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INCOME TAXES
 12 Months Ended
Dec. 31, 2023
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
During the years ended December 31, 2023, 2022, and 2021, the Company's loss before income taxes of $142,324, loss before income taxes of $220,450, and income before income taxes $614,762 includes a United States component of loss before income taxes of $157,529, loss before income taxes of $229,174, and income before income taxes of $598,882 and a foreign component comprised of income before income taxes of $15,205, $8,724, and $15,880, respectively. The Company’s provision for income taxes consists of the following during the years ended December 31, 2023, 2022, and 2021:
Year Ended December 31,
202320222021
Current:
Federal$2,411 $15,793 $67,322 
State1,871 (1,053)30,036 
Foreign(16)1,638 4,796 
Total current provision4,266 16,378 102,154 
Deferred:   
Federal(30,049)(60,736)42,734 
State(10,294)(19,544)17,824 
Foreign(616)46 1,248 
Total deferred(40,959)(80,234)61,806 
Total (benefit from) provision for income taxes$(36,693)$(63,856)$163,960 
A reconciliation of the federal statutory rate of 21.0% to the effective tax rate for income before income taxes is as follows during the years ended December 31, 2023, 2022, and 2021:
Year Ended December 31,
202320222021
Provision for income taxes at federal statutory rate(21.0 %)(21.0 %)21.0 %
State income taxes, net of federal benefit(6.5 %)(7.2 %)6.5 %
Noncontrolling interest tax differential1.4 %(0.6 %)0.1 %
Employee stock based compensation1.8 %(1.7 %)(1.1 %)
Bargain purchase(2.9 %)— %— %
Foreign tax(3.4 %)(0.2 %)0.1 %
Goodwill impairment9.2 %— %— %
Provision true-up(3.4 %)(0.8 %)(0.7 %)
NOL true-up(1.4 %)(1.2 %)0.1 %
Other0.4 %3.7 %0.7 %
Effective income tax rate(25.8 %)(29.0 %)26.7 %
Deferred income tax assets (liabilities) consisted of the following as of December 31, 2023 and 2022:
December 31,
20232022
Deferred tax assets:
Accrued liabilities and other$14,006 $19,942 
Mandatorily redeemable noncontrolling interests1,190 1,190 
Deferred revenue3,696 — 
Other558 42 
Share based payments13,953 14,346 
Capital loss carryforward43,488 66,308 
Net operating loss carryforward103,313 39,801 
Total deferred tax assets180,204 141,629 
Deferred tax liabilities:  
Deductible goodwill and other intangibles(33,265)(44,155)
State taxes(5,051)(3,839)
Depreciation(2,983)(4,087)
Deferred revenue— (15,967)
Other(993)(15,574)
Total deferred tax liabilities(42,292)(83,622)
Net deferred tax assets137,912 58,007 
Valuation allowance(104,317)(83,577)
Net deferred tax liabilities$33,595 $(25,570)
Deferred tax assets, net$33,595 $3,978 
Deferred tax liabilities, net— (29,548)
Net deferred tax liabilities$33,595 $(25,570)
As of December 31, 2023, the Company had federal net operating loss carryforwards of $46,384 and state net operating loss carryforwards of $64,247. In addition, one of the Company's majority-owned subsidiaries that does not file a tax return as part of the Company's consolidated group had federal net operating loss carryforwards of $298,416 and state net operating loss carryforwards of $222,585 available to utilize against future taxable income of the majority-owner subsidiary. During the years ended December 31, 2023, 2022, and 2021, the Company recorded a benefit in the provision for income taxes related to federal and state net operating loss carryforwards in the amount of $1,983, $1,820, and $1,527, respectively. The Company’s federal net operating loss carryforwards will expire in the tax years commencing in December 31, 2033 through December 31, 2038, the state net operating loss carryforwards will expire in tax years commencing in December 31, 2030.
The Company establishes a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Tax benefits of operating loss, capital loss, and tax credit carryforwards are evaluated on an ongoing basis, including a review of historical and projected future operating results, the eligible carryforward period, and other circumstances. The Company’s net operating losses are subject to annual limitations in accordance with Internal Revenue Code Section 382. Accordingly, the Company is limited to the amount of net operating loss that may be utilized in future taxable years depending on the Company’s actual taxable income. As of December 31, 2023, the Company believes that the existing net operating loss carryforwards will be utilized in future tax periods before the loss carryforwards expire and it is more-likely-than-not that future taxable earnings will be sufficient to realize its deferred tax assets and has not provided an additional valuation allowance. The valuation allowance increased by $20,740 during the year ended December 31, 2023. This was primarily due to the inclusion of bebe in the Company's consolidated results offset by the expiration of capital loss carryover that had previously been valued. The
Company does not believe that it is more likely than not that it will be able to utilize the benefits related to Israel capital loss carryforwards and has provided a full valuation allowance in the amount of $41,751 against these deferred tax assets.
As of December 31, 2023, the Company had gross unrecognized tax benefits totaling $14,819 all of which would have an impact on the Company’s effective income tax rate, if recognized. A reconciliation of the amounts of gross unrecognized tax benefits (before federal impact of state items), excluding interest and penalties, was as follows:
Year Ended
December 31,
2023
Beginning balance$16,146 
Reductions for prior year tax positions(969)
Reductions due to lapse in statutes of limitations(358)
Ending balance$14,819 
The Company files income tax returns in the U.S., various state and local jurisdictions, and certain other foreign jurisdictions. The Company is currently under audit by certain federal, state and local, and foreign tax authorities. The audits are in varying stages of completion. The Company evaluates its tax positions and establishes liabilities for uncertain tax positions that may be challenged by tax authorities. Uncertain tax positions are reviewed on an ongoing basis and are adjusted in light of changing facts and circumstances, including progress of tax audits, case law developments, and closing of statutes of limitations. Such adjustments are reflected in the provision for income taxes, as appropriate. The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the calendar years ended December 31, 2020 to 2023.
As of December 31, 2023, the Company believes it is reasonably possible that its gross liabilities for unrecognized tax benefits may decrease by approximately $2,395 within the next 12 months due to expiration of statute of limitations.
During the year ended December 31, 2023, the Company had accrued interest and penalties relating to uncertain tax positions of $28, $483, and $4,068 for UOL, magicJack, and Targus respectively, all of which was included in income taxes payable. During the year ended December 31, 2023, the Company recorded a net benefit of $45 and $142 for UOL and magicJack, respectively, related to interest and penalties for uncertain tax positions primarily due to the lapse in statute of limitations.
Inflation Reduction Act of 2022
On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law. The IR Act provides for, among other things, a new U.S. federal 1% excise tax on certain repurchases if stock by publicly traded U.S. domestic corporations and certain U.S. domestic subsidiaries of public traded foreign corporations occurring on or after January 1, 2023. The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased. The amount of excise tax is generally 1% of the fair market value of the shares repurchased at the time of repurchase. However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year. In addition, certain exceptions apply to the excise tax. The U.S. Department of Treasury (the “Treasury”) has been given authority to provide regulations and other guidance to carry out and prevent the abuse or avoidance of the excise tax. The Company does not expect the IR Act to have a material impact on its financial position and result of operations.
Pillar Two
The Pillar Two directive, which was established by the Organization for Economic Co-operation and Development, and which generally provides for a 15% minimum effective tax rate for multinational enterprises, in every jurisdiction in which they operate. While the Company does not anticipate that this will have a material impact on its tax provision or effective tax rate, it will continue to monitor evolving tax legislation in the jurisdictions in which it operates.