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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | (22) Income Taxes The components of our income before income taxes for the years ended December 31, 2022, 2021 and 2020 are as follows:
(in thousands) |  | 2022 |  | 2021 |  | 2020
Income (loss) before income taxes: |  |  |  |  |  |
Domestic |  | $ | (110,610) |  |  | $ | 308,514 |  |  | $ | (45,973) |
Foreign |  | (10,199) |  |  | 11,026 |  |  | (97,437) |
Total |  | $ | (120,809) |  |  | $ | 319,540 |  |  | $ | (143,410) |
The components of income tax provision for the years ended December 31, 2022, 2021 and 2020 are as follows:
(in thousands) |  | 2022 |  | 2021 |  | 2020
Current: |  |  |  |  |  |
U.S. federal |  | $ | 119 |  |  | $ | (8,675) |  |  | $ | 1,294 |
State |  | (498) |  |  | 2,097 |  |  | 451 |
Foreign |  | 5,037 |  |  | 6,861 |  |  | 5,645 |
Total |  | 4,658 |  |  | 283 |  |  | 7,390 |
Deferred: |  |  |  |  |  |
U.S. federal |  | — |  |  | — |  |  | 67 |
State |  | — |  |  | — |  |  | — |
Foreign |  | (2,518) |  |  | (2,795) |  |  | (1,273) |
Total |  | (2,518) |  |  | (2,795) |  |  | (1,206) |
Total income tax (benefit) provision |  | $ | 2,140 |  |  | $ | (2,512) |  |  | $ | 6,184 |
The overall effective tax rate differs from the statutory federal tax rate for the years ended December 31, 2022, 2021 and 2020 as follows:
|  | % of Pretax (Loss) Income
|  | 2022 |  | 2021 |  | 2020
Tax provision based on the federal statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Increase in valuation allowances |  | (10.7) |  |  | (10.4) |  |  | (8.5) |
Dividends not taxable |  | — |  |  | — |  |  | 9.5 |
Net operating loss carryback claim |  | — |  |  | — |  |  | 6.2 |
Change in carryforward attributes |  | (1.9) |  |  | (0.7) |  |  | (3.2) |
Global intangible low-taxed income inclusion |  | (0.5) |  |  | 1.2 |  |  | (0.3) |
Non-deductible expenses |  | (1.6) |  |  | 1.4 |  |  | (13.5) |
Non-deductible earnout expense |  | (2.8) |  |  | — |  |  | — |
Foreign income tax rate differential |  | (0.3) |  |  | — |  |  | (3.3) |
Deemed income related to foreign operations |  | (0.2) |  |  | — |  |  | (1.6) |
Tax rate change |  | (1.2) |  |  | (0.7) |  |  | (0.3) |
Employee share-based payments |  | (1.6) |  |  | (1.3) |  |  | (1.4) |
Other |  | 0.4 |  |  | — |  |  | (0.4) |
Deferred and payable adjustments |  | (1.7) |  |  | 1.4 |  |  | (2.6) |
Non-deductible penalties |  | (2.5) |  |  | — |  |  | — |
State taxes, net of federal benefit, before valuation allowance |  | 1.4 |  |  | 1.0 |  |  | 0.5 |
Return-to-provision adjustments |  | (0.2) |  |  | (0.1) |  |  | 0.9 |
Other tax credits |  | 0.8 |  |  | (0.5) |  |  | 0.2 |
Uncertain tax positions and audit settlements |  | (0.2) |  |  | (3.0) |  |  | (7.5) |
Divestitures |  | — |  |  | (10.1) |  |  | — |
Effective tax rate |  | (1.8) | % |  | (0.8) | % |  | (4.3) | %
The difference between our effective tax rate for 2022 and the federal statutory rate was 22.8 percentage points. The difference in the effective rate is primarily due to valuation allowance changes and non-deductible expenses, including earnout expense and penalties. The difference between our effective tax rate for 2021 and the federal statutory rate was 21.8 percentage points. The difference in the effective rate is primarily due to differences in book and stock bases related to the divestitures of Cimatron and Simbionix, valuation allowance changes, and adjustments to uncertain tax positions, provisions for GILTI, and non-deductible expenses. The difference between our effective tax rate for 2020 and the federal statutory rate was 25.3 percentage points. The difference in the effective rate is primarily due to valuation allowance changes, nondeductible impairment charges, dividends not taxable, net operating loss carryback claim, and adjustments to uncertain tax positions. In 2022, 2021 and 2020, there were no significant changes to our valuation allowance assertions. We continue to review results of operations and forecast estimates to determine if it is more likely than not that the deferred tax assets will be realized. The components of our net deferred income tax assets and net deferred income tax (liabilities) at December 31, 2022 and 2021 are as follows:
(in thousands) |  | 2022 |  | 2021
Deferred income tax assets: |  |  |  |
Intangible assets |  | $ | 8,601 |  |  | $ | 10,950 |
Stock options and restricted stock awards |  | 6,091 |  |  | 8,005 |
Reserves and allowances |  | 6,145 |  |  | 8,692 |
Net operating loss carryforwards |  | 51,845 |  |  | 38,394 |
Tax credit carryforwards |  | 19,649 |  |  | 19,967 |
Accrued liabilities |  | 2,518 |  |  | 2,893 |
Deferred revenue |  | 5,502 |  |  | 8,141 |
Lease tax assets |  | 9,589 |  |  | 10,362 |
Research expenditures capitalization |  | 11,140 |  |  | — |
Other |  | 1,180 |  |  | — |
Valuation allowance |  | (100,694) |  |  | (91,165) |
Total deferred income tax assets |  | 21,566 |  |  | 16,239 |
Deferred income tax liabilities: |  |  |  |
Intangible assets |  | 9,090 |  |  | 2,356 |
Property and equipment |  | 4,477 |  |  | 2,110 |
Lease tax liabilities |  | 7,785 |  |  | 8,458 |
Other |  | 807 |  |  | 434 |
Total deferred income tax liabilities |  | 22,159 |  |  | 13,358 |
Net deferred income tax (liabilities) assets |  | $ | (593) |  |  | $ | 2,881 |
At December 31, 2022, $51,845 of our deferred income tax assets was attributable to $367,611 of gross net operating loss carryforwards, which consisted of $120,659 of loss carryforwards for U.S. federal income tax purposes, $168,364 of loss carryforwards for U.S. state income tax purposes and $78,587 of loss carryforwards for foreign income tax purposes. $11,128 of gross net operating loss carryforwards for U.S. federal income tax purposes are acquisition related and are subject to potential measurement period adjustments under ASC 805. The net operating loss carryforwards for U.S. federal income tax purposes do not expire. The net operating loss carryforwards for U.S. state income tax purposes begin to expire in 2023. In addition, certain net loss carryforwards for foreign income tax purposes begin to expire in 2024 and certain other loss carryforwards for foreign purposes do not expire. At December 31, 2022, tax credit carryforwards included in our deferred income tax assets consisted of $9,090 of research and experimentation credit carryforwards for U.S. federal income tax purposes, $4,975 of research and experimentation tax credit carryforwards for U.S. state income tax purposes, and $6,629 of foreign tax credits for U.S. federal income tax purposes. Certain state research and experimentation and other state credits begin to expire in 2023. We have recorded a valuation allowance related to the U.S. federal and state tax credits. Due to the one time transition tax, our previously unremitted earnings have been subjected to U.S. federal income tax, although, other additional taxes such as, withholding tax, could be applicable. We intend to permanently reinvest our earnings outside the U.S. and as such, have not provided for any additional taxes on approximately $122,732 of unremitted earnings. We believe the unrecognized deferred tax liability related to these earnings is approximately $5,761. Including interest and penalties, we decreased our unrecognized benefits by $691 for the year ended December 31, 2022 and increased our unrecognized tax benefits by $580 for the year ended December 31, 2022. The decrease was primarily related to the release of unrecognized tax benefits due to the receipt of two favorable U.S. private letter rulings and the settlement of an audit in a foreign jurisdiction. We do not anticipate any additional unrecognized tax benefits during the next 12 months that would result in a material change to our consolidated financial position. The total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate is $5,710. We include interest and penalties in the consolidated financial statements as a component of income tax expense.
|  | Unrecognized Tax Benefits*
(in thousands) |  | 2022 |  | 2021 |  | 2020
Balance at January 1 |  | $ | (17,261) |  |  | $ | (25,902) |  |  | $ | (15,467) |
Increases related to prior year tax positions |  | (192) |  |  | (467) |  |  | (10,426) |
Decreases related to prior year tax positions |  | 508 |  |  | 8,886 |  |  | 788 |
Decreases related to prior year tax positions as a result of lapse of statute |  | 145 |  |  | 371 |  |  | — |
Decreases related to settlement |  | — |  |  | 1,043 |  |  | — |
Increases related to current year tax positions |  | (269) |  |  | (553) |  |  | (797) |
Increases related to acquired tax positions |  | (119) |  |  | (639) |  |  | — |
Decreases related to acquired tax positions |  | 38 |  |  | — |  |  | — |
Balance at December 31 |  | $ | (17,150) |  |  | $ | (17,261) |  |  | $ | (25,902) |
* The unrecognized tax benefit balance includes an insignificant amount of interest and penalties. Tax years 2013 through 2021 remain subject to examination by the U.S. Internal Revenue Service (“IRS”). State income tax returns are generally subject to examination for a period of three to four years after filing the respective tax returns. The tax years 2017 through 2021 remain open to examination by the various foreign taxing jurisdictions to which the Company is subject. The following presents the changes in the balance of our deferred income tax asset valuation allowance:
Year Ended |  | Item |  | Balance at beginning of year |  | Additions (reductions) charged to expense |  | Other |  | Balance at end of year
2022 |  | Deferred income tax asset valuation allowance |  | $ | 91,165 |  |  | $ | 12,848 |  |  | $ | (3,319) |  |  | $ | 100,694 |
2021 |  | Deferred income tax asset valuation allowance |  | $ | 123,113 |  |  | $ | (31,948) |  |  | $ | — |  |  | $ | 91,165 |
2020 |  | Deferred income tax asset valuation allowance |  | $ | 109,643 |  |  | $ | 13,470 |  |  | $ | — |  |  | $ | 123,113 |

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