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Income Taxes | 12 Months Ended
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Dec. 31, 2022
Income Tax Disclosure [Abstract] |
Income Taxes | Income TaxesWe recorded a benefit from income taxes of $162.7 million during the year ended December 31, 2022 and a provision for income taxes of $7.2 million and $5.4 million during the years ended December 31, 2021 and 2020, respectively. The benefit from income taxes during the year ended December 31, 2022 was primarily due to the release of the valuation allowance on certain U.S. and state deferred tax assets. The provision for income taxes during the year ended December 31, 2021 was primarily due to state and foreign income tax expenses and the withholding taxes related to the sale of our strategic equity investment. The provision for income taxes during the year ended December 31, 2020 was primarily due to state and foreign income tax expense. Our benefit from (provision for) income taxes consisted of the following (in thousands):
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Current income taxes: |  |  |  |  |
Federal | $ | (113) |  |  | $ | — |  |  | $ | — |
State | (2,172) |  |  | (852) |  |  | (459) |
Foreign | (3,702) |  |  | (7,449) |  |  | (5,010) |
Total current provision for income taxes | (5,987) |  |  | (8,301) |  |  | (5,469) |
Deferred income taxes: |  |  |  |  |
Federal | 147,236 |  |  | (250) |  |  | (187) |
State | 19,995 |  |  | (218) |  |  | (255) |
Foreign | 1,448 |  |  | 1,572 |  |  | 551 |
Total deferred benefit from income taxes | 168,679 |  |  | 1,104 |  |  | 109 |
Total benefit from (provision for) income taxes | $ | 162,692 |  |  | $ | (7,197) |  |  | $ | (5,360) |
Income (loss) before benefit from (provision for) income taxes consisted of the following (in thousands):
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
United States | $ | 123,269 |  |  | $ | (6,256) |  |  | $ | (10,369) |
Foreign | (19,323) |  |  | 11,995 |  |  | 9,508 |
Total income (loss) before benefit from (provision for) income taxes | $ | 103,946 |  |  | $ | 5,739 |  |  | $ | (861) |
The differences between our benefit from (provision for) income taxes as presented in the accompanying consolidated statements of operations and the income tax expense computed at the federal statutory rate consists of the items shown in the following table as a percentage of income (loss) before benefit from (provision for) income taxes (in percentages):
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Income tax at U.S. statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State, net of federal benefit | 1.6 |  |  | (232.0) |  |  | (169.5) |
Foreign rate differential | (1.1) |  |  | 35.5 |  |  | (285.9) |
Share-based compensation | 15.3 |  |  | (209.0) |  |  | 2,901.5 |
Non-deductible expenses | 1.6 |  |  | 1.5 |  |  | (50.3) |
Tax credits | (0.7) |  |  | (28.3) |  |  | 351.6 |
Acquisition related | — |  |  | 17.2 |  |  | — |
Convertible senior notes | 15.0 |  |  | (2,435.3) |  |  | (5,854.8) |
Other | 1.3 |  |  | 0.5 |  |  | 1.2 |
Change in valuation allowance | (210.5) |  |  | 2,954.3 |  |  | 2,462.7 |
Total | (156.5) | % |  | 125.4 | % |  | (622.5) | %
A summary of our deferred tax assets is as follows (in thousands):
| As of December 31,
| 2022 |  | 2021 |  |
Deferred tax assets: |  |  |  |  |
Accrued expenses and reserves | $ | 7,990 |  |  | $ | 6,402 |  |  |
Share-based compensation | 10,078 |  |  | 8,979 |  |  |
Net operating loss and credits carryforwards | 147,465 |  |  | 188,329 |  |  |
Property and equipment, textbooks and intangibles assets | — |  |  | 1,849 |  |  |
Convertible senior notes | 16,648 |  |  | 32,254 |  |  |
Research and experimental expenditures capitalization | 37,719 |  |  | — |  |  |
Other items | 6,777 |  |  | 7,221 |  |  |
Gross deferred tax assets | 226,677 |  |  | 245,034 |  |  |
Valuation allowance | (36,122) |  |  | (238,317) |  |  |
Total deferred tax assets | $ | 190,555 |  |  | $ | 6,717 |  |  |
Deferred tax liabilities: |  |  |  |  |
Property and equipment, textbooks and intangibles assets | $ | (14,766) |  |  | $ | — |  |  |
Other | (10,070) |  |  | (7,878) |  |  |
Total deferred tax liabilities | $ | (24,836) |  |  | $ | (7,878) |  |  |
Net deferred tax asset (liability) | $ | 165,719 |  |  | $ | (1,161) |  |  |
As of December 31, 2022 and 2021, the deferred tax assets are primarily created by U.S. net operating loss and credits and the deferred tax liability was primarily created by the tax amortization of acquired indefinite lived intangible assets. As of December 31, 2022, we intend to permanently reinvest all 2018 and later earnings from our foreign subsidiaries. As such, we have not provided for any remaining tax effect, if any, of the outside basis difference of our foreign subsidiaries based upon plans of future reinvestment. The determination of the future tax consequences of the remittance of these earnings is not practicable. Realization of the deferred tax assets is dependent upon future taxable income, the amount and timing of which are uncertain. The valuation allowance decreased by approximately $202.2 million during the year ended December 31, 2022 and increased by approximately $86.5 million during the year ended December 31, 2021. Previously, we maintained a valuation allowance against our deferred tax assets until we expected that it would be more-likely-than not that they would be realized. The release of the valuation allowance is the result of our expectation that our domestic operations will continue to be profitable and is based on a detailed evaluation of all available evidence. The principal indicator leading to the release is the recent cumulative earnings of U.S. and certain state jurisdictions and the forecasted earnings in these jurisdictions. We continue to maintain a valuation allowance against our California deferred tax assets and our anticipated capital loss temporary differences. We will continue to quarterly assess the need for such valuation allowance. As of December 31, 2022, we had net operating loss carryforwards for federal and state income tax purposes of approximately $389 million and $344 million, respectively, which will begin to expire in years beginning 2028 and 2023, respectively. We also had net operating loss carryforwards for United Kingdom income tax purposes of approximately $88.6 million, which do not expire. As of December 31, 2022, we had tax credit carryforwards for federal and state income tax purposes of approximately $20.9 million and $16.1 million, respectively. The federal credits expire in various years beginning in 2030. The state credits do not expire. Utilization of our net operating losses and tax credit carryforwards may be subject to substantial annual limitations due to ownership change limitations provided by the Internal Revenue Code of 1986, as amended (IRC), and similar state provisions. Such annual limitations could result in the expiration of the net operating losses and tax credit carryforwards before utilization. We recognize interest and penalties related to uncertain tax positions as a component of income tax expense. During the years ended December 31, 2022, 2021 and 2020, we recognized an increase of $26 thousand, $0.1 million and $0.1 million of interest and penalties, respectively. Accrued interest and penalties as of December 31, 2022 and 2021 were approximately $0.3 million . We file tax returns in U.S. federal, state, and certain foreign jurisdictions with varying statutes of limitations. Due to net operating loss and credit carryforwards, all of the tax years since inception through tax year 2022 remain subject to examination by the U.S. federal and some state authorities. Foreign jurisdictions remain subject to examination up to approximately seven years from the filing date, depending on the jurisdiction. United Kingdom income tax remains subject to examination by the HM Revenue & Custom for certain tax years due to net operating loss and credits carryforwards. A reconciliation of the beginning and ending balances of the total amount of unrecognized tax benefits, excluding accrued interest and penalties, is as follows (in thousands):
| Years Ended December 31,
| 2022 |  | 2021 |  | 2020
Beginning balance | $ | 16,805 |  |  | $ | 14,654 |  |  | $ | 10,993 |
Increase in tax positions for prior years | 333 |  |  | 305 |  |  | 479 |
Decrease in tax positions for prior years | (876) |  |  | (952) |  |  | (535) |
Decrease in tax positions for prior year settlement | (386) |  |  | (22) |  |  | (208) |
Decrease in tax positions for prior years due to statutes lapsing | — |  |  | (426) |  |  | (26) |
Increase in tax positions for current year | 1,520 |  |  | 3,309 |  |  | 3,999 |
Change due to translation of foreign currencies | (443) |  |  | (63) |  |  | (48) |
Ending balance | $ | 16,953 |  |  | $ | 16,805 |  |  | $ | 14,654 |
The amount of unrecognized tax benefits, if recognized, that would affect the effective tax rate is $11.6 million for the year ended December 31, 2022. One or more of these unrecognized tax benefits could be subject to a valuation allowance if, and when recognized in a future period, which could impact the timing of any related effective tax rate benefit. The actual amount of any taxes due could vary significantly depending on the ultimate timing and nature of any settlement. We believe that the amount by which the unrecognized tax benefits may increase or decrease within the next 12 months is not estimable.

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