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Income Taxes
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
The components of income (loss) before income taxes were as follows (in thousands):
Year ended December 31,
20242023
U.S.$(170,901)$(43,450)
Non-U.S.42,475 35,636 
Income (loss) before income taxes$(128,426)$(7,814)
The components of income tax expense (benefit) were as follows (in thousands):
Year ended December 31,
20242023
Current
U.S. federal and state$1,545 $101 
Non-U.S.22,929 11,165 
Total current24,474 11,266 
Deferred
U.S. federal and state(752)85 
Non-U.S.(16,822)(289)
Total deferred(17,574)(204)
Income tax expense$6,900 $11,062 
The reconciliation between the actual provision for income taxes and that computed by applying the U.S. statutory rate to loss before income taxes are outlined below (in thousands):
Year ended December 31,
20242023
Income tax benefit at the statutory rate$(26,970)(21.0)%$(1,641)(21.0)%
State taxes, net of federal tax benefit(115)(0.1)%(114)(1.5)%
Non-U.S. operations3,143 2.4 %(274)(3.5)%
Domestic incentives(402)(0.3)%448 5.7 %
Prior year federal, non-U.S. and state tax3,488 2.7 %3,536 45.3 %
Nondeductible expenses2,124 1.7 %806 10.3 %
Valuation allowance25,137 19.6 %8,313 106.4 %
Other495 0.4 %(12)(0.1)%
Income tax expense$6,900 5.4 %$11,062 141.6 %
Our effective tax rate was 5.4% and 141.6% for the years ended December 31, 2024 and 2023, respectively.
The Organization for Economic Co-operation and Development introduced Base Erosion and Profit Shifting (“BEPS”) Pillar 2 rules that impose a global minimum tax rate of 15%. As of January 1, 2024, numerous countries, including European Union member states, have enacted a global minimum tax and more countries are expected to enact similar minimum tax regimes in 2025. Based on current enacted legislation, we do not expect a material impact on our future effective tax rate.
The primary components of deferred taxes include (in thousands):
December 31,
20242023
Deferred tax assets
Reserves and accruals$5,579 $3,821 
Operating lease liabilities20,086 17,384 
Inventories8,894 10,170 
Stock awards935 1,829 
Net operating loss and other tax carryforwards186,118 160,127 
Goodwill and intangible assets19,513 20,091 
Fair value discount on 2025 Notes12,188 19,751 
Property and equipment— 6,619 
Other10,114 5,896 
Gross deferred tax assets263,427 245,688 
Valuation allowance(254,515)(231,907)
Total deferred tax assets$8,912 $13,781 
Deferred tax liabilities
Property and equipment$(3,771)$— 
Operating lease assets(16,924)(13,903)
Prepaid expenses and other(450)(450)
Total deferred tax liabilities(21,145)(14,353)
Net deferred tax liabilities$(12,233)$(572)
Goodwill from certain acquisitions is tax deductible due to the acquisition structure as an asset purchase or due to tax elections made by the Company and the respective sellers at the time of acquisition.
We have deferred tax assets related to net operating loss and other tax carryforwards in the U.S., and in certain states and foreign jurisdictions. We recognize deferred tax assets to the extent that we believe these assets are more likely than not to be realized.
At December 31, 2024, we had $334.6 million of gross U.S. net operating loss carryforwards and $10.4 million of state net operating losses. Of these losses, $33.7 million will expire no later than 2037 if they are not utilized prior to that date. The remaining $311.3 million will not expire. We also had $65.3 million of gross non-U.S. net operating loss carryforwards with indefinite expiration dates. In addition to our net operating loss carryforwards, we also had gross U.S. interest limitation carryforwards of $206.5 million and gross non-U.S. interest limitation carryforwards of $200.3 million, all with indefinite expiration dates. The ultimate realization of income tax benefits for these net operating loss and interest limitation carryforwards depends on our ability to generate sufficient taxable income in the respective taxing jurisdictions. Because of the change of ownership provisions of the Tax Reform Act of 1986, use of a portion of our domestic net operating losses may be limited in future periods depending upon future changes in ownership. Where we have unrecognized tax benefits in jurisdictions with existing net operating losses, we utilize the unrecognized tax benefits as a source of income to offset such losses. We do not anticipate being able to fully utilize all of the losses prior to their expiration in the following jurisdictions: the U.S, the U.K, Singapore and China.
During 2024, we recognized $25.1 million of tax expense related to the net increase in our valuation allowance provided against our deferred tax assets to write down our deferred tax assets in these jurisdictions to what is more likely than not realizable. We increased our valuation allowance related to our U.S. deferred tax assets by $29.5 million along with a $6.9 million increase to certain non-U.S. deferred tax assets in the U.K. Singapore and China. In addition, we released $11.3 million of valuation allowance on our deferred tax assets generated from operations in Germany and Saudi Arabia. In making such a determination for each of these jurisdictions, we considered all available positive and negative evidence, including our recent history of pretax losses over the prior three year period, the goodwill and intangible asset impairments for various reporting units, the future reversals of existing taxable temporary differences, the projected future taxable income or loss and tax-planning. We intend to continue maintaining a full valuation allowance on our deferred tax assets until there is sufficient evidence to support the reversal of all or some portion of these allowances.
Deferred tax liabilities arising from the difference between the financial reporting and income tax bases inherent in our foreign subsidiaries, referred to as outside basis differences, have not been provided for U.S. income tax purposes because we do not intend to sell, liquidate or otherwise trigger the recognition of U.S. taxable income with regard to our investment in these foreign subsidiaries. Determining the amount of U.S. deferred tax liabilities associated with outside basis differences is not practicable at this time.
We file income tax returns in the U.S. as well as in various states and non-U.S. jurisdictions. With few exceptions, we are no longer subject to income tax examination by tax authorities in these jurisdictions prior to 2017.
We account for uncertain tax positions in accordance with guidance in ASC Topic 740, which prescribes the minimum recognition threshold a tax position taken or expected to be taken in a tax return is required to meet before being recognized in the financial statements. A reconciliation of the beginning and ending amount of uncertain tax positions is as follows (in thousands):
2024 ActivityAmount
Balance at January 1, 2024$10,903 
Additional based on tax positions related to prior years259 
Additional based on tax positions related to current year3,040 
Lapse of statute of limitations(1,448)
Balance at December 31, 2024$12,754 
The total amount of unrecognized tax benefits at December 31, 2024 was $12.8 million, of which it is reasonably possible that $4.4 million could be settled during the next twelve-month period as a result of the conclusion of various tax audits or due to the expiration of the applicable statute of limitations. We estimate that $9.8 million of the unrecognized tax benefits at December 31, 2024, excluding consideration of valuation allowance, would impact our future effective income tax rate, if recognized.
We recognize interest and penalties related to uncertain tax positions within the provision for income taxes in the consolidated statements of comprehensive loss. As of December 31, 2024 and 2023, we had accrued approximately $0.6 million and $0.3 million in interest and penalties, respectively. During the years ended December 31, 2024 and 2023, we recognized no material change in the interest and penalties related to uncertain tax positions.