 31, 2022, 2021 and 2020, respectively. The Company recorded income tax expense (benefit) for potential penalties and interest of $(0.3) million, $1.9 million and $0.5 million for the years ended December 31, 2022, 2021 and 2020, respectively. The Company had $2.9 million and $3.2 million accrued in Other long-term liabilities for penalties and interest at December 31, 2022 and 2021, respectively. The Company believes that it is reasonably possible that $(0.6) million in tax positions related to its unrecognized tax benefits will be recognized within the next twelve months. The Company and its subsidiaries file income tax returns in the U.S. federal jurisdiction as well as various state and foreign jurisdictions. Generally, the tax years 2018 through 2021 remain open to examination by the major taxing jurisdictions in which the Company operates. The Company's federal and state NOLs generated prior to 2018 could be adjusted on examination even though the year in which the loss was generated is otherwise closed by the statute of limitations. As of December 31, 2022, the Company had ongoing income tax audits in certain foreign countries. Management believes that an adequate provision has been recorded for any adjustments that may result from tax examinations. Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective January 1, 2022. The mandatory capitalization requirement increases our deferred tax assets and cash tax liabilities. On August 16, 2022, Congress passed the Inflation Reduction Act of 2022 which introduced the 15% corporate alternative minimum tax on book income and a 1% excise tax on stock repurchases which are both effective January 1, 2023. We do not currently anticipate these new laws to have a material effect on the Company's financial position in the near term. A change in tax laws is one of many factors that impact the Company’s effective tax rate. The U.S. and other jurisdictions where the Company does business have had an extended focus on issues related to the taxation of multinational corporations. As a result, the tax laws in the U.S. and other countries in which the Company does business could change, and any such changes could adversely impact our effective tax rate, financial condition and results of operations. The Organization for Economic Co-operation and Development ("OECD"), an international association of 38 countries including the United States, has proposed changes to numerous long-standing tax principles (e.g. Pillar 1 and Pillar 2). These proposals, if finalized and adopted by the associated countries, will likely increase tax uncertainty and may adversely affect our provision for income taxes.

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