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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | (19) Income Taxes The components of our income before income taxes for the years ended December 31, 2023, 2022 and 2021 are as follows:
|  | Year Ended December 31,
(in thousands) |  | 2023 |  | 2022 |  | 2021
Income (loss) before income taxes: |  |  |  |  |  |
Domestic |  | $ | (239,971) |  |  | $ | (110,610) |  |  | $ | 308,514 |
Foreign |  | (122,341) |  |  | (10,199) |  |  | 11,026 |
Total |  | $ | (362,312) |  |  | $ | (120,809) |  |  | $ | 319,540 |
The components of income tax provision for the years ended December 31, 2023, 2022 and 2021 are as follows:
(in thousands) |  | 2023 |  | 2022 |  | 2021
Current: |  |  |  |  |  |
U.S. federal |  | $ | 135 |  |  | $ | 119 |  |  | $ | (8,675) |
State |  | (50) |  |  | (498) |  |  | 2,097 |
Foreign |  | 1,686 |  |  | 5,037 |  |  | 6,861 |
Total |  | 1,771 |  |  | 4,658 |  |  | 283 |
Deferred: |  |  |  |  |  |
U.S. federal |  | — |  |  | — |  |  | — |
State |  | — |  |  | — |  |  | — |
Foreign |  | (2,412) |  |  | (2,518) |  |  | (2,795) |
Total |  | (2,412) |  |  | (2,518) |  |  | (2,795) |
Total income tax (benefit) provision |  | $ | (641) |  |  | $ | 2,140 |  |  | $ | (2,512) |
The overall effective tax rate differs from the statutory federal tax rate for the years ended December 31, 2023, 2022 and 2021 as follows:
|  | % of Pretax (Loss) Income
|  | 2023 |  | 2022 |  | 2021
Tax provision based on the federal statutory rate |  | 21.0 | % |  | 21.0 | % |  | 21.0 | %
Increase in valuation allowances |  | (6.5) |  |  | (10.7) |  |  | (10.4) |
Change in carryforward attributes |  | — |  |  | (1.9) |  |  | (0.7) |
Global intangible low-taxed income inclusion |  | (0.4) |  |  | (0.5) |  |  | 1.2 |
Non-deductible expenses |  | — |  |  | (1.6) |  |  | 1.4 |
Non-deductible earnout expense |  | 1.0 |  |  | (2.8) |  |  | — |
Goodwill impairment charge |  | (14.6) |  |  | — |  |  | — |
Foreign income tax rate differential |  | 0.5 |  |  | (0.3) |  |  | — |
Deemed income related to foreign operations |  | (0.3) |  |  | (0.2) |  |  | — |
Tax rate change |  | — |  |  | (1.2) |  |  | (0.7) |
Employee share-based payments |  | (0.5) |  |  | (1.6) |  |  | (1.3) |
Other |  | (0.7) |  |  | 0.4 |  |  | — |
Deferred and payable adjustments |  | (1.3) |  |  | (1.7) |  |  | 1.4 |
Non-deductible penalties |  | — |  |  | (2.5) |  |  | — |
State taxes, net of federal benefit, before valuation allowance |  | 0.7 |  |  | 1.4 |  |  | 1.0 |
Return-to-provision adjustments |  | 0.2 |  |  | (0.2) |  |  | (0.1) |
Other tax credits |  | 1.1 |  |  | 0.8 |  |  | (0.5) |
Uncertain tax positions and audit settlements |  | — |  |  | (0.2) |  |  | (3.0) |
Divestitures |  | — |  |  | — |  |  | (10.1) |
Effective tax rate |  | 0.2 | % |  | (1.8) | % |  | (0.8) | %
The difference between our effective tax rate for 2023, and the federal statutory rate was 20.8 percentage points. The difference in the effective rate is primarily due to the net increase in valuation allowances and non-deductible goodwill impairment charges. 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. In 2023, we recorded a full valuation allowance for Wematter and Layerwise, a foreign subsidiary of the Company. In 2022, and 2021, 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, 2023 and 2022 are as follows:
(in thousands) |  | 2023 |  | 2022
Deferred income tax assets: |  |  |  |
Intangible assets |  | $ | 13,830 |  |  | $ | 8,601 |
Stock options and restricted stock awards |  | 5,409 |  |  | 6,091 |
Reserves and allowances |  | 6,395 |  |  | 6,145 |
Net operating loss carryforwards |  | 47,875 |  |  | 51,845 |
Tax credit carryforwards |  | 25,286 |  |  | 19,649 |
Accrued liabilities |  | 2,371 |  |  | 2,518 |
Deferred revenue |  | 2,783 |  |  | 5,502 |
Lease tax assets |  | 15,985 |  |  | 9,589 |
Research expenditures capitalization |  | 30,601 |  |  | 11,140 |
Other |  | 1,227 |  |  | 1,180 |
Valuation allowance |  | (125,533) |  |  | (100,694) |
Total deferred income tax assets |  | 26,229 |  |  | 21,566 |
Deferred income tax liabilities: |  |  |  |
Intangible assets |  | 8,688 |  |  | 9,090 |
Property and equipment |  | 4,082 |  |  | 4,477 |
Lease tax liabilities |  | 13,924 |  |  | 7,785 |
Other |  | 467 |  |  | 807 |
Total deferred income tax liabilities |  | 27,161 |  |  | 22,159 |
Net deferred income tax liabilities |  | $ | (932) |  |  | $ | (593) |
At December 31, 2023, $47,875 of our deferred income tax assets was attributable to $347,035 of gross net operating loss carryforwards, which consisted of $80,645 of loss carryforwards for U.S. federal income tax purposes, $166,419 of loss carryforwards for U.S. state income tax purposes and $99,971 of loss carryforwards for foreign income tax purposes. $7,381 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, 2023, tax credit carryforwards deferred assets of $25,286 consisted of $15,093 of research and experimentation credit carryforwards for U.S. federal income tax purposes, $3,565 of research and experimentation tax credit carryforwards for U.S. state income tax purposes, and $6,628 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 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 $95,352 of unremitted earnings. We believe the unrecognized deferred tax liability related to these earnings is approximately $4,485. Including interest and penalties, we decreased our unrecognized benefits by $271 for the year ended December 31, 2023, and increased our unrecognized tax benefits by $1,733 for the year ended December 31, 2023. The increase was primarily related to the addition of unrecognized tax benefits around current year R&D credits generated. 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 $5,577. We include interest and penalties in the consolidated financial statements as a component of income tax expense.
|  | Unrecognized Tax Benefits(1)
(in thousands) |  | 2023 |  | 2022 |  | 2021
Balance at January 1 |  | $ | (17,150) |  |  | $ | (17,261) |  |  | $ | (25,902) |
Increases related to prior year tax positions |  | (99) |  |  | (192) |  |  | (467) |
Decreases related to prior year tax positions |  | 107 |  |  | 508 |  |  | 8,886 |
Decreases related to prior year tax positions as a result of lapse of statute |  | 271 |  |  | 145 |  |  | 371 |
Decreases related to settlement |  | — |  |  | — |  |  | 1,043 |
Increases related to current year tax positions |  | (1,733) |  |  | (269) |  |  | (553) |
Increases related to acquired tax positions |  | — |  |  | (119) |  |  | (639) |
Decreases related to acquired tax positions |  | — |  |  | 38 |  |  | — |
Balance at December 31 |  | $ | (18,604) |  |  | $ | (17,150) |  |  | $ | (17,261) |
(1) The unrecognized tax benefit balance as of December 31, 2023, 2022, and 2021 includes $323, $283, and $208 of interest and penalty, respectively. 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 2018 through 2022 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(1) |  | Balance at end of year
2023 |  | Deferred income tax asset valuation allowance |  | $ | 100,694 |  |  | $ | 23,606 |  |  | $ | 1,233 |  |  | $ | 125,533 |
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 |
(1) The Other portion of changes to our valuation allowance consists primarily of the impact of acquisitions and changes in foreign currency translation rates.

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