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Income Taxes | 12 Months Ended
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Dec. 31, 2023
Income Tax Disclosure [Abstract] |
Income Taxes | Income Taxes We recorded a provision for income taxes of $32.1 million during the year ended December 31, 2023, 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 during the year ended December 31, 2021. The provision for income taxes during the year ended December 31, 2023 was primarily due to federal and state income taxes in the United States largely driven by a shortfall associated with equity compensation. 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 following table presents our (provision for) benefit from income taxes (in thousands):
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Current income taxes: |  |  |  |  |
Federal | $ | (2,460) |  |  | $ | (113) |  |  | $ | — |
State | (3,064) |  |  | (2,172) |  |  | (852) |
Foreign | (33) |  |  | (3,702) |  |  | (7,449) |
Total current provision for income taxes | (5,557) |  |  | (5,987) |  |  | (8,301) |
Deferred income taxes: |  |  |  |  |
Federal | (26,210) |  |  | 147,236 |  |  | (250) |
State | (1,634) |  |  | 19,995 |  |  | (218) |
Foreign | 1,269 |  |  | 1,448 |  |  | 1,572 |
Total deferred benefit from income taxes | (26,575) |  |  | 168,679 |  |  | 1,104 |
Total (provision for) benefit from income taxes | $ | (32,132) |  |  | $ | 162,692 |  |  | $ | (7,197) |
The following table presents our income before (provision for) benefit from income taxes (in thousands):
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
United States | $ | 61,152 |  |  | $ | 123,269 |  |  | $ | (6,256) |
Foreign | (10,840) |  |  | (19,323) |  |  | 11,995 |
Total income before (provision for) benefit from income taxes | $ | 50,312 |  |  | $ | 103,946 |  |  | $ | 5,739 |
The following table presents the differences between our (provision for) benefit from income taxes as presented in the accompanying consolidated statements of operations and the income tax expense computed at the federal statutory rate as a percentage of income before (provision for) benefit from income taxes (in percentages):
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Income tax at U.S. statutory rate | 21.0 | % |  | 21.0 | % |  | 21.0 | %
State, net of federal benefit | 11.6 |  |  | 1.6 |  |  | (232) |
Taxes on foreign earnings | 0.7 |  |  | (1.1) |  |  | 35.5 |
Share-based compensation | 39.3 |  |  | 15.3 |  |  | (209.0) |
Non-deductible expenses | (2.5) |  |  | 1.6 |  |  | 1.5 |
Tax credits | 0.8 |  |  | (0.7) |  |  | (28.3) |
Change in valuation allowance | 4.2 |  |  | (210.5) |  |  | 2,954.3 |
Settlement of Unrecognized Tax Benefits | (8.0) |  |  | 0.0 |  |  | 0.0 |
Foreign-Derived Intangible Income | (5.2) |  |  | 0.0 |  |  | 0.0 |
Other | 2.0 |  |  | 1.3 |  |  | 0.5 |
Convertible senior notes | 0.0 |  |  | 15.0 |  |  | (2,435.3) |
Acquisition related | 0.0 |  |  | 0.0 |  |  | 17.2 |
Total | 63.9 | % |  | (156.5) | % |  | 125.4 | %
The following table presents a summary of our deferred tax assets (in thousands):
| December 31,
| 2023 |  | 2022 |  |
Deferred tax assets: |  |  |  |  |
Accrued expenses and reserves | $ | 10,442 |  |  | $ | 7,990 |  |  |
Share-based compensation | 11,200 |  |  | 10,078 |  |  |
Net operating loss and credits carryforwards | 92,302 |  |  | 147,465 |  |  |
Convertible senior notes | 5,566 |  |  | 16,648 |  |  |
Research and experimental expenditures capitalization | 69,362 |  |  | 37,719 |  |  |
Other items | 6,133 |  |  | 6,777 |  |  |
Gross deferred tax assets | 195,005 |  |  | 226,677 |  |  |
Valuation allowance | (40,162) |  |  | (36,122) |  |  |
Total deferred tax assets | $ | 154,843 |  |  | $ | 190,555 |  |  |
Deferred tax liabilities: |  |  |  |  |
Property and equipment, textbooks and intangibles assets | $ | (2,621) |  |  | $ | (14,766) |  |  |
Other | (13,134) |  |  | (10,070) |  |  |
Total deferred tax liabilities | $ | (15,755) |  |  | $ | (24,836) |  |  |
Net deferred tax asset (liability) | $ | 139,088 |  |  | $ | 165,719 |  |  |
As of December 31, 2023, we have determined our earnings in India are not permanently reinvested. As such, a tax liability of $2.8 million has been accrued for taxes that would be incurred upon repatriation of such earnings. The determination of the future tax consequences of the remittance of these earnings is not practicable. For our remaining foreign subsidiaries, to the extent we can repatriate cash with no significant tax cost, we have determined those earnings are not permanently reinvested. All other earnings have been determined to be permanently reinvested. Realization of the deferred tax assets is dependent upon future taxable income, the amount and timing of which are uncertain. The valuation allowance increased by approximately $4.0 million during the year ended December 31, 2023 and decreased by approximately $202.2 million during the year ended December 31, 2022. 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 in 2022 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, 2023, we had net operating loss carryforwards for federal and state income tax purposes of approximately $169 million and $218 million, respectively, which will begin to expire in years beginning 2030 and 2024, respectively. We also had net operating loss carryforwards for United Kingdom income tax purposes of approximately $109 million, which do not expire. As of December 31, 2023, we had tax credit carryforwards for federal and state income tax purposes of approximately $13.9 million and $17.0 million, respectively. The federal credits expire in various years beginning in 2038. 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, 2023, 2022 and 2021, we recognized a decrease of $0.3 million and an increase of $26 thousand and $0.1 million of interest and penalties, respectively. As of December 31, 2023, there are no accrued interest and penalties related to uncertain tax positions. As of December 31, 2022, accrued interest and penalties 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 2023 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. The following table presents the reconciliation of the beginning and ending balances of the total amount of unrecognized tax benefits, excluding accrued interest and penalties (in thousands):
| Years Ended December 31,
| 2023 |  | 2022 |  | 2021
Beginning balance | $ | 16,953 |  |  | $ | 16,805 |  |  | $ | 14,654 |
Increase in tax positions for prior years | — |  |  | 333 |  |  | 305 |
Decrease in tax positions for prior years | (131) |  |  | (876) |  |  | (952) |
Decrease in tax positions for prior year settlement | (4,703) |  |  | (386) |  |  | (22) |
Decrease in tax positions for prior years due to statutes lapsing | — |  |  | — |  |  | (426) |
Increase in tax positions for current year | 281 |  |  | 1,520 |  |  | 3,309 |
Change due to translation of foreign currencies | — |  |  | (443) |  |  | (63) |
Ending balance | $ | 12,400 |  |  | $ | 16,953 |  |  | $ | 16,805 |
The amount of unrecognized tax benefits, if recognized, that would affect the effective tax rate is $6.8 million for the year ended December 31, 2023. 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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