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INCOME TAXES
 12 Months Ended
Dec. 31, 2024
Income Tax Disclosure [Abstract]  
INCOME TAXES INCOME TAXES
The components of loss before income taxes and non-controlling interests consist of the following for the years ended December 31:
(in thousands)20242023
Domestic - Luxembourg $(34,896)$(56,506)
Foreign - U.S.(283)(453)
Foreign - non-U.S.2,312 4,611 
Total$(32,867)$(52,348)
The income tax provision consists of the following for the years ended December 31:
(in thousands)20242023
Current:
Foreign - U.S. federal$(313)$(1,014)
Foreign - U.S. state72 (206)
Foreign - non-U.S.(3,024)(2,449)
$(3,265)$(3,669)
Deferred:
Foreign - U.S. federal$458 $257 
Foreign - U.S. state(117)(11)
Foreign - non-U.S.343 (291)
$684 $(45)
Income tax provision$(2,581)$(3,714)
On June 30, 2024, we exited the Uruguay free trade zone and, as a result, no longer benefit from the Uruguay tax holiday. The impact of this tax holiday decreased foreign taxes by $0.1 million (less than $0.01 per diluted share) for both the years ended December 31, 2024 and 2023.
The Company accounts for certain income and expense items differently for financial reporting purposes and income tax purposes. We recognize deferred income tax assets and liabilities for these differences between the financial reporting basis and the tax basis of our assets and liabilities as well as expected benefits of utilizing net operating loss and credit carryforwards. We measure deferred income tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect to recover or settle those temporary differences.
A summary of the tax effects of the temporary differences is as follows for the years ended December 31:
(in thousands)20242023
Non-current deferred tax assets:
Net operating loss carryforwards$527,180 $481,741 
U.S. federal and state tax credits622 228 
Other non-U.S. deferred tax assets12,346 12,487 
Share-based compensation1,308 1,420 
Accrued expenses2,308 1,931 
Capital loss carryforward
— 10,046 
Depreciation14 8 
Non-current deferred tax liabilities:
Intangible assets(9,141)(9,122)
Other non-U.S. deferred tax liability(15)(433)
Other(596)(415)
534,026 497,891 
Valuation allowance(537,425)(501,927)
Non-current deferred tax liabilities, net$(3,399)$(4,036)
A valuation allowance is provided when it is deemed more likely than not that some portion or all of a deferred tax asset will not be realized. In determining whether a valuation allowance is needed requires an extensive analysis of positive and negative evidence regarding realization of the deferred tax assets and, inherent in that, an assessment of the likelihood of sufficient future taxable income. When there is a cumulative pretax loss for financial reporting for the current and two preceding years (i.e., a three year cumulative loss), this is a significant element of negative evidence that would be difficult to overcome on a more
likely than not or any other basis. Therefore, the Company’s valuation allowance was $537.4 million and $501.9 million as of December 31, 2024 and 2023, respectively.
The Company does not recognize deferred taxes on cumulative earnings of its U.S. subsidiaries because the Company intends for those earnings to be indefinitely reinvested. The other non-Luxembourg earnings that are indefinitely reinvested as of December 31, 2024 were approximately $0.1 million which, if distributed, would result in no additional tax due.
The Company had a deferred tax asset of $527.2 million as of December 31, 2024 relating to Luxembourg, U.S. federal, state and foreign net operating losses compared to $481.7 million as of December 31, 2023. As of December 31, 2024 and 2023, a valuation allowance of $526.6 million and $481.0 million, respectively, has been established related to Luxembourg net operating loss (“NOL”). The gross amount of net operating losses available for carryover to future years is approximately $2,112.5 million as of December 31, 2024 and approximately $1,930.0 million as of December 31, 2023. These losses are scheduled to expire between the years 2025 and 2043.
In addition, the Company had a deferred tax asset of $0.8 million as of December 31, 2024 and 2023, relating to state tax credits. Some of the state tax credit carryforwards have an indefinite carryforward period.
The effective tax rate differs from the Luxembourg statutory tax rate due to tax rate differences on foreign earnings, increases in uncertain tax positions, state taxes, a decrease in unrecognized tax benefits, tax exempt income primarily from the sale of Pointillist and a valuation allowance against deferred tax assets the Company believes it is more likely than not will not be realized
The following table reconciles the Luxembourg statutory tax rate to our effective tax rate for the years ended December 31:
20242023
Statutory tax rate24.94 %24.94 %
Change in valuation allowance(110.68)(186.89)
State tax expense(0.18)(0.33)
Uncertain tax positions(5.02)(2.98)
Unrealized losses(27.90)— 
Tax rate differences on foreign earnings0.89 (1.58)
Tax exempt income
0.04 0.18 
Provision to return
0.06 — 
Loss on treasury shares
112.55 160.11 
Other(2.55)(0.54)
Effective tax rate(7.85)%(7.09)%
The Company follows ASC Topic 740 which clarifies the accounting and disclosure for uncertainty in tax positions. We analyzed our tax filing positions in the domestic and foreign tax jurisdictions where we are required to file income tax returns as well as for all open tax years subject to audit in these jurisdictions. The Company has open tax years in the United States (2017 through 2023), India (2011 through 2024) and Luxembourg (2017 through 2023).
Under Luxembourg legal and regulatory requirements, the public offering of common stock and the share-based compensation are issued out of treasury shares. The difference between the cost of treasury shares when acquired and when reissued results in tax deductible losses of $26.4 million and $336.0 million for the years ended December 31, 2024 and 2023, respectively.
The following table summarizes changes in unrecognized tax benefits during the years ended December 31:
(in thousands)20242023
Amount of unrecognized tax benefits as of the beginning of the year$9,208 $9,015 
Decreases as a result of tax positions taken in a prior period(191)(65)
Increases as a result of tax positions taken in a prior period1,009 — 
Increases as a result of tax positions taken in the current period214 258 
Amount of unrecognized tax benefits as of the end of the year$10,240 $9,208 
The total amount of unrecognized tax benefits including interest and penalties that, if recognized, would affect the effective tax rate is $19.2 million and $18.1 million as of December 31, 2024 and 2023, respectively. The Company recognizes interest, if any, related to unrecognized tax benefits as a component of income tax expense. As of December 31, 2024 and 2023, the Company had recorded accrued interest and penalties related to unrecognized tax benefits of $9.1 million and $8.9 million, respectively.